Document:

<PAGE>

                                LEASE AGREEMENT

TUIS LEASE AGREEMENT (this "Lease") is made and entered into this the 18th
day of December of 1998 (the "Effective Date"), by and between THE PRUDENTIAL
SAVINGS BANK, F.S.B., as Trustee ("Landlord") and DIGITAL RECORDERS, INC., a
North Carolina corporation ("Tenant").

WITNESSETH:

1. PREMISES: In consideration of the rents, terms, provisions and covenants of
this Lease, Landlord hereby leases, lets and demises to Tenant and Tenant hereby
leases, lets and demises from Landlord the premises (the "Premises") shown on
EXHIBIT "A" attached hereto and by this reference made a part hereof, which
Premises contain an agreed approximate 18,494 rentable square feet designated as
Suite 100 of that certain building known as 4018 Patriot Drive, Durham, North
Carolina 27709, (the "Building") located on that certain tract of land more
particularly identified on EXHIBIT "B" attached hereto and made a part hereof
(the "Property"), said Property being a part of that certain development known
as One Park Center (the "Park").

2. TERM: Subject to and upon the conditions set forth below, the term of this
Lease (the "Term") shall commence on the later to occur of (i) the date of
Substantial Completion (as defined in the Work Letter), or (H) February 1, 1999,
but in no event later than May 1, 1999, (unless Substantial Completion is
delayed as a direct and immediate result of Landlord's negligence or willful
misconduct (a "Landlord Delay"), in which event, the date of Substantial
Completion shall be delayed beyond May 1, 1999 one day for each day of Landlord
Delay) (such date being hereinafter referred to as the "Commencement Date") and
shall terminate ten (10) full calendar years thereafter. Promptly following the
Commencement Date, Landlord and Tenant shall enter into a letter agreement in
the form attached hereto as EXHIBIT "F".

3. RENT: (a) Tenant agrees to pay Landlord monthly installments of base rent in
accordance with the following schedule, which shall be due and payable to
Landlord in advance, without deduction or setoff, prior notice or demand at the
address shown below on the first day of each and every month following the
Commencement Date for the Term:

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------
                        PERIOD             MONTHLY INSTALLMENT OF BASE RENT
------------------------------------------------------------------------------------
<S>                                        <C>
                     Rent Year 1                      $13,092.83
------------------------------------------------------------------------------------
                     Rent Year 2                      $13,485.62
------------------------------------------------------------------------------------
                     Rent Year 3                      $13,890.19
------------------------------------------------------------------------------------
                     Rent Year 4                      $14,306.89
------------------------------------------------------------------------------------
                     Rent Year 5                      $14,736.10
------------------------------------------------------------------------------------
                     Rent Year 6                      $15,178.18
------------------------------------------------------------------------------------
                     Rent Year 7                      $15,633.53
------------------------------------------------------------------------------------
                     Rent Year 8                      $16,102.53
------------------------------------------------------------------------------------
                     Rent Year 9                      $16,585.61
------------------------------------------------------------------------------------
                    Rent Year 10                      $17,083.18
------------------------------------------------------------------------------------

</TABLE>

One monthly installment of base rental shall be due and payable on the date of
execution of this Lease by Tenant for the first month's rent with subsequent
monthly rental installments being paid in accordance with the

<PAGE>

foregoing; provided, that if the Commencement Date should be a date other than
the first day of a calendar month, the monthly installment of base rental for
such month and for the last month of the Term shall be prorated to the end of
that calendar month, and, thereafter, all other succeeding monthly
installments of base rental during the Term shall be due and payable on or
before the first day of each succeeding calendar month during the Term. Tenant
shall pay, as additional rental, all other sums due under this Lease as
provided for hereunder. For purposes hereof, a "Rent Year" shall mean each
twelve month period from the Commencement Date to the day immediately prior to
the first anniversary thereof and each succeeding one year period immediately
thereafter.

         (b) Upon execution hereof, Tenant shall deposit with Landlord the sum
of $12707.75 (the "Security Deposit") as security for the faithful performance
of all the terms, provisions, covenants, conditions and agreements of this
Lease. If Tenant defaults with respect to any of the terms, provisions,
covenants, conditions and agreements of this Lease, including, but not limited
to, the payment of any base rental or additional rent, Landlord may use, apply
or retain the whole or any part of the Security Deposit for payment of such base
rental or additional rental, or for any other sum which Landlord may expend or
be required to expend by reason of Tenant's default. Tenant shall not be
entitled to any interest on the Security Deposit. Tenant, on written demand from
Landlord, will forthwith replenish the Security Deposit or any portion thereof
so used, applied or retained by Landlord. It is expressly agreed and understood
that the Security Deposit is not an advance base rental payment or additional
rental payment nor the measure of Landlord's damages in the case of a Tenant
default hereunder. In the event Tenant shall fully and faithfully comply with
all terms, provisions, covenants, conditions and agreements of this Lease, the
Security Deposit, without interest, will be promptly be returned to Tenant upon
expiration or sooner termination of this Lease but only after Tenant has
delivered possession of the Premises to Landlord.

                                     -2-

<PAGE>

         (c) If any increase of the fire insurance premiums paid by Landlord for
the Building in which Tenant occupies space is caused by Tenant's use and
occupancy of the Premises, or if Tenant vacates the Premises and causes an
increase in such premiums, then Tenant shall pay in additional rental the amount
of such increase to Landlord.

         (d) Other remedies for nonpayment of rent notwithstanding, if the
monthly rental payment is not received by Landlord on or before the tenth day of
the month for which rent is due, or if any other payment due Landlord by Tenant
is not received by Landlord on or before the tenth day of the month next
following the month in which Tenant was invoiced, a service charge of five
percent (5%) of such past due amount shall become due and payable in addition to
such amounts owed under this Lease.

         (e) Tenant agrees to pay on a monthly basis in advance as additional
rent Tenant's Pro Rata Share of the annual operating expenses (defined below) in
excess of the operating expenses paid or incurred by Landlord for calendar year
1999 (the "Base Year Amount"). Landlord may estimate Tenant's Pro Rata Share of
the operating expenses with an annual adjustment at the end of each calendar
year to adjust for any discrepancies between the actual expenses incurred and
any such estimate. Landlord agrees to refund any excess amount charged for any
such year and Tenant agrees to promptly pay upon demand any additional amount
due pursuant to the annual adjustment The obligation to pay such additional
rental amounts shall survive the termination of this Lease. For all purposes of
this Lease, the term "Pro Rata Share" shall refer to the. ratio of the total
floor-area of the Premises to the total floor area of the Building or Park
whichever is applicable in such instance.

         (f) The term "operating expenses" as used herein means all actual costs
and expenses paid or incurred by Landlord or on its behalf in connection with
the maintenance, management, operation, repair (including the items in
subparagraph 7 (a) below), cleaning, security and landscaping of the common
areas of the Property and Building including, without limitation, the Property's
share of common area charges and assessments with respect to the Park. The term
"operating expenses" also includes all real property taxes and installments of
special assessments, including special assessments due to deed restrictions
and/or owners' associations, and other taxes levied or assessed by any
municipality, county or other governmental agency, which accrue against the
Building, Property and/or Park during the Term as well as all insurance premiums
Landlord is required to pay or deems necessary to pay, with respect to the
Building and/or Property. The term "operating expenses" does not include any
capital improvement to the Building, Property and/or Park but may include a
reasonable depreciation or amortization of such capital expenditures

                                     -3-

<PAGE>

consistent with generally accepted account principles, nor shall it include
repairs, restoration or other work occasioned by fire, windstorm or other
casualty to the extent Landlord receives insurance proceeds therefor, income and
franchise taxes of Landlord, leasing commissions, expenses for the renovating of
space for new tenants, interest or principal payments on any mortgage or other
indebtedness of Landlord.

         (g) Landlord and Tenant agree that no portion of the base rental, rent
adjustments for operating expense, or additional rental paid by Tenant during
the portion of the Term occurring after the expiration of any period during
which such amounts were abated shall be allocated, for income tax purposes, by
Landlord or Tenant to such abatement period, nor are such amounts intended by
the parties to be allocable, for income tax purposes, to any abatement period.

         (h) Notwithstanding any provision contained herein to the contrary,
solely for purposes of determining Tenant's Pro Rata Share of operating
expenses, the portion of operating expenses attributable to all items other than
taxes, utilities and insurance (such controllable expenses being referred to
herein as "Controllable Expenses") shall not in any calendar year exceed the
Controllable Expenses for the 1999 calendar year increased by five percent (5%)
per annum calculated on a cumulative, compounded basis.

         (i) If the Building is less than ninety-five percent (95%) occupied
throughout any calendar year of the Term, then the actual operating expenses for
the calendar year in question shall be increased to the amount of operating
expenses which Landlord reasonably determines would have been incurred during
that calendar year if the Building had been fully occupied throughout such
calendar year. If the provisions of this subsection are applied in any calendar
year, the Base Year Amount shall likewise be adjusted for the calendar year on
which it is based.

         4. SIGNS: Notwithstanding anything to the contrary set forth in the
Lease, signage rights will be provided on the front of the building in an area
to be designated by Landlord in its sole discretion. The actual sign and its
respective installation cost shall be at the expense of the Tenant. Tenant shall
be responsible for any damage to the Building occasioned by the installation or
removal of any such signs. Tenant shall place no sign upon the roof of the
Premises or Building, nor any part of the roof, including the flashing or
gutters of the Premises or Building or any part thereof. Tenant shall repair any
damage to the Building caused thereby, including, but not limited to,
discoloration. Excepting "force majeure", Tenant shall be required to install
identification signage within ninety (90)

                                     -4-

<PAGE>

days of the commencement, subject to the aforementioned conditions and
limitations. The provisions hereof shall survive the expiration or sooner
termination of this Lease.

         5. USAGE: (a) Tenant warrants and represents to Landlord that the
Premises shall be used and occupied only for the purpose of office, assembly and
distribution and for no other purposes. Outside storage, including, without
limitation, trucks and other vehicles, is prohibited without Landlord's prior
written consent. Without Landlord's prior written consent, Tenant shall not
receive, store, or otherwise handle any substance, product, material or
merchandise which is explosive or highly flammable, toxic or hazardous. Tenant
shall occupy the Premises, conduct its business and control its agents,
employees, invitees and visitors in such a manner as is lawful, reputable and
will not create any nuisance or otherwise interfere with, annoy or disturb any
other tenant in its normal business operations or Landlord in its management of
the Building. Tenant shall not commit, or suffer to be committed, any waste on:
the Premises, nor shall Tenant permit the Premises to be used in any way which
would, in the opinion of Landlord, be extra hazardous on account of fire or
otherwise which would in any way increase the premiums for or render void the
fire insurance on the Premises or contents of the Building.

