Document:

<PAGE>

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED ("ACT"), OR APPLICABLE STATE SECURITIES LAWS ("STATE ACTS"), AND SHALL
NOT BE SOLD, HYPOTHECATED, OR OTHERWISE TRANSFERRED, UNLESS SUCH TRANSFER IS
MADE IN COMPLIANCE WITH THE ACT AND THE STATE ACTS.

                             STOCK PURCHASE WARRANT

         This Stock Purchase Warrant (this "Warrant"), dated June 27, 2001, is
issued to HSBC GLOBAL CUSTODY NOMINEE (U.K.) LIMITED, DESIGNATION NO. 896414
("Holder"), by DIGITAL RECORDERS, INC., a North Carolina corporation (the
"Company").

         1.       PURCHASE OF SHARES. Subject to the terms and conditions
hereinafter set forth, the Holder is entitled, upon surrender of this Warrant
at the principal office of the Company (or at such other place as the Company
shall notify the holder hereof in writing), to purchase from the Company one
hundred thousand (100,000) fully paid and non-assessable shares of Common
Stock, no par value (the "Common Stock"), of the Company (as adjusted pursuant
to Section 7 hereof, the "Shares") for the purchase price specified in Section
2 below.

         2.       PURCHASE PRICE. The purchase price for the Shares is $2.00
per share. Such price shall be subject to adjustment pursuant to Section 7
hereof (such price, as adjusted from time to time, is herein referred to as the
"Warrant Price").

         3.       EXERCISE PERIOD. This Warrant is exercisable in whole or in
part at any time from the date hereof through June 27, 2006.

         4.       METHOD OF EXERCISE. While this Warrant remains outstanding
and exercisable in accordance with Section 3 above, the Holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by:

                  (a) surrender of this Warrant, together with a duly executed
copy of the form of Exercise Notice attached hereto, to the Secretary of the
Company at its principal offices, and the payment to the Company of an amount
equal to the aggregate purchase price for the number of Shares being purchased;
or

                  (b) if the Company's Common Stock is publicly traded as of
such date, the instruction to retain that number of Shares having a value equal
to the aggregate exercise price of the Shares as to which this Warrant is being
exercised and to issue to the Holder the remainder of such Shares computed using
the following formula:

                  X = Y(A-B)
                      ------
                         A

Where:            X = the number of shares of Common Stock to be issued to the
                      Holder.

                                       1

<PAGE>

                  Y = the number of shares of Common Stock as to which this
                      Warrant is being exercised.

                  A = the fair market value of one share of Common Stock.

                  B = the Warrant Price.

         As used herein, the "fair market value of one share of Common Stock"
shall mean:

                      (2) Except in the circumstances described in clause (2)
or (3) hereof, the closing price of the Company's Common Stock, as reported in
the WALL STREET JOURNAL, on the trading day immediately prior to the date of
exercise;

                      (3) If such exercise is in conjunction with a merger,
acquisition or other consolidation pursuant to which the Company is not the
surviving entity, the value received by the holders of the Common Stock
pursuant to such transaction for each share; or

                      (4) If such exercise is in conjunction with the initial
public offering of the Company, the price at which the Common Stock is sold to
the public in such offering.

         5.       CERTIFICATES FOR SHARES. Upon the exercise of the purchase
rights evidenced by this Warrant, one or more certificates for the number of
Shares so purchased shall be issued as soon as practicable thereafter, and in
any event within thirty (30) days of the delivery of the subscription notice.

         6.       RESERVATION OF SHARES. The Company covenants that it will at
all times keep available such number of authorized shares of its Common Stock,
free from all preemptive rights with respect thereto, which will be sufficient
to permit the exercise of this Warrant for the full number of Shares specified
herein. The Company further covenants that such Shares, when issued pursuant to
the exercise of this Warrant, will be duly and validly issued, fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issuance thereof.

         7.       ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number
and kind of securities purchasable upon exercise of this Warrant and the
Warrant Price shall be subject to adjustment from time to time as follows:

                  (a) STOCK DIVIDENDS, SUBDIVISIONS, COMBINATIONS AND OTHER
ISSUANCES. If the Company shall at any time prior to the expiration of this
Warrant subdivide its Common Stock, by stock split or otherwise, combine its
Common Stock or issue additional shares of its Common Stock as a dividend with
respect to any shares of its Common Stock, the number of Shares issuable on the
exercise of this Warrant shall forthwith be proportionately increased in the
case of a subdivision or stock dividend and proportionately decreased in the
case of a combination. Appropriate adjustments shall also be made to the
purchase price payable per share, but the aggregate purchase price payable for
the total number of Shares purchasable under this Warrant (as adjusted) shall
remain the same. Any adjustment under this Section 7(a) shall become effective
at the close of business on the date the subdivision or combination becomes
effective or

                                       2
<PAGE>

as of the record date of such dividend, or, in the event that no record date is
fixed, upon the making of such dividend.

