INVESTOR SUBSCRIPTION AGREEMENT
OF APPLIED VOICE RECOGNITION, INC.
THIS INVESTOR SUBSCRIPTION AGREEMENT (the "Agreement") is made and entered
into as of this 30th day of July, 1998, by and between APPLIED VOICE
RECOGNITION, INC., a Delaware corporation ("Seller"), with offices at 0000 Xxxx
Xxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000 and XXXX XXXXXXXXX-XXXXXXX, an
individual ("Buyer"), with offices at Xxxxxxxxxx Xxxxxxx 000, 00000 Xxxxxxx,
Xxxxxxx, providing for the purchase and sale of Five Thousand (5,000) shares
(the "Shares") of Series C 4% Cumulative Convertible Preferred Stock of Seller
(the "Series C Preferred Stock"), convertible into shares of the common stock,
par value $0.001 per share (the "Common Stock"), of Seller. Seller and Buyer
(collectively, the "Parties") hereby represent and agree as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
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(i) Buyer hereby subscribes for Five Thousand (5,000) Shares of Series C
Preferred Stock in exchange for Sixty Two Thousand Five Hundred and no/100
Dollars ($62,500.00) in cash (the "Purchase Price"). Buyer shall pay the
Purchase Price for the Shares by wire transfer of immediately available,
federal funds in United States dollars against counter-delivery of the
Shares by Seller. The closing of the purchase and sale of the Shares (the
"Closing") shall take place on or about June 15, 1998.
(ii) The rights, privileges and preferences of the Series C Preferred Stock,
shall be as set forth in the Certificate of Designation attached as Exhibit
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"A" to this Agreement.
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2. BUYER'S REPRESENTATIONS AND COVENANTS.
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Buyer represents, warrants and covenants to Seller as follows:
(i) This Agreement has been duly authorized, validly executed and delivered on
behalf of Buyer and is a valid and binding agreement of Buyer enforceable
in accordance with its terms, subject to general principles of equity and
of bankruptcy or other laws affecting the enforcement of creditors' rights;
(ii) Buyer is purchasing the Shares for its own account for investment purposes
only and not with a view towards distribution. Buyer understands and agrees
that it must bear the economic risks of investments for an indefinite
period of time. Buyer has received and carefully reviewed copies of the
Disclosure Documents (as defined in Section 3). No representations or
warranties have been made to Buyer by Seller, the officers or directors of
Seller, or any agent, employee or affiliate of any of them, except as
specifically set forth herein or in the placement agent's agreement between
the Seller and Equity Services, Ltd. (the "Placement Agreement"). Buyer
shall be a third party beneficiary of the representations, warranties and
covenants made by Seller in the Placement Agreement. Buyer is aware that
the purchase of the Shares involves a high degree of risk and that it may
sustain, and has the financial ability to sustain, the loss of its entire
investment. Buyer has had the opportunity to ask questions of, and receive
answers satisfactory to it from, Seller's management
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regarding Seller. Buyer understands that no federal or state governmental
authority has made any finding or determination relating to the fairness of
an investment in the Shares and that no federal or state governmental
authority has recommended or endorsed, or will recommend or endorse, the
investment herein. Buyer has significant assets and upon consummation of
the purchase of the Shares will continue to have significant assets
exclusive of the Shares. Buyer has not been organized for the sole purpose
of acquiring the Shares;
(iii) Buyer (a) is not a citizen or resident of the United States of America,
(b) is not an entity organized under any laws of any state of the United
States of America, and (c) does not have offices in the United States of
America;
(iv) Buyer is an "accredited investor" within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act of 1933, as amended
(the "Securities Act");
(v) Buyer understands that the Shares are being offered and sold to it in
reliance on specific provisions of federal and state securities laws and
that Seller is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgements and
understandings of Buyer set forth herein in order to determine the
applicability of such provisions;
(vi) Buyer is capable of evaluating the risks and merits of this investment by
virtue of its experience as an investor and its knowledge, experience,
and sophistication in financial and business matters;
(vii) Buyer shall execute the Registration Rights Agreement in the form
attached hereto as Exhibit "B";
(viii) Buyer has not employed any investment banker, broker or finder or
incurred any liability for any brokerage fees, commissions or finder's
fees in connection with the transactions contemplated by this Agreement;
and
(ix) Buyer understands that neither the Shares nor the shares of Common Stock
issuable upon conversion of the Series C Preferred Stock have been
registered under the Securities Act and therefore it cannot dispose of
any or all of the Shares or Common Stock unless and until such Shares or
Common Stock, as the case may be, are subsequently registered under the
Securities Act or exemptions from such registration are available. Buyer
acknowledges that a legend substantially as follows will be placed on the
certificates representing the Shares and/or Common Stock:
THE SECURITIES REPRESENTED HEREBY ARE RESTRICTED SECURITIES WITHIN THE
MEANING OF THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH
SUCH ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THE ISSUER OF THESE
SECURITIES WILL NOT TRANSFER SUCH
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SECURITIES EXCEPT UPON RECEIPT OF EVIDENCE SATISFACTORY TO THE ISSUER
THAT THE REGISTRATION PROVISIONS OF SUCH ACT HAVE BEEN COMPLIED WITH OR
THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT SUCH TRANSFER WILL NOT
VIOLATE ANY APPLICABLE FEDERAL OR STATE SECURITIES LAWS.