         (b) "Hazardous Substances", as used in this Lease shall mean
pollutants, contaminants, toxic or hazardous wastes, or any other substances,
the removal of which is required or the use of which is regulated, restricted,
prohibited or penalized by any "Environmental Law", which term shall mean any
federal, state or local law, ordinance or regulation. relating to pollution or
protection of the environment. Tenant hereby agrees that:

         (1) no activity will be conducted on the Premises which will produce
         any Hazardous Substance;

         (2) the Premises will not be used in any manner for the storage of any
         Hazardous Substances;

         (3) no portion of the Premises will be used as a landfill or a dump;

         (4) Tenant will not install any underground tanks of any type;

         (5) Tenant will not allow or cause any surface or subsurface conditions
         to exist or come into existence that constitute, or with the passage of
         time may constitute, a public or private nuisance; and

                                     -5-

<PAGE>

         (6) Tenant will not permit any Hazardous Substances to be brought into
         the Premises.

Tenant agrees to indemnify and hold Landlord harmless from all claims, demands,
actions, liabilities, costs, expenses, damages and obligations of any nature
including, without limitation, court costs and attorney's fees arising from or
as a result of the use of the Premises by Tenant, its agents, employees,
contractors, invitees or licenses. The foregoing indemnification shall survive
the expiration or sooner termination or expiration of this Lease.

         6. INTENTIONALLY DELETED.

         7. REPAIRS AND MAINTENANCE: (a) Unless otherwise expressly provided,
Landlord shall not be required to make any: improvements, replacements or
repairs of any kind or character to the Premises of Building during the Term,
except repairs to the roof, foundation, exterior walls (not including any
windows or doors) and additional maintenance as may be necessary because of
damage by persons other than Tenant, its agents, employees, invitees, licensees
or visitors, and as may be necessary solely because of the negligence of
Landlord, which repairs shall be made by Landlord at its expense beginning not
more than fifteen (15) days after written notice by Tenant. Landlord's cost of
maintaining these items are subject to the additional rental provisions in
paragraph 3. Landlord shall not be liable to Tenant, except as expressly
provided in this Lease, for any damage or inconvenience, and Tenant shall not be
entitled to any abatement or reduction of rent by reason of any repairs,
alterations or additions made by Landlord under this Lease.

         (b) Upon occupancy of the Premises for business purposes. Tenant shall
be deemed to have accepted the Premises in their then present condition and as
suited for the uses intended by Tenant. Tenant shall, throughout the Term and
all renewals thereof, at its sole cost and expense, maintain in good order and
repair the Premises-, including, without limitation, the heating and air
conditioning equipment (including, but not limited to, replacement of parts,
compressors, air handling units and heating units) and other improvements
located therein, except those repairs expressly required by this Lease to be
made by Landlord. Tenant agrees to enter into a service contract with a reliable
certified heating and air conditioning company to maintain the heating and air
conditioning units and keep them in good working order. Tenant shall furnish
Landlord a copy of the service contract and, upon request of Landlord, Tenant
shall also furnish copies of routine maintenance reports or invoices. Tenant
shall be responsible for pest and termite control. Tenant shall be responsible
for maintenance of the sprinkler valves and any alarm systems in the Premises.
Tenant agrees to maintain adequate dumpster service and to keep the

                                     -6-

<PAGE>

Premises in a neat, clean and attractive manner. Tenant shall not damage any
demising wall or disturb the integrity and support provided by any demising wall
and shall, at its sole cost and expense, promptly repair any damage or injury to
any demising wall caused b y Tenant or its employees, agents or invitees. Tenant
further agrees to repair, at its sole cost and expense, glass and exterior doors
(including loading) serving the Premises and, in addition, to make, at its sole
cost and expense, all repairs made necessary by the negligence of Tenant, its
agents, employees, contractors, licensees, invitees or guests.

         (c) Tenant shall not allow any damage to be committed on any portion of
the Premises, and at the expiration or sooner termination of this Lease, by
lapse of time or otherwise, Tenant shall deliver the Premises to Landlord in as
good condition as existed at the Commencement Date of this Lease, ordinary wear
and tear excepted. The cost or expense of any repairs necessary to restore the
condition of the Premises shall be borne by Tenant, and if Landlord undertakes
to restore the Premises it shall have a right of reimbursement against Tenant,
which right shall survive the expiration or termination of this Lease.

         (d) All requests for repairs or maintenance that are the responsibility
of Landlord pursuant to any provision of this Lease must be made in writing to
Landlord at the address set forth below.

         (e) In addition to Landlord's obligations pursuant to subsection 7(a)
above, Landlord agrees that Tenant's repair: obligations, for the HVAC system
and fire sprinklers pursuant to subsection 7(b) above shall be limited to an
amount not to exceed $1,000.00 per. occurrence such that if Tenant's
responsibility repair cost for the HVAC system, or. any unit thereof or for the
fire sprinkler system, or any individual sprinkler thereof, exceeds $1,000.00,
Landlord shall pay any such repair cost in excess of $1,000.00 per occurrence.

         8. COMPLIANCE WITHLAWS, RULES AND REGULATIONS: Tenant, at Tenant's
expense, shall comply with all laws, ordinances, orders, rules and regulations
of state, federal, municipal or other agencies or bodies having jurisdiction
relating to the use, condition and occupancy of the Premises. Tenant will comply
with the rules of the Building adopted by Landlord which are set forth on a
schedule attached to this Lease (see Exhibit "C" attached hereto and by this
reference made a part hereof). Landlord shall have the right at all times to
change the rules and regulations of the Building or to amend them in any
reasonable manner. All changes and amendments in the rules and regulations of
the Building will be sent by Landlord to Tenant in writing and shall thereafter
be carried out and observed by Tenant.

                                     -7-

<PAGE>

         9. ALTERATIONS AND IMPROVEMENTS: (a) Tenant shall not make any
alterations, additions or replacements to the Premises, or any repairs required
of Landlord under this Lease, without the prior written consent of Landlord,
such consent to be given or withheld at the sole and absolute discretion of
Landlord, except for the installation of unattached movable fixtures, which may
be installed without drilling, cutting, or otherwise defacing the Premises. All
alterations, additions, and improvements made in and to the Premises and all
floor covering that is cemented or adhesively fixed to the floor and all
fixtures (other than trade fixtures) which are installed in the Premises shall
remain in and be surrendered with the Premises and shall become the property of
Landlord at the expiration or sooner termination of this Lease. So long as
Tenant is not in default hereunder, Tenant shall have the right to remove its
trade fixtures from the Premises, provided that Tenant shall repair and restore
any damage to the Premises caused or occasioned by such removal.

         (b) All repairs, alterations, additions and improvements done by Tenant
within the Premises shall be performed in a good and workmanlike manner, in
compliance with all governmental, requirements, and at such times and in such
manner as will cause a minimum of interference with other construction in
progress and with the transaction of business in the Building and/or Park.
Whenever Tenant proposes to do any construction work within the Premises, Tenant
shall first furnish to Landlord plans and specifications covering such work in
such detail as Landlord may reasonably request. Such plans and specifications
shall comply with such requirements as Landlord may from time to time proscribe
for construction within the. Building and/or Park. In no event shall any
construction work be commenced within the Premises without Landlord's written
approval of such plans and specifications. In the event Tenant does perform any
construction work without the prior written consent of Landlord, Landlord shall,
in addition to all other remedies it might have hereunder or at law, have the
right to require Tenant to immediately remove any unapproved additions or
improvements and restore the Premises to -the condition existing prior to such
unauthorized construction. Without limiting the generality of the foregoing,
Tenant shall under no circumstances make any penetration of the roof of the
Building without Landlord's consent, which consent may be given or withheld by
Landlord in its sole and absolute discretion. In the event Landlord consents to
a penetration of the roof, all such work shall be performed by contractors
designated or approved by Landlord and shall be supervised by Landlord or its
designees and performed under conditions and subject to such conditions and
requirements as may be established by Landlord. Tenant shall and hereby agrees
to indemnify and hold Landlord harmless from and against any and all loss, cost,
damage, expense or liability (including, without limitation, court costs and
attorneys' fees) ever suffered or incurred by Landlord as a result of any
penetration of the roof, including, without limitation, costs of repair, loss of
income, claims for damages from

                                     -8-

<PAGE>

other tenants of the Building and damages which result if any warranty on the
roof held or maintained by Landlord is voided or impaired by such penetration.
The provisions hereof shall survive the expiration or sooner termination of this
Lease. Additionally, any penetration of the roof without Landlord's consent
shall be deemed an immediate event of default hereunder entitling Landlord to
the exercise of all rights and remedies provided in this Lease or at law or
equity.

         10. FLOOR PENETRATION AND FLOOR LOADING: Under no circumstances may
Tenant penetrate the floor slab of the Building without Landlord's prior written
consent, which may be given or withheld by Landlord in its sole and absolute
discretion. Tenant agrees that the point pressure resulting from the Tenant's
racking system, inventory, forklifts and equipment pertaining to Tenants use of
the Premises shall not exceed allowable design floor loading for floor slabs on
grade. Tenant shall be responsible to provide steel plates, angles, or channels
as, required to distribute floor loading to the Building design loads. Tenant
agrees not to use any vehicle, including, but not limited to those having steel
wheels, that will cause damage to the floor slab. Tenant shall hold harmless
Landlord from any loss, liability, any expenses, both real and alleged, arising
out of such damage or repair caused by Tenant's negligence or failure to comply
with this paragraph,

         11. LANDLORD IMPROVEMENTS: Landlord agrees to prepare the Premises for
occupancy by Tenant: in. accordance with the terms and provisions of the Work
Agreement attached hereto, as EXHIBIT "E" and by this reference made a part
hereof.

         12. SERVICES: Landlord agrees to provide at its cost, water, electrical
and telephone service connections stubbed out to the Premises; Tenant agrees to
pay directly to the provider (except as otherwise set forth below) all charges,
fees (hook-up, installation and the like) and deposits incurred for any utility
services used on the Premises. Landlord shall not be liable for any interruption
or failure of utility service to the Premises, but, if requested by Tenant,
Landlord shall use reasonable efforts to cooperate with Tenant in securing
speedy resumption of said interrupted service. Tenant shall promptly notify the
proper public authorities and utility companies to provide service for water,
sewer, trash removal, gas, electricity, telephone and all other utilities
required or desired by Tenant, which services are to be in Tenant's name and all
costs for such services shall be borne by Tenant as its sole responsibility. In
the event the water and sewer connections into the Premises are jointly metered
with other premises, Tenant covenants and agrees to pay to Landlord on a monthly
basis as additional rent, on the first day of each month, its Pro Rata Share of
all water and sewer charges applicable to the Building.