                  (b) RECLASSIFICATION, REORGANIZATION, MERGER, SALE OR
CONSOLIDATION. In the event of any reclassification, capital reorganization or
other change in the Common Stock of the Company (other than as a result of a
subdivision, combination or stock dividend provided for in Section 7(a) above)
or in the event of a consolidation or merger of the Company with or into, or the
sale of all or substantially all of the properties and assets of the Company, to
any person, and in connection therewith consideration is payable to holders of
Common Stock in cash, securities or other property, then as a condition of such
reclassification, reorganization or change, consolidation, merger or sale,
lawful provision shall be made, and duly executed documents evidencing the same
shall be delivered to the Holder, so that the Holder shall have the right at any
time prior to the expiration of this Warrant to purchase, at a total price equal
to that payable upon the exercise of this Warrant immediately prior to such
event, the kind and amount of cash, securities or other property receivable in
connection with such reclassification, reorganization or change, consolidation,
merger or sale, by a holder of the same number of shares of Common Stock as were
exercisable by the Holder immediately prior to such reclassification,
reorganization or change, consolidation, merger or sale. In any such case,
appropriate provisions shall be made with respect to the rights and interest of
the Holder so that the provisions hereof shall thereafter be applicable with
respect to any cash, securities or property deliverable upon exercise hereof.
Notwithstanding the foregoing, (i) if the Company merges or consolidates with,
or sells all or substantially all of its property and assets to, any other
person, and consideration is payable to holders of Common Stock in exchange for
their Common Stock in connection with such merger, consolidation or sale which
consists solely of cash, or (ii) in the event of the dissolution, liquidation or
winding up of the Company, then the Holder shall be entitled to receive
distributions on the date of such event on an equal basis with holders of Common
Stock as if this Warrant had been exercised immediately prior to such event,
less the Warrant Price. Upon receipt of such payment, if any, the rights of the
Holder shall terminate and cease, and this Warrant shall expire. In case of any
such merger, consolidation or sale of assets, the surviving or acquiring person
and, in the event of any dissolution, liquidation or winding up of the Company,
the Company shall promptly, after receipt of this surrendered Warrant, make
payment by delivering a check in such amount as is appropriate (or, in the case
of consideration other than cash, such other consideration as is appropriate) to
such person as it may be directed in writing by the Holder surrendering this
Warrant.

                  (c) CERTAIN DISTRIBUTIONS. In case the Company shall fix a
record date for the making of a dividend or distribution of cash, securities or
property to all holders of Common Stock (excluding any dividends or
distributions referred to in Sections 7(a) or 7(b) above, the number of Shares
purchasable upon an exercise of this Warrant after such record date shall be
adjusted to equal the product obtained by multiplying the number of Shares
purchasable upon an exercise of this Warrant immediately prior to such record
date by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such distribution, and the denominator of which shall be
the Warrant Price immediately prior to such distribution, less the fair market
value per Share, as determined by the Holder, of the cash, securities or
property so distributed. Such adjustment shall be made successively whenever any
such distribution is made and shall become effective on the effective date of
distribution.

                                       3
<PAGE>

                  (d) ADJUSTMENT FOR ISSUANCE OF SHARES AT LESS THAN THE WARRANT
PRICE. If and whenever any Additional Common Stock shall be issued by Borrower
(the "Stock Issue Date") for a consideration per share less than the Warrant
Price, then in each such case the initial Warrant Price shall be reduced to a
new Warrant Price in an amount equal to the price per share for the Additional
Common Stock then issued, if issued in connection with a sale of shares, or the
value of the Additional Common Stock then issued, as determined in accordance
with generally accepted accounting principles, if issued other than for cash,
and the number of shares issuable to Holder upon conversion shall be
proportionately increased; and, in the case of Additional Common Stock issued
without consideration, the initial Warrant Price shall be reduced in amount and
the number of shares issued upon conversion shall be increased in an amount so
as to maintain for the Holder the right to convert the Debentures into shares
equal in amount to the same percentage interest in the Common Stock of the
Company as existed for the Holder immediately preceding the Stock Issue Date.

