EXHIBIT 4.6
FORM OF
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of March 11,
1998, by and among APPLIED VOICE RECOGNITION, INC., a Delaware corporation (the
"Company"), and ________________ (the "Subscriber").
W I T N E S S E T H
WHEREAS, pursuant to Subscription Agreement (the "Subscription Agreement"),
by and among the Company and the Subscriber, the Company has agreed to sell and
the Subscriber has agreed to purchase an aggregate of 3,000 Series B,
Convertible Preferred Shares (the "Shares"), at $1,000 per Share, of the Company
convertible into shares of the Company's Common Stock, $.001 par value per share
(the "Common Stock"); and
WHEREAS, pursuant to the terms of, and in partial consideration for, the
Subscriber's entering into the Subscription Agreement, the Company has agreed to
provide the Subscriber with certain registration rights with respect to the
Common Stock;
NOW THEREFORE, in consideration of the mutual promises, representation,
warranties, covenants and conditions set forth in the Subscription Agreement and
this Registration Rights Agreement, the Company and the Subscriber agree as
follows:
1. Certain Definitions. As used in this Agreement the following terms
shall have the following respective meanings:
The "Act" shall mean the Securities Act of 1933, as amended, or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
"Closing Date" shall mean the date the funds necessary to purchase the
Shares were received by the Company.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Company's Common Stock, $.001 par value per
share.
"Registrable Shares" shall mean (i) the Common Stock issuable on conversion
of the Shares, (ii) any Common Stock of the Company issued or issuable in
respect of the Common Stock issued or issuable on conversion of the Shares or
upon any stock split, stock dividend, recapitalization or similar event;
provided, however, that shares of Common Stock or other securities shall no
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longer be treated as Registrable Shares if (a) they have been sold to or through
a broker or dealer or underwriter in a public distribution or a public
securities transaction, (b) they have been sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act of 1933
so that all transfer restrictions and restrictive legends with respect thereto
are removed upon consummation of such sale or (c) they are available for sale
under Rule 144 or otherwise, in the opinion of counsel to the Company, without
compliance with the registration and prospectus delivery requirements of the
Securities Act of 1933 so that no transfer restrictions or restrictive legends
will appear upon the Common Stock certificates following the consummation of
such sale.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933 and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement. Said registration shall include all amendments, post-
effective amendments and supplements to any such registration statement as may
be necessary under the Act and the regulations of the Commission to keep such
registration effective with respect to the Registrable Shares until Subscriber
has converted all the Shares and or until March 11, 2000, whichever shall occur
first.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with Section 2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, reasonable fees and
disbursements of one counsel for Subscriber, and the reasonable expenses of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company).
The "Reserved Shares" shall mean the shares of Common Stock issuable upon
conversion of the Shares that have been duly and validly reserved for issuance,
and upon issuance which shall be duly and validly issued, fully paid, and non-
assessable.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Shares.
2. Registration.
(a) Mandatory Registration. The Company shall prepare and file with the
SEC, no later than forty-five (45) days after the Closing Date, an amendment to
the currently filed Registration Statement on Form S-3 (or any other available
form), covering a sufficient number of shares of Common Stock for the Subscriber
but in no event less than 2,500,000 shares of Common Stock into
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which the $3,000,000 of Shares in the total offering would be convertible. Such
Registration Statement shall state that, in accordance with the Securities Act,
it also covers such indeterminate number of additional shares of Common Stock as
may become issuable to prevent dilution resulting from stock splits or stock
dividends. If at any time the number of shares of Common Stock into which the
Shares may be converted exceeds the aggregate number of shares of Common Stock
then registered, the Company shall, within ten (10) business days after receipt
of written notice from any Subscriber, either (i) amend the Registration
Statement filed by the Company pursuant to the preceding sentence, if such
Registration Statement has not been declared effective by the SEC at that time,
to register all shares of Common Stock into which the Shares may be converted,
or (ii) if such Registration Statement has been declared effective by the SEC at
that time, file with the SEC an additional Registration Statement on Form S-3(or
any other available form), to register the shares of Common Stock into which the
Shares may be converted that exceed the aggregate number of shares of Common
Stock already registered.
(b) Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Subscribers acting by majority in interest of the Registrable Shares subject to
such underwritten offering shall have the right to select one legal counsel to
represent their interests, and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company. The
Subscriber(s) who hold the Registrable Shares to be included in such
underwriting shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or managers so
selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Shares under federal or state securities
laws, which are payable by the Company pursuant to Section 5 hereof) with
respect to their Registrable Shares and the fees and expenses of such legal
counsel so selected by the Subscriber.
