EXHIBIT 10.1
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
Amended and Restated Registration Rights Agreement (this "Agreement")
executed this 1st day of April, 2004, by and between DIGITAL RECORDERS, INC., a
North Carolina corporation (the "Company"), and DOLPHIN OFFSHORE PARTNERS, L.P.
(the "Holder").
WHEREAS, it is contemplated under that certain Stock Purchase Agreement
by and between the Company and the Holder dated October 13, 2003 (as such may be
amended from time to time, the "Stock Purchase Agreement") and that certain
Stock Purchase Warrant dated as of October 13, 2003, by the Company in favor of
the Holder (the "Warrant Agreement"), that the Company provide the Holder with
certain registration rights, as set forth in that certain Registration Rights
Agreement dated as of October 13, 2003, by and between the parties hereto (the
"Original Agreement");
WHEREAS, the Company and the Holder have entered into that certain
Clarification and Modification Agreement dated as of the date hereof, which
provides for, among other things, amendment of the terms of the Company's Series
F Convertible Preferred Stock to add a provision requiring the payment of
dividends thereon, which dividends will initially be payable in additional
shares of Series F Convertible Preferred Stock, and the termination of the
Warrant Agreement; and
WHEREAS, the Clarification and Modification Agreement provides that the
Original Agreement shall be amended in the manner set forth herein, and the
parties desire to enter into this Agreement to reflect such amendments and to
amend and restate in its entirety the Original Agreement;
NOW THEREFORE, in consideration of the mutual covenants and agreements
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
REQUIRED REGISTRATION
1.1 Required Registration. Subject to Sections 1.5 and 5.2 hereof,
as soon as practicable after the date hereof, but in no event later than May 15,
2004 (the "Target Effective Date"), the Company shall, at its sole cost and
expense, cause a Registration Statement under the 1933 Act covering the resale
by Holder of all of the Conversion Shares (which may be the Registration
Statement on Form S-3, registration no. 333-111534, filed prior to the date
hereof) to be declared effective by the Commission, time being of the essence.
The Company will use its reasonable efforts to keep such Registration Statement
current and effective for at least two (2) years from the date hereof or until
such earlier date as the Company's registration obligations with respect to the
Conversion Shares terminate pursuant to Section 5.2 hereof. The Company
acknowledges and agrees that if such Registration Statement shall not be
declared effective by the Target Effective Date, assuming full cooperation by
the Holder (including compliance by the Holder with all its obligations under
Section 1.6 hereof), then the rate at which dividends accrue on the Preferred
Stock shall increase as provided in Section 2(d) of the Amended and Restated
Certificate of Designation dated on or about the date hereof setting forth the
terms and provisions of the Preferred Stock.
1.2 Demand Registration.
(a) At any time during the period beginning on the date
on which any Dividend Shares become issuable (upon the initial issuance
as dividends of shares of Preferred Stock convertible into such
Dividend Shares, as contemplated by clause (b) of the definition of
"Preferred Stock" contained in Section 6.1), and ending on the earlier
of two years after the final issue date of such shares of Preferred
Stock or the date on which the Company's registration obligations with
respect to the Dividend Shares terminate pursuant to Section 5.2
hereof, the Holder may request the Company to register under the
Securities Act all, but not less than all, of the Dividend Shares that
the Holder then holds or has the right to acquire and that constitute
Registrable Securities, for sale by such Holder in the manner specified
in such request. The Company will use its reasonable efforts to
expeditiously effect the registration of the Dividend Shares following
such a request. The Holder shall have the right to require such a
registration one (1) time, provided that if the requested registration
is not effected as contemplated by Section 1.5, the Holder shall
continue to have the rights specified in this Section 1.2 until such
registration is effected in accordance herewith. The Company shall not
be required to effect a registration pursuant to a request under this
Section 1.2 within six (6) months after the filing of a registration
statement relating to a public offering of securities by the Company.