                  (e) SALE OF SHARES. In case of the issuance of Additional
Common Stock for a consideration part or all of which shall be cash, the amount
of the cash consideration therefor shall be deemed to be the gross amount of the
cash paid to Borrower for such shares, before deducting any underwriting
compensation or discount in the sale, underwriting or purchase thereof by
underwriters or dealers or others performing similar services or for any
expenses incurred in connection therewith. In case of the issuance of any shares
of Additional Common Stock for a consideration part or all of which shall be
other than cash, the amount of the consideration therefor, other than cash,
shall be deemed to be the then fair market value of the property received. The
term "Additional Common Stock" herein shall mean all shares of Common Stock
hereafter issued by Borrower (including Common Stock held in the treasury of
Borrower), except (A) Common Stock issued upon the conversion of any of the
Debentures; (B) Common Stock issuable upon exercise of presently outstanding
amounts or stock options; or (C) up to 300,000 shares of Common Stock issuable
upon exercise of employee or director stock options to be granted in the future
at less than the initial Warrant Price.

         8.       PRE-EXERCISE RIGHTS. Prior to exercise of this Warrant, the
Holder shall not be entitled to any rights of a shareholder with respect to the
Shares, including without limitation, the right to vote such Shares, receive
preemptive rights or be notified of shareholder meetings, and the Holder shall
not be entitled to any notice or other communication concerning the business or
affairs of the Company.

         9.       REGISTRATION RIGHTS. The Shares of Common Stock issuable
shall be subject to the registration rights set forth in the Convertible Loan
Agreement of even date herewith by and among the Holder and the Company, and
the Holder shall be entitled to all rights and benefits thereof.

         10.      SUCCESSORS AND ASSIGNS. The terms and provisions of this
Warrant shall inure to the benefit of, and be binding upon, the Company and the
Holder and their respective successors and assigns.

                            [SIGNATURE PAGE FOLLOWS.]

                                       4
<PAGE>

         11.      GOVERNING LAW. This Warrant shall be governed by the laws of
the State of Texas, excluding the conflicts of laws provisions thereof.

                                       DIGITAL RECORDERS, INC.

                                       By:
                                           -------------------------------------
                                           David L. Turney
                                           Chairman, Chief Executive Officer and
                                           President

                                       5
<PAGE>

                                 EXERCISE NOTICE

                                                           Dated _________, ____

         The undersigned hereby irrevocably elects to exercise the Stock
Purchase Warrant, dated June 27, 2001, issued by DIGITAL RECORDERS, INC., a
North Carolina corporation (the "Company") to the undersigned to the extent of
purchasing ___________ shares of Common Stock and hereby makes payment of
$_________ in payment of the aggregate Warrant Price of such Shares.

                                       BFSUS SPECIAL OPPORTUNITIES TRUST PLC

                                       By:
                                           -------------------------------
                                           Russell Cleveland, Director<PAGE>

                               SECURITY AGREEMENT

         This SECURITY AGREEMENT (this "Agreement"), dated as of June 27, 2001,
is entered into among DIGITAL RECORDERS, INC., a North Carolina corporation
("Borrower"), and RENAISSANCE US GROWTH & INCOME TRUST PLC ("RUSGIT"), BFSUS
SPECIAL OPPORTUNITIES TRUST PLC, a public limited company registered in England
and Wales ("BFSUS") (RUSGIT and BFSUS collectively referred to as "Lender"), and
RENAISSANCE CAPITAL GROUP, INC., a Texas corporation, as Agent for the Secured
Party (the "Agent").

                                    RECITALS

         A. Lender, Agent and Borrower have entered into a Convertible Loan
Agreement of even date herewith (the "Loan Agreement"), pursuant to which Lender
will lend to Borrower the aggregate principal amount of $3,000,000 evidenced by
Borrower's 8.00% Convertible Debentures of even date herewith (the
"Debentures").

         B. As a condition for entering into the Loan Agreement and providing
the Loan, Lender required that Borrower grant a security interest in its assets
as collateral for such Loan.

         NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements set forth herein, the parties agree as follows:

         1. GRANT OF SECURITY INTEREST. In order to secure payment when due of
the Obligations now existing or hereafter incurred, Borrower hereby irrevocably
grants to the Lender a continuing security interest in the following property of
the Borrower (the "Collateral"), whether now owned or existing, or hereafter
acquired, owned, existing or arising (whether by contract or operation of law),
and wherever located, which shall be retained by Lender until the Obligations
have been paid in full and the Loan Agreement has been terminated; PROVIDED,
HOWEVER, that such Liens in the Collateral shall at all times be subject and
subordinate to the Liens granted by Borrower to the holder of Senior
Obligations, on the terms set forth in the Intercreditor Agreement.

                  a. All accounts (including inter-company receivables),
         contract rights, chattel paper and rights of payment of every kind
         (collectively, "Accounts") and instruments and general intangibles of
         Borrower.

                  b. All bank accounts of Borrower.

                  c. All monies and property of any kind of Borrower, now or
         hereafter in the possession or under the control of Lender, Agent or a
         bailee of Lender.

                  d. All licenses, patents, patent applications, copyrights,
         trademarks, trademark applications, trade names, assumed names, service
         marks and service mark applications of Borrower.

                                       1
<PAGE>

                  e. All inventory, equipment (including any and all computer
         hardware and components), machinery and fixtures of Borrower in all
         forms and wherever located, and all parts and products thereof, all
         accessories thereto, and all documents therefor.

                  f. All books and records (including, without limitation,
         customer lists, credit files, tapes, ledger cards, computer software
         and hardware, electronic data processing software, computer programs,
         printouts and other computer materials and records) of Borrower
         evidencing or containing information regarding or otherwise pertaining
         to any of the foregoing.

                  g. Contract rights under agreements between Borrower and its
         Subsidiaries.

                  h. All accessories to, substitutions for and all replacements,
         products and proceeds of the foregoing, including, without limitation,
         proceeds of insurance policies insuring the Collateral (including, but
         not limited to, claims paid and premium refunds).

         2. INSURANCE ON COLLATERAL. Borrower further warrants and agrees that
it will pay for and maintain insurance in the amounts and of the types required
pursuant to Section 5.12 of the Loan Agreement.

         3. DELIVERY OF RECEIVABLES. Subject to the rights of the holders of the
Senior Obligations, upon Agent's request, upon the occurrence and during the
continuance of an Event of Default, Borrower will, at any reasonable time and at
Borrower's own expense, physically deliver to Agent, all Accounts (including
inter-company receivables) assigned to Agent at any reasonable place or places
designated by Agent. Failure to deliver any Account, or failure to deliver
physical possession of any instruments, documents or writings in respect of any
Account shall not invalidate Agent's Lien and security interest therein, except
to the extent that possession may be required by applicable law for the
perfection of said Lien or security interest, in which latter case, the Account
shall be deemed to be held by the Borrower (for the holders of the Senior
Obligations, as applicable) as the custodian agent of Agent, for the benefit of
Lender. Failure of Agent to demand or require Borrower to include any Account in
any schedule, to execute any schedule, to assign and deliver any schedule or to
deliver physical possession of any instruments, documents or writings related to
any Account shall not relieve Borrower of its duty so to do.

         4. COLLECTION OF RECEIVABLES. Borrower hereby agrees that it shall use
commercially reasonable efforts, at its sole cost and expense and in its own
name, to promptly and diligently collect and enforce payment of all Accounts and
Borrower will defend and hold Lender and Agent harmless from any and all loss,
damage, penalty, fine or expense arising from such collection or enforcement.

         5. FINANCING STATEMENTS. Borrower agrees to execute all financing
statements and amendments thereto as Agent, on behalf of the Lender, may request
from time to time to evidence the security interest granted to Agent hereunder
and will pay the cost of all filing fees and taxes, if any, necessary to effect
the filing thereof. Wherever permitted by law, during the term of this
Agreement, Borrower authorizes Agent to file financing statements with respect
to the Collateral without the signature of Borrower, and shall give notice
thereof to Borrower.

                                       2
<PAGE>

Without the written consent of Agent, Borrower will not allow any financing
statement or notice of assignment to be on file in any public office covering
any Collateral, proceeds thereof or other matters subject to the security
interest granted to Agent herein, unless such financing statement relates to
a Permitted Lien.

