EXHIBIT 4.11
APPLIED VOICE RECOGNITION, INC.
INVESTOR'S RIGHTS AGREEMENT
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December 31, 1998
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INVESTORS' RIGHTS AGREEMENT
This Investor' Rights Agreement (this "Agreement') is made as of the 31st
day of December, 1998, by and between APPLIED VOICE RECOGNITION, INC., a
Delaware corporation (the "Company"), and L & H INVESTMENT COMPANY, N.V., a
Belgium company (the "Investor").
RECITALS
The Company and the Investor are parties to that certain Series D Preferred
Stock and Warrant Purchase Agreement of even date herewith (the "Series D
Agreement"); and
WHEREAS, in order to induce the Company to enter into the Series D Agreement
and to induce the Investor to invest funds in the Company pursuant to the Series
D Agreement, the Investor and the Company hereby agree that this Agreement shall
govern certain rights of the Investor with respect to the Company.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
COVENANTS OF THE COMPANY
1.01 Delivery of Financial Statements. The Company shall deliver to the
Investor so long as it holds a minimum of 500 shares of Series D Preferred Stock
(subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations):
(a) as soon as practicable, but in any event within 135 days after the
end of each fiscal year of the Company, an income statement for such fiscal
year, a balance sheet of the Company and statement of stockholder's equity
as of the end of such year, and a schedule as to the sources and
applications of funds for such year, such year-end financial reports to be
in reasonable detail, prepared in accordance with generally accepted
accounting principles, audited by independent public accountants selected by
the Company;
(b) as soon as practicable, but in any event within 135 days after the
end of each of the first three (3) quarters of each fiscal year of the
Company, an unaudited profit or loss statement, schedule as to the sources
and application of funds for such fiscal quarter and an unaudited balance
sheet as of the end of such fiscal quarter;
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(c) within twenty-one (21) days of the end of each month, an unaudited
income statement and schedule as to the sources and application of funds and
balance sheet for and as of the end of such month, in reasonable detail;
(d) as soon as practicable, but in any event no later than sixty (60)
days prior to the end of each fiscal year, a budget and business plan for
the next fiscal year, prepared on a monthly basis, including budgeted
balance sheets and sources and applications of funds statements for such
months and, as soon as reasonably practicable after having been prepared,
any other budgets or revised budgets prepared by the Company; provided,
however, notwithstanding the foregoing, the budget and business plan for
1999 shall be due no later than January 31, 1999.
1.02 Inspection. The Company shall permit the Investor, at such Investor's
expense, to visit and inspect the Company's properties, to examine its books of
account and records and to discuss the Company's affairs, finances and accounts
with its officers, all at such reasonable times as may be requested by the
Investor and without unreasonably disrupting the Company; provided, however,
that the Company shall not be obligated pursuant to this Section 1.02 to provide
access to any information which it reasonably considers to be a trade secret or
similar confidential information.
1.03 Proprietary Information and Inventions Agreements. The Company will
cause each person now or hereafter employed by it or any subsidiary with access
to confidential information to enter into a proprietary information and
inventions agreement substantially in the form approved by the Board of
Directors.
1.04 Right of First Offer. Subject to the terms and conditions specified in
this Section 1.04 and the provisions of Section 1.05 below, the Company hereby
grants to the Investor so long as the investor holds shares of Series D
Preferred Stock and this agreement has not been terminated in accordance with
the terms hereof, a right of first offer with respect to future sales by the
Company of its Shares (as hereinafter defined). For purposes of this Section
1.04, the Investor includes any general partners and affiliates of the Investor.
The Investor shall be entitled to apportion the right of first offer hereby
granted it among itself and its partners and affiliates in such proportions as
it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock in a private sale ("Shares"), the Company shall first make an offering of
such Shares to the Investor in accordance with the following provisions:
(a) The Company shall deliver a written in accordance herewith
("Notice") to the Investor stating (i) its bona fide intention to offer such
Shares, (ii) the number of such Shares to be offered, and (iii) the price
and terms, if any, upon which it proposes to offer such Shares.
(b) By written notification received by the Company within five (5)
calendar days after receipt of the Notice, the Investor may elect to
purchase or obtain, at the price
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and on the terms specified in the Notice, all of such Shares or may request
(without guarantee by the Company) to purchase up to that number of the
Shares which equals the proportion that the number of shares of Common Stock
of the Company ("Common Stock") issued and held, or issuable upon conversion
of the Series D Preferred Stock then held, by the Investor bears to the
total number of shares of Common Stock then outstanding (assuming full
conversion and exercise of all convertible and exercisable securities) as of
the date of the Notice. If the Investor elects to purchase all Shares, the
Company shall promptly use its best efforts to bring about such sale.
(c) If the Investor does not elect to purchase all Shares referred to in
the Notice as provided in subsection 1.04(b) hereof, the Company may, during
the sixty (60)-day period following, offer the Shares to any person or
persons at a price not less than 95% of the purchase price, and upon terms
no more favorable to the offeree than those specified in the Notice. The
Company shall use reasonable efforts to arrange such a sale allowing the
Investor to purchase its pro rata portion of the Shares (as described
above). If the Company does not consummate such sale within the sixty
(60)-day period, the right provided hereunder shall be deemed to be revived
and such Shares shall not be offered unless first reoffered to the Investor
in accordance herewith.