                                     -9-

<PAGE>

          13. CONDEMNATION: (a) If, during the term (or any extension or
renewal) of this Lease, all or a substantial part of the Premises are taken for
any public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain or by purchase in lieu thereof, and
the taking would prevent or materially interfere with the use of the Premises
for the purpose for which they are then being used, this Lease shall terminate
and the rent shall be abated during the unexpired portion of this Lease
effective on the date physical possession is taken by the condemning authority.
In no event shall Tenant have claim against Landlord or against the total award
for the value of the unexpired lease term or otherwise, and Tenant shall not be
entitled to any part of any award that may be made for such taking, nor to any
damages therefor except that the rent shall be adjusted as of the date of such
termination of this Lease.

          (b) In the event a portion of the Premises shall be taken for any
public or quasi or public use under, any governmental law, ordinance or
regulation, or by right of eminent domain or by purchase in lieu thereof, and
this Lease is not terminated as provided in subparagraph 13(a) above, Landlord
may, at Landlord's sole risk and expense, restore and reconstruct the Building
and other improvements on the Premises to the extent necessary to make it
reasonably tenantable. The rent payable under this Lease during the unexpired
portion of the term shall be adjusted to such an extent as may be fair and
reasonable under the circumstances. In no event shall Tenant. have claim against
Landlord or against the total award for the value of the unexpired lease term or
otherwise, and Tenant shall not be entitled to any part of any award that may be
made for such taking, nor to any damages therefor except that, the rent shall be
adjusted, as of the date of such termination of this Lease.

          14. FIRE AND CASUALTY: (a) If the Premises should be totally
destroyed by fire or other casualty, or if the Premises should be damaged so
that rebuilding reasonably cannot be completed within one hundred eighty (180)
working days after the date of written notification by Tenant to Landlord of
the destruction, this Lease shall terminate and rent shall be abated for the
unexpired portion of the Lease, effective as of the date of written
notification of the casualty.

          (b) If the Premises should be partially damaged by fire or other
casualty, and rebuilding or repairs can reasonably be completed within one
hundred eighty (180) working days from the date of written notification by
Tenant to Landlord of the destruction, this Lease shall not terminate, but
Landlord may at its sole risk and expense proceed with reasonable diligence to
rebuild or repair the Building or other improvements to substantially the same
condition in which they existed prior to the damage. If the Premises are to be
rebuilt or repaired and are untenantable in whole or in part following the

                                    -10-

<PAGE>

damage, and the damage or destruction was not caused or contributed by act or
negligence of Tenant, its agents, employees, invitees or those for whom Tenant
is responsible, the rent payable under this Lease during the period for which
the Premises are untenantable shall be adjusted to such an extent as may be fair
and reasonable under the circumstances. In the event that Landlord fails to
complete the necessary repairs or rebuilding within one hundred eighty (180)
working days from the date of written notification by Tenant to Landlord of the
destruction, Tenant may at its option terminate this Lease by delivering written
notice of termination to Landlord, whereupon all rights and obligations under
this Lease shall cease to exist.

          15. INSURANCE: (a) Tenant shall maintain comprehensive general
liability insurance in the amount of at least One Million Dollars ($1,000,000)
per occurrence, naming Landlord as an additional insured. Prior to taking
possession of the Premises, and thereafter at least, fifteen (15) days prior to
expiration: of the current policy, Tenant shall deliver a certificate of such
insurance to Landlord, providing for at least ten (10) days written notice to
Landlord prior to any cancellation or nonrenewal of coverage. Tenant hereby
waives all rights of recovery against Landlord for any loss or liability which
may be covered by such comprehensive general liability insurance.

          (b) Property Insurance. Tenant acknowledges and agrees that Tenant is
solely responsible for insuring Tenant's personal property, fixtures and
equipment located in or about the Premises. Tenant waives all claims or rights
of recovery from any all-risk or fire insurance which Landlord may obtain with
respect to the Building in which the Premises are located.

          (c) If Tenant fails to comply with the foregoing requirements relating
to insurance, Landlord shall have the right to obtain such insurance and Tenant
shall pay as additional rental to Landlord on demand the premium cost thereof
plus interest from the date of payment until repaid by Tenant.

          16. WAIVER OF SUBROGATION: Anything in this Lease to the contrary
notwithstanding, Landlord or Tenant hereby waive and release each other of and
from any and all rights of recovery, claim, action or cause of action, against
each other, their agents, officers and employees, for any loss or damage that
may occur to the Premises, improvements to the Building of which the Premises
are a part, or personal property (Building contents) within the Building, by
reason of fire or the elements regardless of cause or origin, including
negligence of Landlord or Tenant and their agents, officers and employees.
Because this paragraph will preclude the assignment of any claim mentioned in it
by way of subrogation or otherwise to an insurance company or any other person,

                                    -11-

<PAGE>

each party to this Lease agrees immediately to give to each insurance company
which has issued to it policies of insurance covering all risk of direct
physical loss, written notice of the terms of the mutual waivers contained in
the paragraph, and to have the insurance policies properly endorsed, if
necessary, to prevent the invalidation of the insurance coverage by reason of
the mutual waivers contained in this paragraph.

         17. HOLD HARMLESS: Landlord shall not be liable to Tenant or Tenant's
employees, agents, invitees, licensees or visitors, or to any other person, for
any injury to person or damage to property on or about the Premises caused by
the negligence or misconduct of Tenant, its agents, servants or employees, or of
any other person entering upon the Premises under express or implied invitation
by Tenant, or caused by the Building and improvements located on the Premises
becoming out of repair, or caused by leakage of gas, oil, water or steam or by
electricity emanating from the Premises. Tenant agrees to indemnify and hold
harmless Landlord of and from any loss, attorney's, fees, expenses or claims
arising out of any such damage or injury. The foregoing indemnification shall
survive the expiration or earlier termination of this Lease.

         18. QUIET ENJOYMENT: Landlord warrants that it has full right to
execute and to perform this Lease and to grant the estate demised and that
Tenant, upon payment of the required rents and performing the terms, conditions,
covenants and agreements contained in this Lease, shall peaceably and quietly
have, hold and enjoy the Premises during the full Term as well as any extension
or renewal thereof. Landlord shall not be responsible for the acts or omissions
of any other tenant or third party that may interfere with Tenant's use and
enjoyment of the Premises.

         19. LANDLORD'S RIGHT OF ENTRY: Landlord shall have the right but not
the obligation, to enter the Premises at all reasonable hours for the following
reasons: inspection; cleaning or making repairs; making alterations or additions
as Landlord may deem necessary or desirable; determining Tenant's use of the
Premises, or determining if any act of default under this Lease has occurred; to
show the Premises to lenders, prospective lenders and prospective purchasers; or
to show the Leased Premises to prospective Tenants during the last one year of
the Term.

         20. ASSIGNMENT OR SUBLEASE: Landlord shall have the right to transfer
and assign, in whole or in part, its rights and obligations in the Building and
Property that are the subject of this Lease. Tenant shall not assign this Lease
or sublet all or any part of the Premises without the prior written consent of
Landlord, which consent shall not be unreasonably withheld. In the event of any
assignment or subletting, Tenant shall nevertheless at all times remain fully
responsible and liable for the payment of the rent and

                                    -12-

<PAGE>

for compliance with all of its other obligations under the terms, provisions and
covenants of this Lease. Upon the occurrence of an "event of default" as defined
herein, if all or any part of the Premises are then assigned or sublet,
Landlord, in addition to any other remedies provided by this Lease or provided
by law, may, as its option, collect directly from the assignee or subtenant all
rents becoming due to Tenant by reason of the assignment or sublease, and
Landlord shall have a security interest in all properties on the Premises to
secure payment of such sums. Any collection directly by Landlord from the
assignee or subtenant shall not be construed to constitute a novation or a
release of Tenant for the further performance of its obligation under this
Lease.

         21. LANDLORD'S LIEN: As security for payment of rent, damages and all
other payments required to be made by this Lease, Tenant hereby grants to
Landlord a Lien upon all property of Tenant now or subsequently located upon the
Premises. If Tenant abandons or vacates any substantial portion of the Premises
or is in default in payment of any rentals, damages or other payments required
to be made by this Lease or is in default of any other provision of this Lease,
Landlord may enter upon the Premises, by picking or changing locks if necessary,
and take possession of all or any part of the personal property, and may sell
all or any part of the personal property at a public or private sale, in one or
successive sales, with or without notice, to the highest bidder for cash, and,
on behalf of Tenant, see and convert all or part, of the personal property to
the highest bidder, delivering to the. highest bidder all of Tenant's title and
interest in the personal property sold to him. The proceeds of the sale. of the
personal property shall be applied to Landlord toward the reasonable costs and
expenses of the sale, including attorney's fees, and then toward the payment of
all sums then due by Tenant to Landlord under the terms of this Lease; any
excess remaining shall -be paid to Tenant or any other person entitled thereto
by law. It is expressly agreed to by Tenant that Landlord shall not be subject
to liability for any cause of action, including but not limited to conversion or
trespass, as a result of any actions taken by Landlord pursuant to the
provisions contained in this paragraph.

         22. DEFAULT BY TENANT: The occurrence of any one of the following
events shall automatically (without any need for prior notice or demand)
constitute an event of default hereunder (an "Event of Default"):

         (a) Tenant shall fail to pay when due any installment of rent or any
other payment required pursuant to this Lease;

         (b) Tenant shall abandon any substantial portion of the Premises;

                                    -13-

<PAGE>

         (c) Tenant shall fail to comply with any term, provision or covenant of
this Lease, other than the payment of rent, and the failure is not cured within
thirty (30) days after written notice to Tenant;

         (d) Tenant shall file a petition or be adjudged bankrupt or insolvent
under the National Bankruptcy Act, as amended, or any similar law or statute of
the United States or any state; or a receiver or trustee shall be appointed for
all or substantially all of the assets of Tenant; or Tenant shall make a
transfer in fraud of creditors or shall make an assignment for the benefit of
creditors; or

         (e) Tenant shall do or permit to be done any act which results in a
lien being filed against the Premises or the Building and/or Property of which
the Premises are a part.

         23. REMEDIES FOR TENANT'S DEFAULT: Upon the occurrence of any event of
default set forth in this Lease, Landlord shall have the option to pursue any
one or more of the following remedies without any notice or demand:

         (a) Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails to surrender the
Premises, Landlord may, without prejudice to any other remedy which it may have
for possession or arrearage in rent, enter upon and take possession of the
Premises, by picking or changing locks if necessary, and lock out, expel, or
remove Tenant and any other person who may be occupying all or any part of the
Premises, without-being, liable for prosecution or any claim for damages. Tenant
agrees to pay on demand the amount of all loss and damage which Landlord may
suffer by reason of the termination of the Lease under this subparagraph,
whether through inability to relet the Premises on satisfactory terms or
otherwise.