         6. LENDER'S PAYMENT OF CLAIMS. Lender may, in its sole discretion,
discharge or obtain the release of any Lien asserted by any Person against the
Collateral, other than a Permitted Lien which, in the Lender's judgment, may
have a Material Adverse Effect on the Lender's rights with respect to the
Collateral. All sums paid by Lender in respect thereof shall be payable, on
demand, by Borrower to Lender and shall be a part of the Obligations.

         7. DEFAULT AND REMEDIES.

                  a. Borrower shall be in default hereunder upon the occurrence
         and during the continuation of an Event of Default, as set forth in the
         Loan Agreement.

                  b. Upon the occurrence and during the continuation of any
         Event of Default (i) unless Lender or Agent shall elect otherwise, the
         entire unpaid amount of the Obligations due under the Loan Agreement,
         as are not then otherwise due and payable, shall become immediately due
         and payable without notice to Borrower or demand by Lender or Agent and
         (ii) either Lender or Agent may, at its or their option, exercise from
         time to time any and all rights and remedies available to them under
         the Uniform Commercial Code or otherwise, including the right to
         foreclose or otherwise realize upon the Collateral and to dispose of
         any of the Collateral at one or more public or private sales or other
         proceedings, and Borrower agrees that any of Lender, Agent or their
         nominee may become the purchaser at any such sale or sales. Borrower
         agrees that ten (10) days shall be reasonable prior notice of the date
         of any public sale or other disposition of the same. All rights and
         remedies granted Lender hereunder or under any other agreement between
         Lender and Borrower shall be deemed concurrent and cumulative and not
         alternative, and Lender, or Agent on its behalf, may proceed with any
         number of remedies at the same time or at different times until all the
         Obligations are fully satisfied. The exercise of any one right or
         remedy shall not be deemed a waiver or release of, or an election
         against, any other right or remedy. Borrower shall pay to Lender or
         Agent, on demand, any and all expenses (including reasonable attorneys'
         fees and legal expenses) which may have been incurred by Lender or
         Agent (i) in the prosecution or defense of any action arising under
         this Agreement, the Collateral or any of Lender's rights therein or
         thereto; or (ii) in connection with the custody, preservation, use,
         operation, preparation for sale or sale of the Collateral, the
         incurring of all of which are hereby authorized to the extent Lender or
         Agent deem the same advisable. Borrower's liability to Lender or Agent
         for any such payment shall be included in the Obligations. The proceeds
         of any Collateral received by Lender or Agent at any time before or
         after an Event of Default, whether from a sale or other disposition of
         Collateral or otherwise, or the Collateral itself, may be applied to
         the payment, in full or in part, of such of the Obligations and in such
         order and manner as Lender or Agent may elect.

                                       3
<PAGE>

         8. REPRESENTATIONS AND COVENANTS OF BORROWER. Borrower hereby
represents to and agrees with Lender as follows:

                  a. Except as referred to in Section 1, Borrower owns the
         Collateral as sole owner, free and clear of any Liens, other than
         Permitted Liens.

                  b. So long as any Obligations remain unpaid, Borrower agrees
         not to sell, assign or transfer the Collateral, other than sales of
         Collateral in the ordinary course of business, and to maintain it free
         and clear of any Liens, other than Permitted Liens.

         9.       MISCELLANEOUS.

                  a. This Agreement shall bind and inure to the benefit of the
         parties and their respective heirs, personal representatives,
         successors and assigns, except that Borrower shall not assign any of
         its rights hereunder without Lender's and Agent's prior written
         consent.

                  b. Any provision hereof which is prohibited or unenforceable
         in any jurisdiction shall, as to such jurisdiction, be ineffective to
         the extent of such prohibition or unenforceability without affecting
         the validity or enforceability of the remainder of this Agreement or
         the validity or enforceability of such provision in any other
         jurisdiction.

                  c. This Agreement shall be governed by and construed and
         enforced in accordance with the substantive laws of the State of Texas,
         without regard to the conflicts of laws provisions thereof, and the
         applicable laws of the United States. Venue and jurisdiction shall be
         in the state or federal courts in Dallas County, Texas.

                  d. Borrower hereby consents to the jurisdiction of the courts
         of the State of Texas in any action or proceeding which may be brought
         against it under or in connection with this Agreement or any
         transaction contemplated hereby or to enforce any agreement contained
         herein and, in the event any such action or proceeding shall be brought
         against it, Borrower agrees not to raise any objection to such
         jurisdiction or to the laying of venue in Dallas County, Texas or, if
         applicable, any other county in any state in which Collateral is
         located.

                  e. All capitalized terms, unless otherwise specified, have the
         meanings assigned to them in the Loan Agreement and the Debentures.

                  f. Any notices or other communications required or permitted
         to be given by this Agreement or any other documents and instruments
         referred to herein must be (i) given in writing and personally
         delivered, mailed by prepaid certified or registered mail or sent by
         overnight service, such as FedEx, or (ii) made by telex or facsimile
         transmission delivered or transmitted to the party to whom such notice
         or communication is directed, with confirmation thereupon given in
         writing and personally delivered or mailed by prepaid certified or
         registered mail.