(d) The right of first offer in this Section 1.04 shall not be
applicable (i) to the issuance or sale of shares of Common Stock (or options
therefor) to employees, consultants or directors of this Company pursuant to
the plan as currently approved by the Company's Board of Directors, (ii) to
a public offering of the Company's equity securities, (iii) to the issuance
of securities pursuant to the conversion or exercise of convertible or
exercisable securities, (iv) to the issuance of securities in connection
with a bona fide business acquisition of or by the Company, whether by
merger, consolidation, sale of assets, sale or exchange of stock or
otherwise that is approved by the Board of Directors or (v) to the issuance
of stock, warrants or other securities or rights to persons or entities with
which the Company has or is establishing business relationships that is
approved by the Board of Directors provided such issuances are for other
than primarily equity financing purposes.
1.05 Termination of Rights. The rights set forth in Section 1.04 hereof
shall terminate and be of no further force or effect upon the earlier of (i) the
sale of more than $15 million of securities pursuant to a registration statement
filed by the Company under the Securities Act of 1933, as amended, in connection
with the firm commitment underwritten offering of its securities to the general
public, or (ii) December 31, 2000.
ARTICLE II
MISCELLANEOUS
2.01 Successors and Assigns. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and permitted assigns of the parties. Nothing in
this Agreement, express or implied,
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is intended to confer upon any party other than the parties hereto or their
respective successors and permitted assigns any rights, remedies, obligations,
or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement. This Agreement may not be assigned by either party
without the permission of the other; however, the Company will not unreasonably
withhold permission for the Investor to transfer all of its rights hereunder to
a single party so long as the Investor simultaneously transfers all of its
shares of Series D Preferred Stock and the transferee assumes any obligations of
the Investor hereunder.
2.02 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
2.03 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.04 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
2.05 Notices. Any notice required or permitted under this Agreement shall be
given in writing and shall be delivered in person or by telecopy or by overnight
courier guaranteeing no later than second business day delivery, or five days
after deposit with the United States Post Office, by registered or certified
mail, postage prepaid, in any case directed to the appropriate party at the
address set forth below its signature hereto. Any party may change its address
for notice by giving ten (10) days advance written notice to the other parties.
Every notice or other communication hereunder shall be deemed to have been duly
given or served on the date on which personally delivered, or on the date
actually received, if sent by telecopy or overnight courier service, with
receipt acknowledged.
2.06 Expenses. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
2.07 Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the parties hereto.
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2.08 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
2.09 Arbitration. All disputes, claims, and/or requests for specific
contractual performance, or other equitable relief, or damages or any other
matters in question between the parties arising out of this Agreement shall be
submitted for arbitration, provided that the parties have first made a good
faith effort to resolve such matters together. Demand shall be made to the
American Arbitration Association ("AAA") and shall be conducted in New York, New
York by a panel of three (3) arbitrators. The Investor and the Company shall
each choose one (1) panel member from a panel of person having experience with
and knowledge of the purchase and sale of securities. The third member shall be
an independent party, chosen by the first two members. At least one member of
the panel must have a legal background. Arbitration shall be in accordance with
the commercial rules of the AAA. The Award of the Arbitrators shall be final and
judgement may be entered upon it in any court having jurisdiction thereof, and
the prevailing party shall be entitled to costs and reasonable attorneys' fees
arising out of Arbitration
2.10 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY:
APPLIED VOICE RECOGNITION, INC.
By: ____________________________________________
Xxxxxxx X. Xxxxxxxx, Chief Executive Officer
Address: 0000 Xxxx Xxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
INVESTOR:
L & H INVESTMENT COMPANY N.V.
/s/ Xxxxxx Xxxxx
By: ____________________________________________
C.V.B.A. Xxxxxx Xxxxx, Director
Address: Xxxx-Xxxxxxxxxxxxxx 0
0000 Xxxxx
Xxxxxxx
Telephone: 000-00-0-000-0000
Telecopier: 011-32-5-722-9545
SIGNATURE PAGE TO INVESTOR'S RIGHTS AGREEMENT]
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sale of securities. The third member shall be an independent party, chosen by
the first two members. At least one member of the panel must have a legal
background. Arbitration shall be in accordance with the commercial rules of the
AAA. The Award of the Arbitrators shall be, final and judgement may be entered
upon it in any court having jurisdiction therof, and the prevailing party shall
be entitled to costs and reasonable attorneys' fees arising out of Arbitration.
2.10 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY:
APPLIED VOICE RECOGNITION, INC.
/s/ Xxxxxxx X. Xxxxxxxx
By: _______________________________________________
Xxxxxxx X. Xxxxxxxx, Chief Executive Officer
Address: 0000 Xxxx Xxx xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
INVESTOR:
L & H INVESTMENT COMPANY N.V.
By: _______________________________________________
C.V.B.A. Xxxxxx Xxxxx, Director
Address: Xxxx-Xxxxxxxxxxxxxx 0
0000 Xxxxx
Xxxxxxx
Telephone: 000-00-0-000-0000
Telecopier: 011-32-5-722-9545
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
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