3. SELLER'S REPRESENTATIONS AND COVENANTS.
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Seller represents, warrants and covenants to Buyer that Seller has not
employed any investment banker, broker or finder or incurred any liability for
any brokerage fees, commissions or finder's fees in connection with the
transaction contemplated by this Agreement except that Seller has (i) retained
directly or indirectly Equity Services, Ltd. ("ESL") and (ii) has agreed to pay
a finder's fee to Capital Solutions, Inc. ("CSI").
In addition, the representations and warranties of the Company contained in
that certain placement agreement dated July 30, 1998, by and between Seller
and ESL (the "Placement Agreement") are incorporated herein by reference and
shall be as if made herein. The aforementioned representations and warranties
of Seller shall survive the Closing.
4. INDEMNIFICATION BY SELLER.
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(i) Seller hereby agrees to indemnify and hold harmless Buyer and its officers,
directors, shareholders, employees, agents and attorneys against any and
all losses, claims, damages, liabilities and expenses incurred by each such
person in connection with defending or investigating any such claims or
liabilities, including any costs or expenses incurred, to which any such
indemnified party may become subject under the Securities' Act, or under
any other statute, at common law or otherwise, insofar as such losses,
claims, demands, liabilities and expenses arise out of or are based upon
(x) any untrue statement or alleged untrue statement of a material fact
made by the Seller, (y) any omission or alleged omission of a material fact
with respect to the Seller, or (z) any breach of any representation,
warranty or agreement made by the Seller in this Agreement.
(ii) Buyer hereby agrees to indemnify and hold harmless Seller and its officers,
directors, shareholders, employees, agents and attorneys against any and
all losses, claims, damages, liabilities and expenses incurred by each such
person in connection with defending or any reasonable investigation of
colorable claims or liabilities, including any costs or expenses incurred,
to which any such indemnified party may become subject under the
Securities' Act, or under any other statute, at common law or otherwise,
insofar as such losses, claims, demands, liabilities and expenses arise out
of or are based upon (i) any untrue statement or alleged untrue statement
of a material fact made by Buyer, (ii) any omission or alleged omission of
a material fact with respect to Buyer, or (iii) any breach of any
representation, warranty or agreement made by Buyer in this Agreement.
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5. CONDITIONS PRECEDENT TO CLOSING.
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(i) Buyer shall (a) deliver payment of the Purchase Price to the Escrow
Agent; and (b) execute and deliver the Registration Rights Agreement.
(ii) Seller shall (a) deliver to the Escrow Agent certificates for the Series
C Preferred Stock in the name of the Buyer, (b) execute and deliver the
Registration Rights Agreement and (c) deliver to Buyer an opinion from
counsel for the Company, satisfactory to ESL and the Buyer, as to the
matters described in the Placement Agreement.
2. MISCELLANEOUS.
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(iii) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Texas without giving effect to the rules
governing the conflicts of laws.
(iv) This Agreement may be executed by facsimile signature and in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(v) Each of the parties agrees to pay its own expenses incident to this
Agreement and the performance of its obligations hereunder, including,
but not limited to, the fees and expenses of each such party's legal
counsel.
(vi) All notices and other communications provided for or permitted hereunder
shall be made in writing by hand delivery, express overnight courier,
registered first class mail, overnight courier, or telecopied, initially
to the address set forth below, and thereafter at such other address,
notice of which is given in accordance with the provisions of this
Section 5.
if to Seller:
Applied Voice Recognition, Inc.
0000 Xxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, Chairman & CEO
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxx, Xxxxx & Xxxxxx, P.C.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
if to Buyer:
Xxxx Xxxxxxxxx-Xxxxxxx
Xxxxxxxxxx Xxxxxxx 000
00000 Xxxxxxx, Xxxxxxx
Telephone: (___) ____________________
Telecopier: (___) ____________________
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with a copy (which shall not constitute notice) to:
Gardere & Xxxxx, L.L.P.
3000 Thanksgiving Tower
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000-0000
Attn: I. Xxxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; three (3) business days after
being deposited in the mail, registered mail, return receipt requested, postage
prepaid, if mailed; the next business day after being deposited with an
overnight courier, if deposited with a nationally recognized, overnight courier
service; when receipt is acknowledged, if telecopied (subject to follow up as
discussed above).
(vii) This Agreement together with the Exhibits hereto and the Placement
Agreement constitutes the entire agreement of the parties with respect to
the subject matter hereof and supersedes all prior oral or written
proposals or agreements relating thereto. This Agreement may not be
amended or any provision hereof waived in whole or in part, except by a
written amendment signed by both of the parties.
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IN WITNESS WHEREOF, this Agreement was duly executed on the date first written
above.
APPLIED VOICE RECOGNITION, INC.
By:
XXXXXXX X. XXXXXXXX, Chairman & CEO
XXXX XXXXXXXXX-XXXXXXX
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EXHIBIT "A"
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Certificate of Designation
EXHIBIT "B"
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Registration Rights Agreement