                                       4
<PAGE>

         If to Borrower to:

         Digital Recorders, Inc.
         Sterling Plaza, Box 26
         5949 Sherry Lane, Suite 1050
         Dallas, Texas  75225
         Attn.:   David L. Turney
                  Chairman, CEO and President
         Telephone:  (214) 378-9429
         Facsimile:  (214) 378-8437

         with a copy to:

         David Furr, Esq.
         Gray, Layton, Drum, Kersh, Solomon & Furr, PA
         516 South New Hampton Road
         P.O. Box 2636
         Gastonia, North Carolina  28053-2637
         Telephone:  (704) 865-4400
         Facsimile:  (704) 866-8010

         If to Lender to:

         Renaissance US Growth & Income Trust PLC
         c/o Renaissance Capital Group, Inc.
         8080 North Central Expressway, Suite 210-LB59
         Dallas, Texas 75206
         Attn.:   Robert C. Pearson
                  Senior Vice President
         Telephone:  (214) 891-8294
         Facsimile:  (214) 891-8291

         BFSUS Special Opportunities Trust PLC
         c/o Renaissance Capital Group, Inc.
         8080 North Central Expressway, Suite 210-LB59
         Dallas, Texas 75206
         Attn.:  Robert C. Pearson
                 Senior Vice President
         Telephone:  (214) 891-8294
         Facsimile:  (214) 891-8291

                                       5
<PAGE>

         with a copy to:

         Norman R. Miller, Esq.
         Kirkpatrick & Lockhart LLP
         1717 Main Street, Suite 3100
         Dallas, Texas 75201
         Telephone:  (214) 939-4906
         Facsimile:  (214) 939-4949

         If to Agent to:

         Renaissance Capital Group, Inc.
         8080 North Central Expressway, Suite 210-LB59
         Dallas, Texas 75206
         Attn.:  Robert C. Pearson
                 Senior Vice President
         Telephone:  (214) 891-8294
         Facsimile:  (214) 891-8291

         with a copy to:

         Norman R. Miller, Esq.
         Kirkpatrick & Lockhart LLP
         1717 Main Street, Suite 3100
         Dallas, Texas 75201
         Telephone:  (214) 939-4906
         Facsimile:  (214) 939-4949

                  Any notice delivered personally in the manner provided herein
         will be deemed given to the party to whom it is directed upon the
         party's (or its agent's) actual receipt. Any notice addressed and
         mailed in the manner provided herein will be deemed given to the party
         to whom it is addressed at the close of business, local time of the
         recipient, on the fourth business day after the day it is placed in the
         mail, or, if earlier, the time of actual receipt.

                  g. Capitalized terms used herein, unless otherwise defined
         herein, have the definitions given them in the Loan Agreement and in
         the Intercreditor Agreement among TwinVision Corp. of North America,
         Inc., a North Carolina corporation, Digital Audio Corporation, a North
         Carolina corporation, Borrower, Lender, Agent, and Guaranty Business
         Credit Corporation, a Delaware corporation.

               [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS.]

                                       6
<PAGE>

         IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date and year written above.

                                           BORROWER:

                                           DIGITAL RECORDERS, INC.

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

                                           LENDER:

                                           RENAISSANCE US GROWTH & INCOME
                                           TRUST PLC

                                           By:
                                                  -----------------------------
                                           Name:  Russell Cleveland
                                           Title: Director

                                           BFSUS SPECIAL OPPORTUNITIES TRUST PLC

                                           By:
                                                  -----------------------------
                                           Name:  Russell Cleveland
                                           Title: Director

                                           AGENT:

                                           RENAISSANCE CAPITAL GROUP, INC.

                                           By:
                                                  -----------------------------
                                           Name:  Russell Cleveland
                                           Title: President and CEO

                                       7

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00027-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00027-of-00352.parquet"}]]