EXHIBIT 4.3
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this "Agreement")
is entered into as of the 8th day of January, 1998 by and between APPLIED VOICE
RECOGNITION, INC., a Utah corporation (the "Company") and ENTREPRENEURIAL
INVESTORS, LTD., a Bahamas company (the "Shareholder").
R E CI T A L S:
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WHEREAS, the Shareholder acquired One Hundred Twenty Five Thousand
(125,000) shares (the "Shares") of Series A 4% Convertible Preferred Stock, par
value $0.001 per share (the "Series A Preferred Stock") pursuant to that certain
Investor Subscription Agreement by and between the Company and the Shareholder
dated July 31, 1997 (the "Investor Agreement");
WHEREAS, the Company granted to the Shareholder certain registration rights
relating to the shares of the Company's common stock, $.001 par value ("Common
Stock") issuable upon conversion of the Series A Preferred Stock pursuant to a
Registration Rights Agreement dated July 31, 1997 (the "RRA"); and
WHEREAS, the Company and the Shareholder desire to amend and restate the
RRA as set forth herein.
NOW, THEREFORE, in consideration of the mutual premises, representations,
warranties and conditions set forth in this Agreement, the parties hereto,
intending to be legally bound, hereby agree to amend and restate the RRA as
follows:
1. Definitions and References. For purposes of this Agreement, in
addition to the definitions set forth above and elsewhere herein, the following
terms shall have the following meanings:
(a) The term "Commission" shall mean the Securities and Exchange
Commission and any successor agency.
(b) The terms "register," "registered" and "registration" shall refer
to a registration effected by preparing and filing a registration statement
or similar document in compliance with the 1933 Act (as herein defined) and
the declaration or ordering of effectiveness of such registration statement
or document.
(c) For purposes of this Agreement, the term "Registrable Stock" shall
mean (i) any shares of Common Stock issued or issuable upon the conversion
of any of the Shares (ii) any Common Stock issued by way of a stock split,
reorganization, merger or consolidation, and (iii) any Common Stock issued
as a dividend on the Shares. For purposes
of this Agreement, any Registrable Stock shall cease to be Registrable
Stock when (v) a registration statement covering such Registrable Stock has
been declared effective and such Registrable Stock has been disposed of
pursuant to such effective registration statement, (w) such Registrable
Stock is sold pursuant to Rule 144 (or any similar provision then in force)
under the 1933 Act, (x) such Registrable Stock is eligible to be sold
pursuant to Rule 144(k) under the 1933 Act, (y) such Registrable Stock has
been otherwise transferred, no stop transfer order affecting such stock is
in effect and the Company has delivered new certificates or other evidences
of ownership for such Registrable Stock not bearing any legend indicating
that such shares have not been registered under the 1933 Act, or (z) such
Registrable Stock is sold by a person in a transaction in which the rights
under the provisions of this Agreement are not assigned.
(d) The term "Holder" shall mean the Shareholder or any transferee or
assignee thereof to whom the rights under this Agreement are assigned in
accordance with Section 10 hereof, provided that the Shareholder or such
transferee or assignee shall then own the Registrable Stock.
(e) The term "1933 Act" shall mean the Securities Act of 1933, as
amended.
(f) An "affiliate of such Holder" shall mean a person who controls, is
controlled by or is under common control with a Holder, or the spouse or
children (or a trust exclusively for the benefit of the spouse and/or
children) of a Holder, or, in the case of a Holder that is a partnership,
its partners.
(g) The term "Person" shall mean an individual, corporation,
partnership, trust, limited liability company, unincorporated organization
or association or other entity, including any governmental entity.
(h) The term "Requesting Holder" shall mean a Holder or Holders of in
the aggregate at least a majority of the Registrable Stock.
(i) References in this Agreement to any rules, regulations or forms
promulgated by the Commission shall include rules, regulations and forms
succeeding to the functions thereof, whether or not bearing the same
designation.
2. Demand Registration.
(a) Commencing six (6) months after the date of Closing (as defined in
the Investor Agreement), but in any event, on or after December 31, 1997,
and prior to August 31, 1999, any Requesting Holders may make one (1)
written request to the Company (specifying that it is being made pursuant
to this Section 2) that the Company file a registration statement under the
1933 Act (or a similar document pursuant to any other statute then in
effect corresponding to the 0000 Xxx) covering the registration of
Registrable Stock. In such event, the Company shall (x) within ten (10)
days thereafter notify in writing all other Holders of Registrable Stock of
such request, and (y) use commercially reasonable efforts to cause to be
registered under the 1933 Act all Registrable Stock that the Requesting
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Holders and such other Holders have, within forty-five (45) days after the
Company has given such notice, requested be registered. Such registration
may be, at the election of the Requesting Holders, a shelf registration
statement filed on Form S-3 if the Company is eligible to use such form (a
"Shelf Registration Statement").