Any Registration Statement filed pursuant hereto may include, in
addition to the Dividend Shares, such other shares of Common Stock or
other securities of the Company for sale by the Company or other
security holders of the Company as the Company may deem appropriate,
provided that the inclusion of such additional securities does not
unreasonably interfere with the Holder's ability to dispose of the
Dividend Shares pursuant to such registration. The Company may satisfy
its obligations under this Section 1.2 by amending the Registration
Statement filed pursuant to Section 1.1 to add the Dividend Shares
thereto, if appropriate and permitted under applicable rules of the
Commission.
(b) If at the time of any request to register Dividend
Shares pursuant to this Section 1.2 the Company is engaged in
discussions or negotiations regarding a possible acquisition or other
significant corporate transaction that, in the good faith determination
of the Company's Board of Directors, would be adversely affected by the
requested registration to the material detriment of the Company, then
the Company may at its option direct that such request be delayed for a
period not in excess of sixty (60) days from the date of such request,
such right to delay a request to be exercised by the Company not more
than once in any one (1) year period.
1.3 Short-Form Registration. Notwithstanding the foregoing, the
Company shall not be required to effect a registration pursuant to the foregoing
provisions of Section 1.1 or 1.2 if it is determined that (a) such registration
would not be permitted under applicable securities laws or the rules and
regulations of the Commission or (b) Form S-3 or a comparable "short form"
Registration Statement is not available to the Company for such purpose. In no
event shall the Company be required to file a Registration Statement on Form S-1
pursuant to this Agreement. Any failure to file the Registration Statement
required by Section 1.1 for the reasons stated in this paragraph would, however,
result in any applicable adjustments specified in the last sentence of Section
1.1.
1.4 Expenses. The Company will pay all of its Registration
Expenses in connection with the registrations required by Sections 1.1 and 1.2,
including any Registration Statement that is not deemed to be effected pursuant
to the provisions of Section 1.5 hereof.
1.5 Effective Registration Statement. A registration pursuant to
Section 1.1 or 1.2 of this Agreement shall not be deemed to have been effected
(i) unless a Registration Statement with respect thereto has been declared
effective by the Commission, (ii) if after it has become effective, such
registration is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason or (iii) the Registration Statement does not remain continuously
effective until termination of the Company's registration obligations pursuant
to Section 5.2 hereof. If a registration pursuant to this Article I is deemed
not to have been effected as provided in this Section 1.5, then the Company
shall continue to be obligated to effect the registration required by Section
1.1 or 1.2.
1.6 Obligations of the Holder.
(a) In connection with any registration of Registrable
Securities pursuant to Section 1.1 or 1.2, the Holder shall furnish to
the Company in a timely manner all information regarding itself and the
distribution of such Registrable Securities as may be required to be
included in the Registration Statement and as the Company may from time
to time reasonably request in order to effect the registration of such
Registrable Securities, and shall otherwise cooperate with the Company
to the extent reasonably necessary to effect such registration.
(b) Each Holder agrees, that upon receipt of any notice
from the Company of the happening of any event of the kind described in
paragraph (f) of Article II hereof, the Holder will forthwith
discontinue disposition of Registrable Securities covered by any
Registration Statement or Prospectus until the Holder's receipt of the
copies of the supplemented or amended Prospectus contemplated by such
paragraph (f), or until it is advised in writing by the Company that
the use of the applicable Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated
by reference in such Prospectus, and, if so directed by the Company,
the Holder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in the Holder's
possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice.
(c) If any Registrable Securities are to be sold in an
underwritten offering, the Holder shall complete and execute all
questionnaires, powers of attorney, indemnities, underwriting
agreements (including customary indemnities by the selling
stockholders) and other documents reasonably and customarily required
under the terms of such underwriting arrangements.