(c) Certain Fees. The Company shall pay cash liquidated damages of 2.0%
of the original purchase price of the Shares then outstanding for each 30 day
period or portion thereof after which the following obligations of the Company
remain unsatisfied:
(i) if the registration ceases to remain effective during the "Registration
Period" as defined in Section 3(a); and
(ii) if the registration is not declared effective, through no fault of the
Subscriber, within one hundred (105) days after the Closing Date.
The above damages shall continue until the obligation is fulfilled, subject to a
maximum of 12 months and shall be paid within 10 business days after each 30 day
period. Failure of the Company to make payment within said 10 business days
shall
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be considered a default. The Company acknowledges that its failure to meet
any of its obligations under either Section 2(c) (i) or (ii) of this Agreement
will cause the Subscriber to suffer damages in an amount that will be difficult
to ascertain. Accordingly, the parties agree that it is appropriate to include
in this Agreement a provision for liquidated damages. The parties acknowledge
and agree that the liquidated damages provision set forth in this section
represents the parties' good faith effort to qualify such damages and, as such,
agree that the form and amount of such liquidated damages are reasonable and
will not constitute a penalty. The payment of liquidated damages shall not
relieve the Company from its obligations to deliver the Common Stock pursuant to
the terms of this Agreement and the Subscription Agreement.
3. Obligation of the Company. In connection with the registration of the
Registrable Shares, the Company shall do each of the following:
(a) Prepare promptly, and file with the SEC within forty-five (45) days of
the Closing Date, a Registration Statement with respect to not less than the
number of Registrable Shares provided in Section 2(a), above, and thereafter use
its commercially reasonable efforts to cause each Registration Statement
relating to Registrable Shares to become effective the earlier of (i) five
business days after notice from the Securities and Exchange Commission that the
Registration Statement may be declared effective, or (b) one hundred five (105)
days after the Closing Date, and keep the Registration Statement effective at
all times until the earliest of (i) March 11, 2000 or (ii) the date the
Subscriber no longer owns any of the Registrable Shares (items (i) and (ii)
cumulatively being referred to as the "Registration Period"), which Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading;
(b) Prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration effective at all times during the Registration Period, and,
during the Registration Period, comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Shares of the Company covered
by the Registration Statement until such time as all of such Registrable Shares
have been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in the Registration Statement;
(c) Furnish to each Subscriber whose Registrable Shares are included in the
Registration Statement and its legal counsel identified to the Company, (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each
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preliminary prospectus and prospectus, and each amendment or supplement thereto,
and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents,
as the Subscriber may reasonably request in order to facilitate the disposition
of the Registrable Shares owned by such Subscriber;
(d) Use reasonable efforts to (i) register and qualify the Registrable
Shares covered by the Registration Statement under such other securities or blue
sky laws of such jurisdictions as the Subscriber(s) who hold a majority in
interest of the Registrable Shares being offered reasonably request and in which
significant volumes of shares of Common Stock are traded, (ii) prepare and file
in those jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take such other actions as may be necessary to maintain such registrations
and qualification in effect at all times during the Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify the
Registrable Shares for sale in such jurisdictions: provided, however, that the
Company shall not be required in connection therewith or as a condition thereto
to (A) qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(d), (B) subject itself to general
taxation in any such jurisdiction, (C) file a general consent to service of
process in any such jurisdiction, (D) provide any undertakings that cause more
than nominal expense or burden to the Company, in the good faith determination
of the Company, or (E) make any change in its articles of incorporation or by-
laws or any then existing contracts, which in each case the Board of Directors
of the Company determines to be contrary to the best interests of the Company
and its stockholders;
(e) As promptly as practicable after becoming aware of such event, notify
each Subscriber of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and uses its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Subscriber as such Subscriber may
reasonably request;
(f) As promptly as practicable after becoming aware of such event, notify
each Subscriber who holds Registrable Shares being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance by the SEC of
any notice of effectiveness or any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time;
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(g) Use its commercially reasonable efforts, if eligible, either to (i)
cause all the Registrable Shares covered by the Registration Statement to be
listed on each securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Shares is then permitted under the rules of such exchange, or (ii)
secure designation of all the Registrable Shares covered by the Registration
Statement on the National Association of Securities Dealers Automated Quotations
System ("NASDAQ") within the meaning of Rule 11Aa2-1 of the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
quotation of the Registrable Shares on the NASDAQ National Market System; or if,
despite the Company's commercially reasonable efforts to satisfy the preceding
clause (i) or (ii), the Company is unsuccessful in doing so, to secure NASD
authorization and quotation for such Registrable Shares on either the SmallCap
Market or the over-the-counter bulletin board and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register with the National Association of Securities Dealers, Inc. ("NASD") as
such with respect to such Registrable Shares;
(h) Provide a transfer agent for the Registrable Shares not later than the
effective date of the Registration Statement;
(i) Cooperate with the Subscribers who hold Registrable Shares being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Shares to be offered pursuant to the Registration Statement and
enable such certificates for the Registrable Shares to be in such denominations
or amounts as the case may be, as the Subscribers may reasonably request and
registration in such names as the Subscribers may request; and, within ten (10)
business days after a Registration Statement which includes Registrable Shares
is ordered effective by the SEC, the Company shall deliver, and shall cause
legal counsel selected by the Company to deliver, to the transfer agent for the
Registrable Shares (with copies to the Subscribers whose Registrable Shares are
included in such Registration Statement) an appropriate instruction and opinion
of such counsel; and
(j) Take all other reasonable actions necessary to expedite and facilitate
distribution to the Subscriber of the Registrable Shares pursuant to the
Registration Statement.
