EXHIBIT 4.2
FORM OF
AMENDMENT
TO
RIGHTS AGREEMENT
This Amendment to Rights Agreement ("Amendment") is made and entered
into effective as of December 18, 2000, by and between Digital Recorders, Inc.,
a North Carolina corporation ("Company") and Continental Stock Transfer & Trust
Company, a New York corporation ("Rights Agent").
Recitals
WHEREAS, Company and Rights Agent entered into that certain Rights
Agreement, dated as of December 19, 1999; and
WHEREAS, the Board of Directors (the "Board") of Company approved an
amendment to the Rights Agreement as set forth herein, which amendment has not
previously been documented; and
WHEREAS, Company and Rights Agent desire to enter into this Amendment
to evidence the Board's amendment of the Rights Agreement as set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto agree as follows:
1. Section 1(a). By resolution approved and adopted as of December 20,
2000, the Board agreed to amend Section 1(a) of the Rights Agreement to
specifically exclude certain acquisitions of Common Shares of the Company in
determining whether a Person is an "Acquiring Person" as defined in the Rights
Agreement. Accordingly, Section 1(a) of the Rights Agreement is hereby amended
by deleting Section 1(a) in its entirety and replacing it with the following
Section 1(a), with the added substantive language indicated by italics:
(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of such
Person, shall be the Beneficial Owner of fifteen percent (15%)
or more of the Common Shares of the Company then outstanding
but shall not include (i) the Company, (ii) any Subsidiary of
the Company, (iii) any employee benefit plan of the Company or
any Subsidiary of the Company, or (iv) any Person or entity
holding Common Shares for or pursuant to the terms of any such
employee benefit plan. Notwithstanding the foregoing, (1) no
Person shall become an "Acquiring Person" as the result of an
acquisition of Common Shares by the Company which, by reducing
the number of shares outstanding, increases the proportionate
number of shares beneficially owned by such Person to 15% (or
such other percentage as would otherwise result in such Person
becoming an Acquiring Person) or more of the Common Shares of
the Company then outstanding; provided, however, that if a
Person shall so become the Beneficial Owner of 15% (or such
other percentage) or
more of the Common Shares of the Company then outstanding by
reason of an acquisition of Common Shares by the Company and
shall, after such share purchases by the Company, become the
Beneficial Owner of an additional one percent (1%) of the
outstanding Common Shares of the Company (other than pursuant
to a dividend or distribution paid or made by the Company on
the outstanding Common Shares or pursuant to a share split or
subdivision of the outstanding Common Shares, or pursuant to
any other acquisition of common shares directly from the
Company), then such Person shall be deemed to be an "Acquiring
Person;" (2) no person shall become an "Acquiring Person" as
the result of an acquisition of common shares directly from
the Company which increases the proportionate number of shares
beneficially owned by such person to 15% (or such other
percentage as would otherwise result in such person becoming
an Acquiring Person) or more of the common shares of the
Company then outstanding; provided, however, that if a person
shall so become the beneficial owner of 15% (or such other
percentage) or more of the common shares of the Company then
outstanding by reason of an acquisition of common shares
directly from the Company and shall, after such acquisition of
shares from the Company, become the beneficial owner of an
additional one percent (1%) of the outstanding common shares
of the Company (other than pursuant to a dividend or
distribution paid or made by the Company on the outstanding
common shares, or pursuant to a share split or subdivision of
the outstanding common shares, or pursuant to any other
acquisition of common shares directly from the Company), then
such person shall be deemed to be an "Acquiring Person;" and
(3) if the Board of Directors of the Company determines in
good faith that a Person who would otherwise be an "Acquiring
Person," as defined pursuant to the foregoing provisions of
this paragraph, has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of
Common Shares so that such Person would no longer be an
"Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph, then such Person shall not be
deemed to have become an "Acquiring Person" for any purposes
of this Agreement.
2. Defined Terms. Capitalized terms that are used herein and not
otherwise defined shall have the meanings assigned to them in the Rights
Agreement.
3. No Further Amendment. All other terms and provisions of the Rights
Agreement not expressly modified by this Amendment shall remain in full force
and effect and are hereby expressly ratified and confirmed.
* * * * * * *
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IN WITNESS WHEREOF, the parties hereto have executed or have caused
this Amendment to be executed as of the day and year first above written.
COMPANY:
DIGITAL RECORDERS, INC.,
a North Carolina corporation
By:
-------------------------------------
David L. Turney,
Chairman, Chief Executive Officer and
President
RIGHTS AGENT:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
a New York corporation
By:
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Name:
--------------------------------
Title:
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