         (b) Enter upon and take possession of the Premises, by picking or
changing locks if necessary, and lock out, expel or remove Tenant and any other
person who may be occupying all or any part of the Premises without being
liable for any claim for damages, and relet the Premises on behalf of the Tenant
and receive directly the rent by reason of the reletting. Tenant agrees to pay
Landlord on demand any deficiency that may arise by reason of any reletting of
the Premises; further, Tenant agrees to reimburse Landlord for any expenditures
made by it for remodeling or repairing in order to relet the Premises.

         (c) Enter upon the Premises, by picking or changing locks if necessary,
without being liable for prosecution of any claim for damages, and do whatever
Tenant is obligated to do under the terms of this Lease. Tenant agrees to
reimburse Landlord on demand for any expenses which Landlord may incur in
effecting compliance with Tenant's obligations

                                    -14-

<PAGE>

under this Lease; further; Tenant agrees that Landlord shall not be liable for
any damages resulting to Tenant from effecting compliance with Tenant's
obligations under this subparagraph caused by negligence of Landlord or
otherwise.

         (d) Declare the Lease to be in default and to declare the entire amount
of the unpaid total rental for the balance of the term of the Lease and the
amount of rental abated during any free rent period immediately due and payable
whereupon Tenant shall become obligated to pay Landlord forthwith, the total
amount of unpaid rental for the balance of the term of the Lease and the amount
of rental abated during any free rent period as liquidated damages and shall
additionally be liable to Landlord as herein provided. Any specification herein
of Landlord's remedies shall not be deemed to be exclusive; but said remedies
shall be in addition to all other remedies in its favor, howsoever existing, and
shall be accumulative.

         24. WAIVER OF DEFAULT OR REMEDY: Failure of Landlord to declare an
event of default immediately upon its occurrence, or delay in taking any action
in connection with an event of default, shall not constitute a waiver of the
default, but Landlord shall have the right to declare the default at any time
and take such action as is lawful or authorized under this Lease. Pursuit of any
one or more of the remedies set forth in paragraph 23 above shall not preclude
pursuit of any one or more of the other remedies provided elsewhere in this
Lease or provided by law, nor shall pursuit of any remedy provided constitute
forfeiture or waiver of any rent or damages accruing to Landlord by reason of
the violation of any of the terms, provisions or covenants of this Lease.
Failure by Landlord to enforce one or more of the remedies provided upon an
event of default shall not be deemed or construed to constitute a waiver of the
default or of any other violation or breach of any of the terms, provisions and
covenants contained in this Lease.

         25. ACTS OF GOD: Landlord shall not be required to perform any covenant
or obligation in this Lease, or be liable in damages to Tenant, so long as the
performance or non-performance of the covenant or obligation is delayed, caused
by or prevented by an act of God or force majeure.

         26. ATTORNEY'S FEES: In the event Tenant defaults in the performance of
any of the terms, covenants, agreements or conditions contained in this Lease
and Landlord places in the hands of an attorney the enforcement of all or any
part of this Lease, the collection of the rent due or to become due or recover
of the possession of the Premises, Tenant agrees to pay Landlord reasonable
attorney's fees for the services of the attorney, whether suit is actually filed
or not. In no event shall the attorney's fees be less than fifteen percent of
the outstanding balance owed by Tenant to Landlord.

                                    -15-

<PAGE>

         27. HOLDING OVER: In the event of holding over by Tenant after the
expiration or termination of this Lease, the hold over shall be as a "tenant at
sufferance" and all of the terms and provisions of this Lease shall be
applicable during that period, except that Tenant shall pay Landlord as rental
for the period of such hold over an amount equal to two hundred percent (200%)
of the rent which would have been payable by Tenant had the hold over period
been a part of the original Term. Tenant agrees to vacate and deliver the
Premises to Landlord upon Tenant's receipt of notice from Landlord to vacate.
The rental payable during the hold over period shall be payable to Landlord on
demand. No holding over by Tenant, whether with or without consent of Landlord,
shall operate to extend this Lease except as otherwise expressly provided.

         28. RIGHTS OF FIRST MORTGAGEE: Tenant accepts this Lease subject and
subordinate to any recorded first mortgage or a security deed lien presently,
existing or hereafter created upon the Premises. Landlord is hereby irrevocably
vested with full power and authority to subordinate Tenant's interest under this
Lease to any first mortgage or security deed lien hereafter placed on the
Premises, and Tenant agrees upon demand to execute additional instruments
subordinating this Lease as Landlord may require. If the interests of Landlord
under this Lease shall be transferred by reason of foreclosure or other
proceedings, for enforcement of any first mortgage or security deed on the
Premises, Tenant shall be bound to the transferee (sometimes. called the
"Purchaser"), at the option of the Purchaser, under the terms, covenants and
conditions of this Lease for the balance of the term remaining, and any
extensions or renewals, with the same force and effect as if the Purchaser were
Landlord under this Lease, and, if requested by the Purchaser, Tenant agrees to
attorn to the Purchaser, including the first mortgagee under any such mortgage
if it be the Purchaser, as its Landlord.

         29. ESTOPPEL CERTIFICATES: Tenant agrees to furnish within ten (10)
days and, from time to time, upon request of Landlord or Landlord's mortgagee, a
statement certifying, if applicable, that Tenant is in possession of the
Premises; the Premises are acceptable; the Lease is in full force and effect;
the Lease is unmodified; Tenant claims no present charge, lien, or claim of
offset against rent; the rent is paid for the current month, but is not prepaid
for more than one month and will not be prepaid for more than one month in
advance; there is no existing default by reason of some act or omission by
Landlord; and such other matters as may be reasonably required by Landlord or
Landlord's mortgagee.

         30. SUCCESSORS: This Lease shall be binding upon and inure to the
benefit of Landlord and Tenant and their respective heirs, personal
representatives, successors and

                                    -16-

<PAGE>

assigns. It is hereby covenanted and agreed that should Landlord's interest in
the Premises cease to exist for any reason during the Term, then notwithstanding
the happening of such event this Lease nevertheless shall remain unimpaired and
in full force and effect and Tenant hereunder agrees to attorn to the then owner
of the Premises.

         31. DEFINITIONS: The following definitions apply to the terms set
forth below as used in this Lease:

         (a) "Abandon" means the vacating of all or a substantial portion of the
Premises by Tenant, whether or not Tenant is in default of the rental payments
due under this Lease.

         (b) An "act of God" or "force majeure" is defined for purposes of this
Lease as strikes, lockouts, sit-downs, material or labor restrictions by any
governmental authority, unusual transportation delays, riots, floods, washouts,
explosions, earthquakes, fire, storms, weather (including wet grounds or
inclement weather which prevents construction), acts of the public enemy, wars,
insurrections and any other causes not reasonably within the control of Landlord
and which by the exercise of due diligence Landlord is unable, wholly or in
part, to prevent or overcome.

         (c) The "Commencement Date" shall be the date set forth in paragraph 2.
The "Commencement Date" shall constitute the commencement of this Lease for all
purposes, whether or not Tenant has actually taken possession.

         (d) "real property tax" means all school, city, state and county taxes
and assessments including special district taxes or assessments.

         32. MISCELLANEOUS: The captions appearing in this Lease are inserted
only as a matter of convenience and in no way define, limit, construe or
describe the scope or intent of such paragraph. If any provision of this Lease
shall ever be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision of this Lease, and such
other provisions shall continue in full force and effect.

         33. NOTICE: (a) All rent and other payments required to be made by
Tenant shall be payable to Landlord at the address set forth below:

         (b) All payments required to be made by Landlord to Tenant shall be
payable to Tenant at the address first set forth below or to such other address
Landlord may direct by written notice to Tenant.

                                    -17-

<PAGE>

         (c) Any notice or document required or permitted to be delivered by
this Lease shall be deemed to be delivered (whether or not actually received)
one business day following deposit with a reputable overnight courier (e.g.,
Federal Express) or when deposited in the United States Mail, postage prepaid,
certified mail, return receipt requested, addressed to the parties at the
respective address set out below:

         If to Landlord:

         c/o Prudential Real Estate Investors
         Two Ravinia Drive
         Suite 1400
         Atlanta, Georgia 30346
         Attention: Regional -Vice President

         With a copy to:

         Bullock, Terrell & Mannelly
         400 Perimeter Center Terrace
         Suite 145
         Atlanta, Georgia 30346

         if to Tenant:

         Digital Recorders, Inc.
         c/o Mr. David Furr
         Gray, Layton, Drum, Kersh, Solomon & Furr, PA
         516 South New Hampton Road
         P.O. Box 2636
         Gastonia, North Carolina 28053-2636

         34. BROKERAGE COMMISSIONS: Except with respect to ANTHONY & CO.
(collectively, "Broker"), Tenant warrants and represents to Landlord that Tenant
has not employed or retained any Broker, finder or agent in connection with the
negotiation or execution of this Lease and, except with respect to Broker whose
commission is to be paid by Landlord, agrees to indemnify and hold Landlord
harmless from and against any loss,

                                    -18-

<PAGE>

cost, damage, liability or expense incurred by Landlord resulting from or
attributable to, any claim for a broker's fee, finder's fee or real estate
commission owed by Tenant or claimed by any party claiming by, through or under
Tenant or claiming to be Tenant's agent.

         35. ENTIRE AGREEMENT AND LIMITATION OF WARRANTIES: It is expressly
agreed by Tenant, as a material consideration for the execution of this Lease,
that this Lease, with the specific references to written extrinsic documents, is
the entire agreement of the parties; that there are, and were, no verbal
representations, warranties, understandings, stipulations, agreements or
promises pertaining to this Lease or the expressly mentioned written extrinsic
documents not incorporated in writing in this Lease. Landlord and Tenant
expressly agree that there are and shall be no implied warranties of
merchantability, habitability, fitness for a particular purpose or of any other
kind arising out of this Lease and there are no warranties which extend beyond
those expressly set forth in this Lease. It is likewise agreed that this Lease
may not be altered, waived, amended or extended except by an instrument in
writing signed by both Landlord and Tenant.

         36. TIME IS OF THE ESSENCE: Time is the essence of this Lease.

         37. SPECIAL STIPULATIONS: The special stipulations, if any, attached
hereto as Exhibit "D" are made a part hereof by this reference, and to the
extent they conflict with any of the foregoing provisions, they shall control.

         38. ADMINISTRATIVE CHARGES: In the event any check, bank draft or
negotiable instrument given for any money, payment hereunder shall be dishonored
at any time and from time to time, for any reason whatsoever not attributable to
Landlord, Landlord shall be entitled, in addition to any other remedy that may
be available, to impose an administrative charge of $25.00 which Tenant shall
promptly pay, as additional rent, upon demand.