ARTICLE II
REGISTRATION PROCEDURES
Whenever any Registrable Securities are to be registered pursuant to
this Agreement, the Company will use reasonable efforts to effect the
registration of such Registrable Securities for sale in accordance with the
intended method or methods of disposition thereof as quickly as possible, and
pursuant thereto the Company will as expeditiously as reasonably possible:
(a) prepare and file with the Commission a Registration
Statement with respect to such Registrable Securities and use all
reasonable efforts to cause such Registration Statement to become and
remain effective for the period contemplated by Section 1.1 or 1.2;
provided, that as promptly as practicable before filing a Registration
Statement or Prospectus or any amendments or supplements thereto, the
Company will (i) furnish to counsel selected by the Holder copies of
all such documents proposed to be filed, and (ii) notify the Holder of
(x) any request by the Commission to amend such Registration Statement
or amend or supplement any Prospectus, or (y) any stop order issued or
threatened by the Commission, and take all reasonable actions required
to prevent the entry of such stop order or to promptly remove it if
entered;
(b) (i) prepare and file with the Commission such
amendments and supplements to such Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep
such Registration Statement effective for the period contemplated by
Section 1.1 or 1.2, and (ii) comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such Registration Statement during such period in accordance
with the intended methods of disposition by the Holder set forth in
such Registration Statement;
(c) furnish to the Holder, without charge, such number of
conformed copies of such Registration Statement, each amendment and
supplement thereto, the Prospectus included in such Registration
Statement (including each preliminary Prospectus and, in each case,
including all exhibits) and such other documents as the Holder may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by it;
(d) use all reasonable efforts to register or qualify
such Registrable Securities under such other securities or blue sky
laws of such jurisdictions in the United States as the Holder shall
reasonably request, to keep such registration or qualification in
effect for so long as such Registration Statement remains in effect and
do any and all other acts and things which may be reasonably necessary
or advisable to enable the Holder to consummate the disposition in such
jurisdictions of the Registrable Securities owned by it; provided,
however, that the Company will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be
required to qualify but for this clause (d), (ii) subject itself to
taxation in any such jurisdiction or (iii) consent to general service
of process in any such jurisdiction;
(e) use all reasonable efforts (if the offering is
underwritten) to furnish to the Holder a signed copy, addressed to the
Holder (and the underwriters, if any) of an opinion of counsel for the
Company or special counsel to the selling stockholder, dated the
effective date of such Registration Statement (and, if such
Registration Statement includes an underwritten public offering, dated
the date of the closing under the
underwriting agreement), covering substantially the same matters with
respect to such Registration Statement (and the Prospectus included
therein) as are customarily covered in opinions of issuer's counsel
delivered to the underwriters in underwritten public offerings, and
such other legal matters as the Holder (or the underwriters, if any)
may reasonably request;
(f) notify the Holder, at a time when a Prospectus
relating thereto is required to be delivered under the Securities Act,
of the happening of any event known to the Company as a result of which
the Prospectus included in such Registration Statement, as then in
effect, contains an untrue statement of a material fact or omits to
state any fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under
which they were made, and, at the request of the Holder, the Company
will prepare and furnish to the Holder a reasonable number of copies of
a supplement to or an amendment of such Prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such Prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made;
(g) cause all such Registrable Securities to be listed on
each securities exchange and quotation system on which similar
securities issued by the Company are then listed and to enter into such
customary agreements as may be required in furtherance thereof,
including, without limitation, listing applications and indemnification
agreements in customary form;
(h) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such
Registration Statement;
(i) make available for inspection by the Holder, any
underwriter participating in any disposition pursuant to such
Registration Statement and any attorney, accountant or other agent
retained by the Holder or any such underwriter, all financial and other
records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by the
Holder, any such underwriter, attorney, accountant or agent in
connection with such Registration Statement to enable them to conduct a
reasonable investigation within the meaning of the Securities Act;
(j) subject to other provisions hereof, use all
reasonable efforts to cause such Registrable Securities covered by such
Registration Statement to be registered with or approved by such other
governmental agencies or authorities or self-regulatory organizations
as may be necessary to enable the sellers thereof to consummate the
disposition of such Registrable Securities; and
(k) promptly notify the Holder of the issuance of any
stop order by the Commission or the issuance by any state securities
commission or other regulatory authority of any order suspending the
qualification or exemption from qualification of any of the Registrable
Securities under state securities or "blue sky" laws, and use every
reasonable effort to obtain the lifting at the earliest possible time
of any stop order suspending the effectiveness of any Registration
Statement or of any order preventing or suspending the use of any
preliminary Prospectus.