The Company shall use its commercially reasonable efforts to effect such
registration (including, without limitation, the execution of an undertaking to
file amendments, post-effective amendments, and supplements appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Act and the
Regulations of the Commission) as may be so requested and as would permit or
facilitate the sale and distribution of all or such Registrable Shares as are
specified in such request.
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4. Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification or
compliance of the Registrable Shares pursuant to this Agreement. All Selling
Expenses shall be born by the Subscriber.
5. Registration Procedures. The Company shall advise the Subscriber of
the initiation of a registration under the Agreement and as to the completion
thereof. At its expenses the Company will:
(a) Prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act and the Regulations of the Commission with respect to the disposition of
securities covered by such registration statement; and
(b) Concerning the Securities. The issuance, sale and delivery of the
Shares have been duly authorized by all required corporate action on the part of
Company, and when issued, sold and delivered in accordance with the terms hereof
and thereof for the consideration expressed herein and therein, will be duly and
validly issued and enforceable in accordance with their terms, subject to the
laws of bankruptcy and creditors' rights generally. 2,500,000 shares of Common
Stock issuable upon conversion of the Shares have been duly and validly reserved
for issuance and, upon issuance shall be duly and validly issued, fully paid,
and non-assessable (the "Reserved Shares").
Prior to conversion of all the Shares, if at anytime the conversion of all
the Shares outstanding results in an insufficient number of Reserved Shares
being available to cover all the conversions and exercises, then in such event,
the Company will move to call and hold a shareholder's meeting within 45 days of
such event for the purpose of authorizing additional Shares to facilitate the
conversions. In such an event the Company shall: (1) recommend its current or
future officers, directors and other control people to vote their shares in
favor of increasing the authorized number of shares of Common Stock and (2)
recommend to all shareholders to vote their shares in favor of increasing the
authorized number of shares of Common Stock. Company represents and warrants
that under no circumstances will it deny or prevent Subscriber's right to
convert the Shares as permitted under the terms of the Subscription Agreement or
this Registration Rights Agreement.
6. Indemnification.
(a) The Company will indemnify and hold harmless the Subscriber, each of
its stockholders, executives, employees, representatives, affiliates, officers,
directors and partners, and each person controlling the Subscriber, with respect
to which registration has been effected pursuant to this
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Agreement against all claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus or other document incident to any such registration, or based on
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, or
any violation by the Company of the Act or any rule or regulation thereunder
applicable to the Company which relates to the Registration Statement filed
pursuant to this Agreement and will reimburse the Subscriber, each of its
stockholders, executives, employees, representatives, affiliates, officers,
directors and partners, and each person controlling the Subscriber for any
reasonable legal and any other reasonable out of pocket expenses as they are
reasonably incurred in connection with investigating and defending any such
claim, loss, damage, liability or action, provided, however, that the indemnity
contained in this Section 6(a) shall not apply to amounts paid in settlement of
any such claim, loss, damage, liability or action if such settlement is effected
without the consent of the Company, and provided further that the Company shall
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by the
Subscriber and stated to be specifically for use in the Registration Statement
filed pursuant to this Agreement. The foregoing indemnity agreement is further
subject to the condition that insofar as it relates to any untrue prospectus,
such indemnity agreement shall not inure to the benefit of the foregoing
indemnified parties if copies of a final prospectus correcting the misstatement,
or alleged misstatement, omission or alleged omission upon which such loss,
liability, claim or damage is based is timely delivered to such indemnified
party and a copy thereof was not furnished to the person asserting the loss,
liability, claim or damage.