         39. NON-WAIVER: No waiver of any covenant or condition of this Lease by
either party shall be deemed to imply or constitute a further waiver of the same
covenant or condition or any other covenant or condition of this Lease.

         40. PARTIAL INVALIDITY: If any term or provision of this Lease or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Lease or the application of such term or
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable

                                    -19-

<PAGE>

shall not be affected thereby and such term and provision of this Lease shall be
valid and be enforced to the fullest extent permitted by law.

         41. LIMITATION OF LIABILITY: The term Landlord as used in this Lease
shall be limited to mean and include only the owner or owners, at the time in
question, of the fee of the Premises and in no event shall such term or any
covenant be construed to impose a personal obligation upon a property manager or
leasing agent who is an independent real estate broker and, as such, an
independent contractor authorized by the owner of the Premises to secure leases
and to manage the Premises pursuant to a written management contract. Nothing
herein shall be construed to imply or impose upon either a property manager or
leasing broker or the owner of the Premises, a general agency relationship. In
the event of any transfer of title to such fee, the Landlord herein shall be
automatically freed and relieved from all personal liability with respect to
performance of any covenant or obligation on the part of Landlord, provided any
deposits or advance rents held by Landlord are turned over to the grantee and
said grantee expressly assumes, subject to the limitations of this paragraph,
all the terms, covenants and conditions of this Lease to be performed, on the
part of Landlord, it being intended hereby that the covenants and obligations
contained in this Lease on the part of Landlord shall, subject as aforesaid, be
binding on Landlord, its successors and assigns, only during their respective
successive periods of ownership. Any provision of this Lease to the contrary
notwithstanding' in no event shall Landlord's liability or that of its
directors, officers, employees or agents for failure to perform any obligations
arising out of or in connection with this Lease or for any breach of the Terms
or conditions of this Lease (whether written or implied) exceed Landlord's
equity interest in the Property and any judgment rendered with respect to any
such liability shall be satisfied solely out of proceeds of sale of Landlord's
interest in the Property.

                                 LANDLORD:

                                 THE PRUDENTIAL SAVINGS BANK, F.S.B., AS TRUSTEE

                                 By: Prudential Realty Advisors, as its agent

                                 By:
                                    --------------------------------------------
                                    Name:
                                           -------------------------------------
                                    Title:
                                           -------------------------------------

                                    -20-

<PAGE>

                                 TENANT:

                                 DIGITAL RECORDERS, INC.

                                 By:
                                    --------------------------------------------
                                    Name:
                                           -------------------------------------
                                    Title:
                                           -------------------------------------

                                    -21-

<PAGE>

ONE PARK CENTER 100,800 Square Feet

CORTEX VISION
SYSTEMS - 4,800 S1
12/31/98 Exp

I LIT-11-

          p

BURNHAM
14,400 SF
05/31/02 Ex

SURGICOT
63,116 SF
11/30/02 Exp

r

 .e

<PAGE>

                                    [GRAPH]

<PAGE>

                                    [GRAPH]

<PAGE>

                                    EXHIBIT B

Beginning at an iron located in the southern edge of the 84 foot right of way of
a road shown on the recorded map referred to below (which road is now known as
Patriot Road), said iron being located South 83 degrees 34 minutes 33 seconds
East 409.07 feet (measured along said right of way) from the point of
intersection of said right of way with the eastern edge of the right of way of
North Carolina Secondary Road No. 1959; thence with the southern edge of the
right of way of said 84 foot wide road South 83 degrees 34 minutes 33 seconds
East 925 feet to an iron in the western property line of Dickerson, Inc.; thence
with the western property line of Dickerson, Inc. South 06 degrees 56 minutes 58
seconds West 546.64 feet to an iron, the northeast comer of Wayne Cawley thence
with the northern property line of Wayne Cawley North 82 degrees 33 minutes 31
seconds West 920.13 feet to an iron, the southeast comer of the 5.477 acre tract
shown on a map referred to below; thence with the eastern property line of the
5.477 acre tract North 06 degrees 25 minutes 27 seconds East 530.28 feet to an
iron, the point of BEGINNING, containing 11.404 acres according to a map
entitled "Subdivision Plan for Park Center Industrial Park, Triangle Twp.,
Durham Co." dated May 6, 1982, prepared by F. Donald Lawrence and Associates,
P.A. and recorded in Book of Maps 10 1, Page 17 in the Office of Register of
Deeds of Durham County, North Carolina. Being the same land conveyed to Park
Center Associates by Dickerson, Inc. by deed recorded in Book 1083, Page 353,
Durham County Registry.

<PAGE>

                                   EXHIBIT "C"

                              RULES AND REGULATIONS

<TABLE>

<S>      <C>
1.1      Any outdoor storage facility or trash containers shall be effectively
         screened from all street frontage and shall be kept in a neat and clean
         attractive manner. All trash shall be kept within. Landlord shall have
         the right to approve the color and condition of all storage facilities
         or trash containers.

1.2      All electronic microwave dishes, satellite dishes, transmission towers,
         radio towers and communication devices inside and outside the Premises
         shall be first approved by Landlord in writing.

1.3      The Landlord retains the right of approval of the method of bringing
         power to the Building and especially the quality of the service
         provided. No overhead power lines shall be permitted.

1.4      Tenant shall not use or install inside or outside the Premises any
         water faucets or additional water lines without the express written
         consent of Landlord. If said consent is granted by Landlord, Landlord
         reserves the right to require separate metering and to assess
         additional water and sewer charges.

1.5      Landlord will not be responsible for lost or stolen property,
         equipment, money or any article taken from the Premises, Building or
         parking areas regardless of how or when loss occurs.

1.6      Tenant, its officers, agents, servants or employees shall not permit
         the operation of any musical or sound producing instruments or device
         which may be heard outside the Premises, Building or parking areas or
         which may emanate electrical waves which will impair radio or
         television broadcasting or reception from or in the Building.

 1.7     All contractors and/or technicians performing work for or within the
         Premises, Building or parking areas shall be referred to Landlord for
         approval before performing such work. This shall apply to all work
         affecting the, physical features or structural integrity of the
         Building, Premises or parking areas including but not

                                    -24-

<PAGE>

         limited to the walls and ceilings. None of this work shall be done by
         Tenant's contractor without Landlord's prior written approval.

1.8      In the event Tenant must dispose of crates, boxes, etc. which will not
         fit into outside trash containers it will be the responsibility of
         Tenant to dispose of same. In no event shall such items be left in the
         parking areas.

1.9      If the Premises demised to any become infested with vermin, Tenant at
         its sole cost and expense, shall cause its Premises to be exterminated
         from time to time, to the satisfaction of Landlord, and shall employ
         such exterminators therefor as shall be approved by Landlord.

2.0      Tenant, its officers, agents, employees, servants, patrons, customers,
         licensees, invitees and visitors shall not solicit business in the
         Building's parking areas or Common Areas, nor shall distribute any
         handbills or other advertising matter in automobiles parked in the
         Building's parking areas.

2.1      Tenant, its officers, agents, servants or employees shall not use the
         Premises or Building for housing, lodging or sleeping purposes.

2.2      Tenant, its officers, agents, servants, employees, patrons, licensees,
         customers, visitors or invitees shall not bring into the Premises or
         keep on the Premises any fish, fowl, reptile, insect or animal or any
         bicycle or other vehicle; wheel chairs and baby carriages excepted.

2.3      Tenant's employing laborers or others outside the Building shall not
         have their employees paid in the Building, but shall arrange to pay
         their payrolls elsewhere.

2.4      Sidewalks, doorways, vestibules and other similar areas shall not be
         used for the disposal of trash, be obstructed by Tenant, or be used by
         Tenant for any purpose other than entrance to and exit from the
         Premises and for going from one part of the Building to another part of
         the Building.

2.5      Plumbing fixtures shall be used only for the purpose for which they are
         designed, and no sweepings, rubbish, rags or other unsuitable materials
         shall be disposed into them. Damage resulting to any such fixture due
         to misuse by the Tenant shall be the liability of said Tenant.

2.6      Doors, when not in use, shall be kept closed.

                                    -25-

<PAGE>

2.7      Tenant space, particularly that which is visible from public areas,
         must be kept neat and clean.

</TABLE>

                                    -26-

<PAGE>

                                  EXHIBIT "D"

                              SPECIAL STIPULATIONS

1.       TERMINATION OPTION. Provided that no Event of Default has occurred
and is then continuing and no facts or circumstances exist, either at the time
of Tenant's notice to Landlord or on the date such termination would otherwise
be effective, which, with the giving of notice or the passage of time, or
both, would constitute an Event of Default, Tenant shall have the right to
terminate this Lease effective on the date which is the last day of the fifth
(5th) year of the Term. In order to exercise such termination right, Tenant
shall notify Landlord of such exercise in writing at least one hundred twenty
(120) days prior to the effective date of such termination, and together with
such notice Tenant shall deliver to Landlord an amount equal to the
Termination Fee (as hereinafter defined). In the event Tenant fails to notify
Landlord by such notice deadline or fails to deliver the entire Termination
Fee, as calculated by Landlord, Tenant shall be deemed to have waived Tenant's
termination right for the remainder of the Term and any extensions thereof.
The term "Termination Fee" as used in this Section shall mean the sum of the
following:

         a. the then remaining unamortized costs of the Tenant Improvements (as
hereinafter defined), which costs shall be amortized on a straight-line basis
along with simple interest calculated at 10% per annum over the Term;

         b. the then remaining unamortized leasing commissions and other similar
fees paid by Landlord in connection herewith, which commissions or other fees
shall be amortized on a straight-line basis along with simple interest
calculated at 10% per annum over the Term; and

         c. the cost to return the Premises to market conditions, as determined
by Landlord in its sole discretion as of the date Tenant delivers its notice of
termination. It is currently estimated that the Termination Fee will be
$210,000.00.

2. EARLY ENTRY INTO PREMISES. If and to the extent permitted by applicable laws,
rules and ordinances and provided Tenant obtains, at no cost to Landlord, a
temporary certificate of occupancy or such other permits or approvals from the
applicable governmental. agency or department authorizing the early entry
described herein, Tenant shall have the right to enter the Premises for the
period following the Effective Date hereof but prior to the Commencement Date in
order to temporarily operate an affiliated division of Tenant, provided that
during said period: (i) Tenant shall comply with all

                                    -27-

<PAGE>

terms and conditions of this Lease other than the obligation to pay rent, (ii)
Tenant shall not interfere with Landlord's completion of the Premises and (iii)
Tenant shall not otherwise begin operation of its business. Tenant does hereby
indemnify, agree to defend and save Landlord harmless from and against any and
all claims, liabilities, damages and expenses (including reasonable attorney's
fees) suffered, paid or incurred by Landlord arising out of Tenant's Early
Entry.