ARTICLE III
REGISTRATION EXPENSES
3.1 Registration Expenses. All Registration Expenses will be borne
as provided in Section 1.4 of this Agreement.
3.2 SELLERS' EXPENSES. The Company shall have no obligation to pay
(a) any underwriting discounts or commissions or stock transfer taxes
attributable to the sale of Registrable Securities, which expenses will be borne
by all sellers of securities included in such registration in proportion to the
aggregate selling price of the securities to be so registered, or (b) any fees
or expenses of attorneys for the Holder or any other selling stockholder.
ARTICLE IV
INDEMNIFICATION
4.1 Company's Indemnification Obligations. The Company agrees to
indemnify and hold harmless the Holder and each other Person, if any, who
controls the Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act (collectively, the "Holder Indemnitees"):
(i) against any and all loss, liability, claim,
damage or expense arising out of or based upon an untrue
statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment or
supplement thereto), including all documents incorporated
therein by reference, or in any preliminary Prospectus or
Prospectus (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading;
(ii) against any and all loss, liability, claim,
damage and expense to the extent of the aggregate amount paid
in settlement of any litigation, investigation or proceeding
by any governmental agency or body, commenced or threatened,
or of any claim based upon any such untrue statement or
omission or any such alleged untrue statement or omission, if
such settlement is effected with the written consent of the
Company; and
(iii) against any and all reasonable expense
incurred by them in connection with investigating, preparing
or defending against any litigation, or investigation or
proceeding by any governmental agency or body, commenced or
threatened, or any claim based upon any such untrue statement
or omission or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under clause
(i) or (ii) above;
provided, that this indemnity does not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the
Company by or on behalf of the Holder expressly for use in the preparation of
any Registration Statement (or any amendment or supplement thereto), including
all documents incorporated therein by reference, or in any preliminary
Prospectus or Prospectus (or any amendment or supplement thereto); and provided
further, that the Company will not be liable to the Holder or any other Holder
Indemnitee under the indemnity agreement in this Section 4.1, with respect to
any preliminary Prospectus or the final Prospectus or the final Prospectus as
amended or supplemented, as the case may be, to the extent that any such loss,
liability, claim, damage or expense of such Holder Indemnitee results from the
fact that the Holder sold Registrable Securities to a Person to whom there was
not sent or given, at or prior to the written confirmation of such sale, a copy
of the final Prospectus or of the final Prospectus as then amended or
supplemented, whichever is most recent, if the Company has previously and timely
furnished copies thereof to the Holder.
4.2 Holder's Indemnification Obligations. In connection with any
Registration Statement in which the Holder is participating, the Holder agrees
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 4.1 of this Agreement) the Company and each Person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act with respect to any statement or alleged
statement in or omission or alleged omission from such Registration Statement,
any preliminary, final or summary Prospectus contained therein, or any amendment
or supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Holder. The obligations of each
Holder pursuant to this Section 4.2 (if there are more than one) are to be
several and not joint (however, husband and wife are to be treated as one
Holder); provided, that with respect to each claim pursuant to this Section 4.2,
each such Holder's maximum liability under this Section shall be limited to an
amount equal to the net proceeds actually received by such Holder (after
deducting any underwriting discount and expenses) from the sale of Registrable
Securities being sold pursuant to such Registration Statement or Prospectus by
such Holder.