(b) The Subscriber will indemnify the Company, each of its stockholders,
executives, employers, representatives, affiliates, directors, officers and
each person who controls the Company within the meaning of the Act and the rules
and regulations thereunder against all claims, losses, damages and liabilities
(or actions, proceedings, or settlements in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus or other document incident to any such registration
or based upon any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or any violation of the Act or any rule of regulation thereunder
applicable to the Company and will reimburse the Company, and its stockholders,
executives, employers, representatives, affiliates, directors, officers,
partners, persons, underwriters or control persons for any reasonable legal or
any other reasonable out of pocket expense reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, and only to the extent, that such untrue
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statement (or alleged untrue statement) or omission or alleged omission)
relating to such holder is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in conformity with
written information furnished to the Company by the Subscriber and stated to be
specifically for use therein; provided, however, that the obligations of the
Subscriber shall be limited to an amount equal to the proceeds to the Subscriber
and provided further that such indemnification obligations shall not apply if
the Company modifies or changes to a material extent the written information
furnished by such Holder.
(c) Each party entitled to indemnification under this Section 6 (an
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party, (whose approval shall not
unreasonably be withheld or delayed), and the Indemnified Party may participate
in such defense at such Indemnified Party's expense, and provided further that
the failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement. No
Indemnifying Party, in the defense of any such claim or litigation, shall except
with the consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
7. Information by Holder of Registrable Shares. The Subscriber shall
furnish to the Company such information regarding the Subscriber and the
distribution proposed by such holder of Registrable Shares as the Company may
reasonably request in writing and as shall be reasonably required in connection
with any registration referred to in this Agreement.
8. Transfers or Assignments of Registration Rights. The Subscriber's
rights under this Agreement to cause the Company to register the Registrable
Shares may be transferred or assigned by the Subscriber only to affiliates of
the Subscriber or to a purchaser of the Shares, or any portion of the Shares,
with an original purchase price of at least $500,000 or at least 500 Shares and
such assignment shall only be effective upon delivery of written notice of such
assignment to the Company within thirty (30) days of the assignment. Upon such
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assignment the assignee shall have all the rights and obligations of the
Subscriber hereunder.
9. Miscellaneous.
9.1 Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to
conflict of laws principles.
9.2 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
9.3 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
9.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, or delivered by hand or by messenger or courier delivery
service, addressed (a) if to the Subscriber, at the address listed in the
Subscription Agreement or at such other address as the Subscriber shall have
furnished to the Company in writing, or (b) if to the Company, 0000 Xxxx Xxx
Xxxxx, Xxxxx 000, Xxxxxxx, XX 00000, or at such other address as the Company
shall have furnished to the Subscriber in writing.
9.5 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Registrable Shares, upon any
breach or default of the Company under this Agreement, shall impair any such
right, power, or remedy of such holder nor shall it be construed to be a waiver
of any such breach or default, or an acquiesce therein, or of or in any similar
breach or default thereunder occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any holder of any breach or default under this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
9.6 Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument. An executed facsimile counterpart of this Agreement shall be
effective as an original.
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9.7 Severability. In the case any provision of this agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
9.8 Amendments. This provision of this Agreement may be amended at any
time and from time to time, and particular provisions of this Agreement may be
waived, with and only with an agreement or consent in writing signed by the
Company and by the owners of 66 2/3% of the Registrable Shares as of the date of
such amendment or waiver.
9.9 Termination or Registration Rights. This Agreement shall terminate at
the earlier of March 11, 2000, or such time as there ceases to be any
outstanding Registrable Shares as defined herein.
9.10 Short Sales. The Subscriber and each transferee of rights under
this Agreement agree that for so long as they each hold Shares or Registrable
Shares, each such person, and their respective stockholders, executives,
employees, representatives, affiliates, officers, directors or control persons
will not engage in any short sale or short sale "against the box" transactions
of any type, loan shares or otherwise participate in any transaction which could
be considered as a "short sale" under the rules and regulations promulgated
under the Exchange Act involving the Common Stock.
The foregoing Registration Rights Agreement is hereby executed as of the
date first above written.
APPLIED VOICE RECOGNITION, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------
Xxxxxxx X. Xxxxxxxx
Chairman and CEO
ATTEST:
/s/ Jan Xxxxxx Xxxxxxxx
------------------------------
Jan Xxxxxx Xxxxxxxx
Secretary
SUBSCRIBER
__________________________
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