3. DELIVERY OF GUARANTY. At or prior to the Commencement Date, Tenant will
deliver to Landlord a guaranty, letter of credit or other form of security (the
"Guaranty") in form and substance and from a party (the "Guarantor") acceptable
to Landlord in its sole discretion. Tenant's failure to deliver the original
Guaranty within five (5) days of the Commencement Date shall constitute an Event
of Default hereunder. To the extent necessary, Landlord and Tenant agree to
execute an amendment, which shall be effective as of the Commencement Date,
amending, among other provisions, Section 3(b) hereof.

                                    -28-

<PAGE>

                                 EXHIBIT "E"

                                WORKAGREEMENT

         In consideration of the mutual covenants and agreements contained in
this Lease and in this EXHIBIT D, Landlord and Tenant do hereby expressly agree
as follows:

         1. DESIGN OF TENANT IMPROVEMENTS. Tenant shall, at Tenant's expense,
cause final detail design plans, specifications and working drawings, designated
as being ready for construction, to be prepared in accordance with all
applicable laws, ordinances, rules, regulations and codes of all applicable
governmental. or quasi-governmental bodies (hereinafter collectively referred to
as the "applicable legal requirements") to be prepared by an architect approved
by Landlord ("Tenant's Plans"), which plans shall govern all work to be
performed within the Premises (the "Tenant Improvements"). Landlord shall have
fifteen (15) business days following its receipt of Tenant's Plans to approve or
disapprove Tenant's Plans, which approval shall not be unreasonably withheld. In
the event Landlord fails to approve or disapprove Tenant's Plans within such
fifteen day period, Landlord shall be deemed to have disapproved same. In the
event Landlord disapproves (or is deemed to disapprove) Tenant's Plans, Landlord
and Tenant shall, in good faith, mutually attempt to resolve any disputes.
Tenant Improvements performed pursuant to this Exhibit D shall be deemed to
create permanent fixtures, which shall become the property of the Landlord upon
completion thereof.

         2. PERFORMANCE OF TENANT IMPROVEMENTS. Tenant shall, at Tenant's sole
cost and expense, construct or install, or cause to be constructed and
installed, in or upon the Premises, the Tenant Improvements in accordance with
Tenant's Plans. All permits, licenses and authorizations required or permitted
by all applicable governmental authorities relating to the Tenant Improvements
shall be procured and paid for by Tenant. The Tenant Improvements shall be
completed by Tenant in accordance with Tenant's Plans in a good and workmanlike
manner and in such a manner so as not to unreasonably interfere with the use of
the Building by other tenants thereof Landlord shall have the right to
reasonably (i) approve the work schedule of Tenant and Tenant's contractors in
the construction of the Tenant Improvements, (ii) approve Tenant's move-in
schedule for occupancy of the Premises, and (iii) inspect the Premises
throughout the construction of the Tenant Improvements. The term "Substantial
Completion" shall mean that the Tenant Improvements have been completed by
Tenant substantially in accordance with Tenant's Plans, as evidenced by a
certificate of occupancy for the Premises issued by the applicable governmental
authorities. Notwithstanding anything to the contrary set forth hereinabove, the
date on which Substantial Completion is deemed to have occurred shall be
accelerated by the number of days of Tenant Delay (as defined below), regardless
of the date that Substantial Completion actually occurs. For example, if Tenant
achieves Substantial Completion of the Tenant Improvements on December 1, 1999,
but Tenant is responsible for forty-five (45) days of Tenant Delay, Substantial
Completion shall be deemed to have occurred on October 15, 1999 for all purposes
under this Lease including, without limitation, the determination of the
Commencement Date. The term "Tenant Delay"

                                    -29-

<PAGE>

shall mean any delays in the completion of the Tenant Improvements caused by (i)
Tenant's failure to complete and deliver Tenant's Plans to Landlord; (ii) any
delays resulting from changes to the Plans requested by Tenant; and (iii) any
interference with the performance of the construction of the Tenant Improvements
by Tenant or any of its agents or employees; or (iv) any errors or omissions
contained within Tenant's Plans.

         3. RELEASE OF LIENS. The consent by Landlord to the construction of the
Tenant Improvements by Tenant shall not be construed as any assumption by
Landlord, either express or implied, of any liability of any nature against
Landlord, the Premises, the Building or the Real Property for the payment of any
labor performed or any materials furnished in connection with the construction
or installation of the Tenant Improvements, In the event any such claim for
payment or any materialmen's or mechanics' liens are filed against Landlord, the
Premises (including Tenant's leasehold interest therein), the Building or the
Real Property, then Tenant agrees to forthwith pay the same or cause such
security therefore to be deposited for the payment and discharge of the same as
may be reasonably required by Landlord. Tenant further agrees that, upon
completion of the Tenant Improvements, Tenant shall provide Landlord written
lien releases from any and all contractors who have performed work in the
Premises.

         4. INDEMNIFICATION. Tenant does hereby indemnify, agree to defend and
save Landlord and Agent harmless, from and, against any and all claims,
liabilities, damages and expenses (including reasonable attorney's fees)
suffered, paid or incurred by Landlord arising out of the construction and
installation of the Tenant Improvements, including, specifically, the cost of
any labor performed and materials furnished to Premises.

          5.      TENANT'S COSTS.

         (a) Subject to Landlord's funding of the Tenant Improvement Allowance,
Tenant shall be responsible for the payment of all costs associated with the
Tenant Improvements. Landlord shall pay to Tenant up to $280,000.00 (the "Tenant
Improvement Allowance") toward the cost of the Tenant Improvements. Any costs
and expenses for the Tenant Improvements in excess of the Tenant Improvement
Allowance shall be paid solely by Tenant. Landlord shall, from time to time, pay
to Tenant partial draws (a "Partial Draw") of the Tenant Improvement Allowance
within twenty-one (21) days after Landlord's receipt of. (a) Invoice(s) for
same, (b) partial lien releases from all contractors and subcontractors
performing any portion of the work to which the Partial Draw is to be applied
(the "Partial Draw Improvements"), (c) a certificate from Tenant's architect
certifying in writing that the Partial Draw Improvements have been substantially
completed in accordance with Tenant's Plans, and (d) a certified written
statement from Tenant certifying in writing to Landlord that upon Tenant's
receipt of the Partial Draw, all costs relating to the Partial Draw Improvements
have been paid in full. The remainder of the Tenant Improvement Allowance shall
be paid to Tenant upon Landlord's receipt of (a)

                                    -30-

<PAGE>

Invoice(s) for same, (b) lien releases from all contractors and subcontractors
performing any portion of the work comprising the Tenant Improvements, ~c) a
certificate from Tenant's architect certifying in writing that the Tenant
Improvements have been substantially completed in accordance with Tenant's
Plans, and (d) a certified written statement from Tenant certifying in writing
to Landlord that upon Tenant's receipt of the Tenant Improvement Allowance, all
costs relating to the Tenant Improvements have been paid in full.

         (b) In the event the cost of the Tenant Improvements is less than the
Tenant Improvement Allowance, Tenant shall be entitled to apply an amount up to
$30,000.00 (evidenced by paid invoices) toward the costs Tenant incurs in
relocating to the Premises. Tenant shall be entitled to offset base rent for
fifty percent (50%) of any additional balance beyond the $30,000.00. Landlord
shall retain all remaining sums not applied in accordance with this
subparagraph, and Tenant shall not have any rights thereto.

                                    -31-

<PAGE>

                                 EXHIBIT "F"

                   ACKNOWLEDGMENT, ACCEPTANCE AND AMENDMENT

         Tenant hereby acknowledges that the Premises demised pursuant to the
Lease to which this Exhibit "C is attached (the "Lease"), and Tenant hereby
accepts said Premises as substantially complete and ready for the uses intended
as set forth in the Lease. Possession of the Premises is hereby delivered to
Tenant, and any damages to walls, ceilings, floors or existing work, shall be
the sole responsibility of Tenant.

         If any improvements or tenant finishes are to be constructed or
installed by Tenant or Tenant's contractors, as previously approved by Landlord,
Tenant hereby agrees to indemnify and hold harmless Landlord from and against
any claims, demands, loss or damage Landlord may suffer or sustain as a result
of such work by Tenant or Tenant's contractors, including, without limitation,
any claim of lien which may be filed against the Premises or Landlord's Property
as a result of such work by Tenant's contractors or representatives. In the
event any such claim of lien is filed against Landlord's Property by any
contractor, laborer or materialman performing work on the Premises at Tenant's
direction, Tenant agrees to cause such lien to be discharged, by payment of the
claim or bond, within ten (10) days of receipt of demand by Landlord.

         Tenant and Landlord hereby further acknowledge and agree as follows:

1.       The Commencement Date (as defined in the Lease) is             199
and the Expiration Date (as defined in the Lease) is               199.

2.       The exact rentable square feet contained within the Premises is
square feet

3.       Tenant intends to occupy the Premises on

4.                  (No.) keys to the Premises have been delivered to Tenant or
Tenant' s representative.

5.       This Acknowledgment, Acceptance and Amendment, when executed by
Landlord and Tenant, shall be attached to and shall become a part of the
Lease. If any provision contained herein conflicts with any provision of the
Lease, the provisions hereof shall supersede and control, and the Lease shall
be deemed modified and amended to conform with the provisions hereof.

6.       OTHER AGREEMENTS OR MODIFICATIONS (INSERT NONE, IF NONE):

IN WITNESS WHEREOF, Landlord and Tenant have hereunto set their hands and seals,
as of 199.

                                    -32-

<PAGE>

TENANT:                                   LANDLORD:

DIGITAL RECORDERS, INC.                   TBE PRUDENTIAL SAVINGS BANK,
                                          F.S.B., AS TRUSTEE
By:
                                          By: Prudential Realty Advisors, as its
    Name:                                 agent
    Title:
                                          By:

                                    -33-

<PAGE>

    Name:
         ---------------------------
    Title:
          --------------------------<PAGE>

                          TECHNOLOGY LICENSE AGREEMENT

The University of Washington, a public institution of higher education having
administrative offices in Seattle, Washington 98195 ("UW"), and Digital
Recorders, Inc., a for-profit company having a place of business at 4018
Patriot Drive, One Park Center, Suite 100, Research Triangle Park, NC 27709
("Company") agree as follows:

BACKGROUND          1.1   UW has developed through the efforts of Professor
                    Daniel J. Dailey ("Dr. Dailey"), an employee of UW, and
                    others in the Department of Electrical Engineering certain
                    software, algorithms, and technical information pertaining
                    to transportation information management systems
                    ("Technology").