4.3 Notices; Defense; Settlement. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding involving a claim referred to in Section 4.1 or Section 4.2 of
this Agreement, such indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under Section 4.1 or Section 4.2 of this Agreement except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified,
to the extent that it may wish, and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof, unless in such indemnified party's reasonable judgment, upon
the advice of counsel, a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, in which case the
indemnifying party shall not be liable for the fees and expenses of (i) more
than one counsel for all holders of Registrable Securities, selected by the
Holder or (ii) more than one counsel for the Company in connection with any one
action or
separate but similar or related actions. An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party, based on advice of counsel, a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels. The indemnifying party will not, without the
prior written consent of each indemnified party, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not such indemnified party or any Person who controls such indemnified party
is a party to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of such indemnified
party from all liability arising out of such claim, action, suit or proceeding.
Notwithstanding anything to the contrary set forth herein, and without limiting
any of the rights set forth above, in any event, any party will have the right
to retain, at its own expense, counsel with respect to the defense of a claim.
4.4 Indemnity Provision. The Company and the Holder shall provide
for the foregoing indemnity (with appropriate modifications) in any underwriting
agreement with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority other than the Securities Act.
4.5 Contribution Based on Relative Fault. In order to provide for
just and equitable contribution if a claim for indemnification pursuant to the
indemnification provisions of this Article IV is made but it is found in a final
judgment by a court of competent jurisdiction (not subject to further appeal)
that such indemnification may not be enforced in such case, and the express
provisions hereof provide for indemnification in such case, then the
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities
referred to in Section 4.1 or Section 4.2 of this Agreement in such proportion
as is appropriate to reflect the relative fault of the indemnifying party on the
one hand, and the indemnified party on the other, in connection with statements
or omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations, including,
without limitation, the relative benefits received by each parties from the
offering of the securities covered by such Registration Statement, the parties'
relative knowledge and access to information concerning the matter with respect
to which the claim was asserted and the opportunity to correct and prevent any
statement or omission. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statements or omission. The parties hereto agree
that it would not be just and equitable if contributions pursuant to this
Section 4.5 were to be determined by pro rata or per capita allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the first sentence of this Section 4.5. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this Section 4.5 shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim (which shall be limited as provided in Section 4.3 of this Agreement if
the indemnifying
party has assumed the defense of any such action in accordance with the
provisions thereof) which is the subject of this Section 4.5. Promptly after
receipt by an indemnified party under this Section 4.5 of notice of the
commencement of any action against such party in respect of which a claim for
contribution may be made against an indemnifying party under this Section 4.5,
such indemnified party shall notify the indemnifying party in writing of the
commencement thereof if the notice specified in Section 4.3 of this Agreement
has not been given with respect to such action; provided, that the omission to
so notify the indemnifying party shall not relieve the indemnifying party from
any liability which it may otherwise have to any indemnified party under this
Section 4.5, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. The Company and the Holder agree with
each other, and will agree with the underwriters of the Registrable Securities,
if requested by such underwriters, that (i) the underwriters' portion of such
contribution shall not exceed the underwriting discount and (ii) that the amount
of such contribution by the Holder shall not exceed an amount equal to the net
proceeds actually received by the Holder from the sale of Registrable Securities
in the offering to which the losses, liabilities, claims, damages or expenses of
the indemnified parties relate. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
4.6 Payments. The indemnification required by this Article IV
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when expense, loss, damage or liability is
incurred.
ARTICLE V.
TRANSFER AND TERMINATION OF REGISTRATION RIGHTS;
5.1 Transfer of Rights. The Holder identified in the preamble of
this Agreement may transfer its rights to register such Holder's Registrable
Securities hereunder to any transferee of such Registrable Securities, provided
that such rights may not be transferred (a) to any person or entity who or which
is engaged in an activity or business directly competitive with any activity or
business of the Company or any subsidiary of the Company as presently conducted;
or (b) to any person or entity without the Company's prior written consent,
which shall not be unreasonably withheld; and provided further that the proposed
transferee enters into a written agreement with the Company, agreeing to be
bound by the terms and conditions hereof. As used in Agreement, "Holder" shall
refer to the Holder identified in the preamble of this Agreement and to each
permitted transferee of such Holder's rights pursuant to this Section 5.1, as
the context requires; provided that no Holder other than the Holder identified
in the preamble of this Agreement shall have the right to make any transfer or
assignment of rights under this Agreement.