                    1.2   UW desires to license, and Company desires to obtain,
                    rights in the Technology to promote commercial investment
                    in developing the Technology and in creating products
                    incorporating the Technology.

DEFINITIONS         2.1   "Agreement" means this Technology License Agreement
                    and any attachments referenced by this Agreement and its
                    attachments.

                    2.2   "Effective Date" means the date upon which this
                    Agreement is fully executed by both UW and Company.

                    2.3   "Technology" means the subject matter set forth on
                    Attachment A.

                    2.4   "Modification" means any work based on or derived from
                    the Technology. Modifications may include, but are not
                    limited to, corrections of software program errors,
                    translations and stylistic restructuring of the Technology,
                    addition or deletion of functions or enhancement of existing
                    functions of the Technology, changes required to integrate
                    the Technology into other applications, preparation of
                    derivative works based on one or more works comprising the
                    Technology, and other adaptations of the Technology.

                    2.5   "UW Modification" means a Modification prepared by or
                    under the direction of Dr. Dailey or any successor and
                    which makes changes involving access to Technology source
                    code statements.

                    2.6   "Company Modification" means a Modification prepared
                    by or for Company by other than UW and its personnel,
                    including Dr. Dailey.

                    2.7   "Licensed Subject Matter" means the Technology, UW
                    Modifications delivered to Company pursuant to this
                    Agreement, and Company Modifications.

                    2.8   "End User" means a customer of Company that receives
                    and uses Licensed Subject Matter for customer's internal
                    and/or public operations and not for redistribution,
                    relicensing, disclosure, or conveyance of Licensed Subject
                    Matter beyond the operationsand control of said customer.

                    2.9   "Sublicense" means (a) a license granted by Company
                    to an End User that permits the use of Licensed Subject
                    Matter by the End User for its own internal and/or public
                    operations; (b) a license granted by Company to a
                    distributor or reseller to act on behalf of Company or
                    under contract to Company to convey or sell
                    Company-branded Licensed Subject Matter to End Users under
                    an appropriate End User license consistent with
                    Article 3.1(c).

GRANT               3.1   UW hereby grants to Company, and Company accepts,
                    worldwide non-exclusive licenses, with the right to
                    sublicense to End Users, under the UW's valuable intangible
                    property rights, and providing for a limited time Company
                    with an exclusive commercial position, as follows:

TECHNOLOGY LICENSE AGREEMENT                                         PAGE 1 OF 7
<PAGE>

                    (a)   to install and operate the Technology and UW
                          Modifications for internal research and evaluation
                          purposes on Company owned or controlled servers and
                          workstations;

                    (b)   to create Company Modifications, and to operate
                          Licensed Subject Matter for internal Company purposes,
                          and to install, deploy, and support Licensed Subject
                          Matter for evaluation and operation by two (2) End
                          Users;

                    (c)   to incorporate the Technology and UW Modifications and
                          Company Modifications into commercial products
                          distributed directly or through third party
                          distributors (but carrying Company and not
                          third-party distributor brands and under a Sublicense
                          for distribution or resale) to customers under a
                          Sublicense for End Use;

                    (d)   to use the Identifiers as set forth on Attachment A,
                          provided that Company uses best efforts to avoid any
                          use that would result in the infringement of any
                          valid trademark held by any third party, and further
                          provided that any trademark rights that may arise from
                          Company use of Identifiers shall be owned by UW.

                    3.2   UW retains title to the Technology and to all UW
                    Modifications delivered to Company under this Agreement.
                    Company shall own Company Modifications, including but not
                    limited to any patent, copyright, and trademark rights
                    thereto, prepared pursuant to this Agreement and developed
                    without the involvement of UW and UW personnel, including
                    Dr. Dailey, provided any such Company Modifications are
                    managed under the terms and conditions of this Agreement as
                    Licensed Subject Matter.

                    3.3   Company acknowledges that UW is active in the
                    development of the Technology, and Company agrees that UW
                    may prepare UW Modifications substantially similar to
                    Company Modifications, and that UW shall not be
                    constrained other than by this Agreement in UW's management
                    of such UW Modifications.

                    3.4   Provided Company is in full compliance with this
                    Agreement, UW shall not grant, for a period of thirty
                    (30) months from the Effective Date, additional licenses to
                    the Technology to for-profit commercial entities other than
                    to former and existing for-profit sponsors of research at
                    UW to which UW has obligations to grant non-exclusive
                    licenses to any or all of the Technology. UW shall promptly
                    inform Company of any obligations that come to the attention
                    of UW's Office of the Vice Provost for Intellectual Property
                    and Technology Transfer regarding such commercial licensing
                    of the Technology.

                    3.5   UW and Company will, at Company's request, negotiate
                    in good faith an extension of the period set forth in
                    Article 3.4, provided that Company (i) has granted
                    Sublicenses to at least five (5) End Users under
                    Section 3.1(c); (ii) there are no unresolved disputes
                    between UW and Company regarding this Agreement or other
                    agreements between UW and Company; and (iii) Company
                    presents a commercialization plan to UW showing Company
                    investment in developing and supporting the Technology and
                    a continued commitment to serve the transportation
                    information services marketplace.

                    3.6   UW may grant non-exclusive End User licenses to the
                    Technology and UW Modifications to non-profit organizations
                    and to governments providing regional transportation and
                    transportation information services.

DELIVERY            4.1   UW shall provide to Company the Technology within
                    ten (10) days of the Effective Date to

                    Bill McFarland
                    Digital Recorders, Inc.

Technology License Agreement                                         Page 2 of 7
<PAGE>

                    4018 Patriot Drive, One Park Center, Suite 100
                    P.O. Box 14068
                    Research Triangle Park, NC 27709

                    who shall serve as Company's technical liaison with UW.

                    4.2   UW shall provide to Company UW Modifications for a
                    period determined as the longer of (a) one (1) year from
                    the Effective Date of this Agreement and (b) ninety
                    (90) days following the completion of any research
                    sponsored by Company at UW pertaining to the Technology
                    and Modifications commenced within one (1) year of this
                    Agreement. Company and UW may upon mutually agreeable terms
                    and conditions extend the term for provision of UW
                    Modifications.

CONSIDERATION       5.1   Company shall provide to UW consideration for the
                    licenses granted herein as set forth on Attachment B.

DILIGENCE           6.1   Company shall utilize commercially reasonable efforts
                    in proceeding with the development, manufacture, sale, and
                    other commercial exploitation of Licensed Rights, and in
                    creating a supply and demand for Licensed Subject Matter.

                    6.2   Company shall mark, and shall require any
                    Sublicensee(s) to mark, any and all material forms of
                    Licensed Subject Matter or packaging pertaining thereto
                    distributed, transmitted, or displayed by Company (and/or
                    by its Sublicensees) in the United States with appropriate
                    copyright notices and other notices or disclaimers as
                    reasonably required to preserve UW rights in the Technology
                    and UW-prepared Modifications.

                    6.3   Company shall have Licensed Subject Matter in
                    commercial use with more than one (1) End User by August 31,
                    2002.

                    6.4   Company shall keep complete and accurate records and
                    books of account containing all information necessary for
                    the computation and verification of the amounts to be paid
                    hereunder. Company shall keep these records and books for a
                    period of five (5) years following the end of the accounting
                    period to which the information pertains.

                    6.5   If a dispute arises between UW and Company with regard
                    to the accuracy of reports or the amounts owed by Company
                    pursuant to this Agreement, Company shall, at the request
                    of UW, permit one or more accountants selected by UW
                    ("Accountant") to have access to Company's records and books
                    of account during ordinary working hours to audit with
                    respect to any payment period ending prior to such
                    request, the correctness of any report or payment made under
                    this Agreement, or to obtain information as to the payments
                    due for any such period in the case of failure of the
                    Company to report or make payment pursuant to the terms of
                    this Agreement.

                    6.6   The Accountant shall not disclose to UW any
                    information relating to the business of Company except that
                    which is necessary to inform UW of: (a) the accuracy or
                    inaccuracy of Company's reports and payments; (b) compliance
                    or noncompliance by Company with the terms and conditions
                    of this Agreement; and (c) the extent of any inaccuracy or
                    noncompliance.

                    6.7   Should the Accountant establish with reasonable
                    clarity that there is an inaccuracy in any of the Company's
                    payments or noncompliance by the Company with any of such
                    terms and conditions, the Accountant shall have the right
                    to make and retain copies (including photocopies) of any
                    pertinent portions of the records and books of account.

                    6.8   In the event that Company's financial obligations
                    calculated for any semi-annual period are under reported by
                    more than Ten Percent (10%), the costs of any audit and

Technology License Agreement                                         Page 3 of 7
<PAGE>

                    review initiated by UW will be borne by Company; otherwise,
                    UW shall bear the costs of any audit initiated by UW.

NOTICES             7.1   Any notice or other communication required or
                    permitted to be given by either party hereto shall be
                    deemed to have been properly given and be effective upon
                    the date of delivery if delivered in writing to the
                    respective addresses set forth below, or to such other
                    address as either party shall designate by written notice
                    given to the other party. If notice or other communication
                    is given by facsimile transmission, said notice shall be
                    confirmed by prompt delivery of the hardcopy original.

                    7.2   In the case of Company:

                    All correspondence regarding this Agreement should be
                    addressed to Tanya Johnson.

                    Postal Address:    Digital Recorders, Inc.
                    Address:           4018 Patriot Drive, One Park Center,
                                       Suite 100
                                       PO Box 14068
                                       Research Triangle Park, NC 27709

                    Facsimile Address: (919) 361-2947

                    7.3   In the case of UW:

                    All correspondence regarding this Agreement should be
                    addressed to Dr. Robert C. Miller, Jr.

                    Postal Address:    University of Washington
                                       Office of IP & Technology Transfer
                                       Box 354810
                                       Seattle WA 98195

                    Street Address:    University of Washington
                                       Office of IP & Technology Transfer
                                       1101 N.E. 45th Street, Suite 200
                                       Seattle WA 98105

                    Facsimile Address: (206) 685-4767

TERM                8.1   This Agreement shall be effective until the last
                    to expire of UW's copyrights or patent rights in the
                    Technology and UW-prepared and Company-prepared
                    Modifications, unless sooner terminated as provided by
                    this Agreement.

                    8.2   Company may terminate this Agreement at any time
                    upon ninety (90) days' written notice to UW and provided
                    that Company has paid to UW fees as specified in
                    Attachment B.

                    8.3   UW may terminate this Agreement upon notice if Company
                    is in material breach of this Agreement and fails within
                    thirty (30) days of a written demand for performance to
                    cure such breach.

                    8.4   UW may terminate this Agreement and the license
                    granted to Company herein, effective immediately upon
                    written notice of termination to Company if (i) Company
                    seeks liquidation, reorganization, dissolution or winding-up
                    of itself, is insolvent or evidence exists as to its
                    insolvency, or Company makes any general assignment for the
                    benefit of its creditors; or (ii) a petition is filed by or
                    against Company, or any proceeding is initiated by or
                    against Company, or any proceeding is initiated against
                    Company as a debtor, under any bankruptcy or insolvency law,
                    unless the laws then in effect void the

TECHNOLOGY LICENSE AGREEMENT                                         PAGE 4 OF 7
<PAGE>

                    effectiveness of this provision; or (iii) a receiver,
                    trustee, or any similar officer is appointed to take
                    possession, custody, or control of all or any part of
                    Company's assets or property.

                    8.5   The provisions under which this Agreement may be
                    terminated shall be in addition to any and all other legal
                    remedies which either party may have for the enforcement of
                    any and all terms hereof, and do not in any way limit any
                    other legal remedy such party may have.

                    8.6   Termination of this Agreement shall terminate all
                    rights and licenses granted to Company relating to the
                    Technology and to UW Modifications, and Company shall
                    cease use, distribution, licensing, and other exploitation
                    of Licensed Subject Matter. Upon termination, any and all
                    then in force Sublicenses shall be handled as described
                    on Attachment C.

RISK                9.1   UW represents that UW has the right to enter into
                    this Agreement and that to the best of UW's knowledge, UW
                    is not aware of any claim or notice that the Technology
                    infringes any patents, copyrights, other intellectual
                    property rights of any third parties.

                    9.2   UW EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, WHETHER
                    EXPRESS OR IMPLIED, PERTAINING TO THE MERCHANTABILITY OR
                    FITNESS FOR A PARTICULAR PURPOSE OF THE TECHNOLOGY,
                    MODIFICATIONS, AND LICENSED SUBJECT MATTER.

                    9.3   Except with regard to the representations set forth
                    in Article 9.1 above, Company shall indemnify and hold
                    harmless UW, and its officers, Software developers,
                    employees, students, and agents, against any and all
                    claims, suits, losses, damages, costs, fees, and expenses
                    resulting from Company's possession and/or use of the
                    Technology, Licensed Rights, or Licensed Subject Matter,
                    including but not limited to any damages, losses, or
                    liabilities whatsoever with respect to death or injury to
                    any person and damage to any property. This indemnification
                    clause shall survive the termination of this Agreement.

GENERAL             10.1   This Agreement shall be construed in accordance with,
                    and its performance shall be governed by, the laws of the
                    State of Washington without giving effect to any conflict of
                    laws provisions. Headings are provided for convenience only.

                    10.2   If any dispute should arise between Company and UW
                    regarding this Agreement, Company and UW shall attempt to
                    resolve such dispute through good faith negotiations, to
                    commence promptly upon notice of one party to the other that
                    there is a breach or other significant area of disagreement
                    with regard to the interpretation of, or performance
                    pursuant, to this Agreement. If either Company or UW
                    requests, subsequent to such notice and at least thirty
                    (30) days' effort to resolve such dispute, either party may
                    request arbitration or alternative dispute resolution, and
                    such request shall not be unreasonably refused by the other
                    party.

                    10.3   Any suit, action, or proceeding arising out of or
                    relating to this Agreement shall be decided in King County,
                    Washington. Company and UW accept the venue and jurisdiction
                    of the Federal District Court of Western Washington,
                    Seattle, or the King County Superior Courts.

                    10.4   No omission or delay of either party hereto in
                    requiring due and punctual fulfillment of the obligations
                    of any other party hereto shall be deemed to constitute a
                    waiver by such party of its rights to require such due
                    and punctual fulfillment, or of any other of its remedies
                    hereunder. Amendments to this Agreement must be in
                    writing, reference this Agreement, and be signed by duly
                    authorized representatives of UW and Company.

TECHNOLOGY LICENSE AGREEMENT                                         PAGE 5 OF 7
<PAGE>

                    10.5   In the event either party hereto is prevented from
                    or delayed in the performance of any of its obligations
                    hereunder by reason of acts of God, war, strikes, riots,
                    storms, fires, or any other cause whatsoever beyond the
                    reasonable control of the non-performing party, the
                    non-performing party shall be excused from the
                    performance of any such obligation to the extent and during
                    the period of such prevention or delay.

                    10.6   This Agreement and the rights and benefits conferred
                    upon Company hereunder may not be assigned or otherwise
                    transferred by Company without the prior written consent of
                    UW which shall not be unreasonably withheld.

                    10.7   UW and Company are independent contractors and
                    neither has the authority to obligate the other or shall
                    act as an agent or representative of the other.

                    10.8   Nothing contained in this Agreement shall be
                    construed as conferring any right to use in advertising,
                    publicity, or other promotional activities any name,
                    trade name, trademark or other designation of the other
                    party or of any identifying technology of the other party,
                    including any contraction, abbreviation, or simulation of
                    the foregoing. The foregoing notwithstanding, Company and
                    UW each may include in written and other communications
                    that the Technology has been obtained by the Company
                    under a license from the University of Washington. UW and
                    Company will use best efforts to inform the other party
                    prior to any public releases or announcements conveying
                    such information. Any mark used and owned by Company as
                    of the date of this Agreement shall remain with Company
                    whether or not used in conjunction with any other
                    trademarks.

                    10.9   This Agreement embodies the entire understanding
                    of the parties and supersedes all previous communications,
                    representations, or understandings, either oral or
                    written, between the parties relating to the subject
                    matter hereof.

                    [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT
                    BLANK.]

TECHNOLOGY LICENSE AGREEMENT                                         PAGE 6 OF 7
<PAGE>

The University of Washington and Digital Recorders, Inc. have executed this
Agreement by their respective duly authorized representatives on the dates
given below.

DIGITAL RECORDERS, INC.                UNIVERSITY OF WASHINGTON

By:                                    By:
   ------------------------------         ------------------------------
Name:                                  Name:
     ----------------------------           ----------------------------
Title:                                 Title:
      ---------------------------            ---------------------------
Date:                                  Date:
     ----------------------------           ----------------------------

                                       CONCURRENCE:

                                       ---------------------------------
                                       Daniel J. Dailey

TECHNOLOGY LICENSE AGREEMENT                                         PAGE 7 OF 7
<PAGE>

                         Technology License Agreement
                                  Attachment A
                                   Technology

BUSVIEW

Software inventory: on CDR

Identifier: BUSVIEW

Technical documentation: on CDR

MYBUS

Software inventory: on CDR

Identifier: MYBUS

Technical documentation: on CDR

TECHNOLOGY LICENSE AGREEMENT                                        PAGE A1 OF 1
<PAGE>

                         TECHNOLOGY LICENSE AGREEMENT
                                  ATTACHMENT B
                                 CONSIDERATION

LICENSE FEE         B.1   Company shall pay to UW an Initial License Fee of
                    Fifteen Thousand Dollars ($15,000), payable upon execution
                    of this Agreement.

ROYALTY             B.2   Commencing on January 1, 2001, Company shall pay to
                    UW within thirty (30) days of January 1 and July 1, of each
                    year, a royalty of Seven Thousand Five Hundred Dollars
                    ($7,500) per customer End User Sublicense. The two End User
                    licenses identified in Section 3.1(b) are exempted from the
                    royalty if entered into prior to December 31, 2001.

                    B.3   If Company has (a) commenced Sublicensing under 3.1(c)
                    of the Agreement or (b) files (whether directly or through
                    UW) for patent protection on the Technology, a Modification,
                    or any aspect thereof, including any new use, Company shall
                    pay the greater of the royalty specified above or a
                    semi-annual minimum royalty of Fifteen Thousand Dollars
                    ($15,000).

                    B.4   If Company grants a total of more than five (5) such
                    Sublicenses to End Users under 3.1(c), the semi-annual
                    minimum license fee shall be Thousand Dollars ($30,000).

EQUITY              B.5   The Initial License Fee shall be paid by Company in
                    the form of a grant of warrants for Five Thousand (5,000)
                    shares of Company stock at a strike price of three dollars
                    ($3.00) per share and a term of five (5) years, and a cash
                    payment of Seven Thousand Five Hundred Dollars ($7,500).
                    The first Fifteen Thousand Dollars ($15,000) of the annual
                    minimum fee for 2001, if applicable, shall be paid by
                    Company by two grants of warrants for Two Thousand Five
                    Hundred (2,500) shares each of Company stock with a term of
                    five (5) years and a strike price to be negotiated, and a
                    cash payment of Two Thousand Five Hundred Dollars ($2,500)
                    within thirty (30) days of January 1 and July 1.

PAYMENT             B.6   All non-equity payments under this agreement shall be
                    made in United States dollars by check or money order
                    payable to the University of Washington, and delivered to
                    the University of Washington, Office of Technology
                    Transfer, 1107 NE 45 th Street, Suite 200, Seattle, WA
                    98105. Equity consideration in the form of warrants shall be
                    delivered to the University of Washington, Office of
                    Financial Management, Attn: Douglas Breckel, 280 Gerberding
                    Hall, Box 351248, Seattle, WA 98195.

REFERENCE           B.7   Company shall identify payments and equity
                    consideration to UW as 10798CA.

TECHNOLOGY AND LICENSE AGREEMENT                                    PAGE B1 OF 1
<PAGE>

                         TECHNOLOGY LICENSE AGREEMENT
                                  ATTACHMENT C
                                   SUBLICENSES

END USERS           C.1   Sublicenses as defined at Article 2.9(a) to End
                    Users shall remain in effect. Sublicenses as defined at
                    Article 2.9(b) to distributors and resellers shall
                    terminate upon termination of this Agreement.

COMPANY SUPPORT     C.2 Company shall not provide to End Users further updates,
                    modifications, or other work product that would come within
                    the scope of Licensed Subject Matter. Company may provide
                    other forms of support to End Users, however, such as
                    instruction, installation, and bug fixes for Company
                    Modifications.

REVERSION OF RIGHTS C.3   Sublicenses to End Users shall revert to UW, and UW
                    shall have the right to manage such Sublicenses according
                    to UW policies and regulations, provided that:

                    (a)   Company obligations in the form of assistance,
                          hosting, contract services, or any other such
                          obligations to End Users, provided the conditions of
                          Article C.2 are met, shall not revert to UW;

                    (b)   End Users accept the risk language and obligations as
                          set forth in Article 9;

                    (c)   Any obligation to provide updates, modifications, or
                          contract services involving Licensed Subject Matter
                          which reverts to UW management will be undertaken
                          by UW to End Users only at UW's sole discretion,
                          consistent with UW's public mission and policies.

TECHNOLOGY AND LICENSE AGREEMENT                                    PAGE C1 OF 1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00026-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00026-of-00352.parquet"}]]