5.2 Termination of Rights. The registration rights of any Holder
of such rights hereunder and the registration obligations of the Company
hereunder with respect to Registrable Securities will terminate on the earliest
date at which such Registrable Securities (a) have been sold or (b) may be sold
(i) within a three-month period pursuant to the exemption from registration
provided under Rule 144 promulgated under the Securities Act, or (ii) pursuant
to the exemption from registration provided under Rule 144(k) promulgated under
the Securities Act.
ARTICLE VI
DEFINITIONS
6.1 Terms. As used in this Agreement, the following defined terms
shall have the meanings set forth below:
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of New York are authorized or obligated to
close.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means the common stock, par value $.10 per share, of the
Company, any securities into which such common stock shall have been changed or
any securities resulting from any reclassification or recapitalization of such
common stock, and all other securities (other than Preferred Stock) of any class
or classes (however designated) of the Company the holders of which have the
right, without limitation as to amount, after payment on any securities entitled
to a preference on dividends or other distributions upon any dissolution,
liquidation or winding up, either to all or to a share of the balance of
payments upon such dissolution, liquidation or winding up.
"Conversion Shares" means (i) the shares of Common Stock issued or
issuable upon conversion of the 300 shares of Preferred Stock initially issued
to the Holder pursuant to the Stock Purchase Agreement, (ii) up to 38,894
additional shares of Common Stock issued or issuable upon conversion of shares
of Preferred Stock hereafter issued as dividends on shares of Preferred Stock
(as contemplated by clause (b) of the definition of "Preferred Stock" below),
the issuance of which does not require approval by the Company's shareholders,
and (iii) any securities issued or issuable with respect to such shares of
Common Stock pursuant to the antidilution or similar adjustment provisions
contained in the Company's Articles of Incorporation governing the Preferred
Stock in connection with a stock split or combination of shares,
recapitalization, merger, consolidation, or other reorganization.
"Dividend Shares" means (i) the shares of Common Stock, if any, issued
or issuable upon conversion of shares of Preferred Stock hereafter issued as
dividends on outstanding shares of Series F Convertible Preferred Stock and
which do not constitute Conversion Shares, and the issuance of which requires
approval by the Company's shareholders pursuant to Section 2 of the Amended and
Restated Certificate of Designation setting forth the terms and provisions of
the Series F Convertible Preferred Stock, and (ii) any securities issued or
issuable with respect to such shares of Common Stock pursuant to the
antidilution or similar adjustment provisions contained in the Company's
Articles of Incorporation governing the Preferred Stock in connection with a
stock split or combination of shares, recapitalization, merger, consolidation,
or other reorganization.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar Federal statute then in effect, and any reference to a particular
section thereof shall include a reference to the equivalent section, if any, of
any such similar Federal statute, and the rules and regulations thereunder.
"Person" means any individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Preferred Stock" means the shares of Series F Convertible Preferred
Stock of the Company (a) issued and sold to the Holder by the Company pursuant
to the Stock Purchase Agreement on or before the date hereof and (b) issued to
the Holder as dividends on outstanding shares of Series F Convertible Preferred
Stock pursuant to Section 2 of the Amended and Restated Certificate of
Designation setting forth the terms and provisions of the Series F Convertible
Preferred Stock.
"Prospectus" means the prospectus included in any Registration
Statement (including without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective Registration
Statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the securities covered by such Registration
Statement, and all other amendments and supplements to the prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such prospectus.
"Registrable Securities" means the Conversion Shares and the Dividend
Shares, provided that, as to any particular Registrable Securities, such
securities will cease to be Registrable Securities when they have been (x)
effectively registered under the Securities Act and disposed of in accordance
with the Registration Statement covering them or (y) transferred pursuant to
Rule 144 (or any similar rule then in force) under the Securities Act or
otherwise transferred and, in each case, new certificates for them not bearing a
restrictive Securities Act legend have been delivered by the Company and can be
sold without complying with the registration requirements of the Securities Act.
"Registration Expenses" means, with respect to any registration
required hereunder, all of the reasonable costs and expenses incurred in
connection with such registration, other than (i) underwriting discounts and
commissions; (ii) transfer taxes; and (iii) all attorney's fees for selling
stockholders' attorneys.
"Registration Statement" means any registration statement of the
Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits and all material incorporated by reference in such registration
statement.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute then in effect, and any reference to a particular
section thereof shall include a reference to a comparable section, if any, of
any such similar Federal statute, and the rules and regulations thereunder.
6.2 Defined Terms in Corresponding Sections. The following defined
terms, when used in this Agreement, shall have the meaning ascribed to them in
the corresponding Sections of this Agreement listed below:
"Agreement" -- Preamble
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"Company" -- Preamble
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"Holder Indemnitees" -- Section 4.1
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"Holder" -- Preamble and Section 5.1
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"Stock Purchase Agreement" -- Recitals
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"Target Effective Date" -- Section 1.1
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"Warrant Agreement" -- Recitals
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ARTICLE VII
MISCELLANEOUS
7.1 Remedies. In the event of a breach by any party to this
Agreement of its obligations under this Agreement, any party injured by such
breach, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The parties agree that the provisions of this
Agreement shall be specifically enforceable, it being agreed by the parties that
the remedy at law, including monetary damages, for breach of any such provision
will be inadequate compensation for any loss and that any defense in any action
for specific performance that a remedy at law would be adequate is waived.
7.2 Amendments and Waivers. Except as otherwise provided herein,
no modification, amendment or waiver of any provision of this Agreement will be
effective against the Company or any Holder of Registrable Securities, unless
such modification, amendment or waiver is approved in writing by the Company and
the Holder(s) representing a majority of the Registrable Securities then
outstanding. The failure of any party to enforce any of the provisions of this
Agreement will in no way be construed as a waiver of such provisions and will
not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
7.3 Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and permitted assigns of the parties
hereto whether so expressed or not.
7.4 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or mailed by pre-paid registered or
certified mail, return receipt requested or mailed by overnight courier prepaid
to the parties at the following addresses:
If to the Company, to: Digital Recorders, Inc.
0000 Xxxxxx Xxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: CEO & President
If to Holder: Dolphin Offshore Partners, L.P.
c/o Dolphin Asset Management Corp.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 7.4, be deemed given upon
delivery, (ii) if delivered by mail in the manner described above to the address
as provided in this Section 7.4, be deemed given on the earlier of the tenth
full Business Day following the day of mailing or upon receipt, and (iii) if
delivered by overnight courier to the address provided in this Section 7.4, be
deemed given on the earlier of the third Business Day following the date sent by
such overnight courier or upon receipt. Any party from time to time may change
its address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other parties hereto.
7.5 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
7.6 Gender. Whenever the pronouns "he" or "his" are used herein
they shall also be deemed to mean "she" or "hers" or "it" or "its" whenever
applicable. Words in the singular shall be read and construed as though in the
plural and words in the plural shall be construed as though in the singular in
all cases where they would so apply.
7.7 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
7.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of North Carolina,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of North Carolina or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
North Carolina.
7.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
7.10 Termination of Prior Agreement. This Agreement is being
entered into for the purpose of amending and restating in its entirety the
Original Agreement, and the Original Agreement is hereby terminated and
superceded in its entirety by this Agreement and shall have no further force or
effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the date first above written, intending the same, to the extent
legally permissible, to be effective as of October 13, 2003.
COMPANY:
DIGITAL RECORDERS, INC.
By: /s/ Xxxxx X. Xxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxx
Title: CEO, President and Chairman
HOLDER:
DOLPHIN OFFSHORE PARTNERS, L.P.
By: /s/ Xxxxx X. Xxxxx
----------------------------------
Name: Xxxxx X. Xxxxx
Title: General Partner