(b) If the Requesting Holders intend to distribute the Registrable
Stock covered by their request by means of an underwritten offering, they
shall so advise the Company as a part of their request pursuant to Section
2.(a) above, and the Company shall include such information in the written
notice referred to in clause (x) of Section 2.(a) above. In such event,
the Holder's right to include its Registrable Stock in such registration
shall be conditioned upon such Holder's participation in such underwritten
offering to the extent provided in this Section 2. All Holders proposing
to distribute Registrable Stock through such underwritten offering shall
enter into an underwriting agreement in customary form with the underwriter
or underwriters. Such underwriter or underwriters shall be selected by a
majority in interest of the Requesting Holders and shall be approved by the
Company, which approval shall not be unreasonably withheld; provided that
all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall
also be made to and for the benefit of such Holders and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement shall be conditions precedent to the obligations of
such Holders; and provided further, that no Holder shall be required to
make any representations or warranties to or agreements with the Company or
the underwriters other than representations, warranties or agreements
regarding such Holder, the Registrable Stock of such Holder and such
Holder's intended method of distribution and any other representation
required by law or reasonably required by the underwriter.
(c) Notwithstanding any other provision of this Section 2 to the
contrary, if the managing underwriter of an underwritten offering of the
Registrable Stock requested to be registered pursuant to this Section 2
advises the Requesting Holders in writing that in its opinion marketing
factors require a limitation of the number of shares to be underwritten,
the Requesting Holders shall so advise all Holders of Registrable Stock
that would otherwise be underwritten pursuant hereto, and the number of
shares of Registrable Stock that may be included in such underwritten
offering shall be allocated among all such Holders, including the
Requesting Holders, in proportion (as nearly as practicable) to the amount
of Registrable Stock requested to be included in such registration by each
Holder at the time of filing the registration statement; provided, that in
the event of such limitation of the number of shares of Registrable Stock
to be underwritten, the Holders shall be entitled to one (1) additional
demand registration pursuant to this Section 2. If any Holder of
Registrable Stock disapproves of the terms of the underwriting, such Holder
may elect to withdraw by written notice to the Company, the managing
underwriter and the Requesting Holders. The securities so withdrawn shall
also be withdrawn from registration.
(d) Notwithstanding any provision of this Agreement to the contrary,
the Company shall not be required to effect a registration pursuant to this
Section 2 during the period starting with the fourteenth (14th) day
immediately preceding the date of an anticipated filing by the Company of,
and ending on a date ninety (90) days following the
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effective date of, a registration statement pertaining to a public offering
of securities for the account of the Company; provided, that the Company
shall actively employ in good faith all reasonable efforts to cause such
registration statement to become effective; and provided further, that the
Company's estimate of the date of filing such registration statement shall
be made in good faith.
(e) The Company shall be obligated to effect and pay for a total of
only one (1) registration pursuant to this Section 2, unless increased
pursuant to Section 2.(c) hereof; provided, that a registration requested
pursuant to this Section 2 shall not be deemed to have been effected for
purposes of this Section 2.(e), unless (i) it has been declared effective
by the Commission, (ii) if it is a shelf registration, it has remained
effective for the period set forth in Section 2.(f), (iii) the offering of
Registrable Stock pursuant to such registration is not subject to any stop
order, injunction or other order or requirement of the Commission (other
than any such action prompted by any act or omission of the Holders), and
(iv) no limitation of the number of shares of Registrable Stock to be
underwritten has been required pursuant to Section 2.(c) hereof.
(f) The Company shall use commercially reasonable efforts to have a
Shelf Registration Statement declared effective as soon as reasonably
practicable after such filing, and to keep such Shelf Registration
Statement continuously effective until August 31, 1999; provided, however,
that the Company may voluntarily suspend the effectiveness of such Shelf
Registration Statement for a limited time, which in no event shall be
longer than one hundred twenty (120) days, if the Company has been advised
by counsel or underwriters to the Company that the offering of the shares
of Common Stock pursuant to the Shelf Registration Statement would
adversely affect, or would be improper in view of (or improper without
disclosure in a prospectus), a proposed financing, a reorganization,
recapitalization, merger, consolidation, or similar transaction involving
the Company, in which case the Company shall be required to keep such Shelf
Registration Statement effective for an additional period of time beyond
August 31, 1999 equal to the number of days the effectiveness thereof is
suspended pursuant to this proviso. Upon the occurrence of any event that
would cause the Shelf Registration Statement to contain a material
misstatement or omission or not to be effective and usable during the
period that such Shelf Registration Statement is required to be effective
and usable, the Company shall promptly file an amendment to the Shelf
Registration Statement and use its best efforts to cause such amendment to
be declared effective as soon as practicable thereafter. The Company will
bear all costs and expenses related to the Shelf Registration Statement
other than the expenses incurred by the Purchasers for underwriters'
commissions and discounts or legal fees incurred by the Purchasers. The
Purchasers shall furnish to the Company such information regarding their
holdings and the proposed manner of distribution thereof as the Company may
reasonably request and as shall be required in connection with the Shelf
Registration Statement.
3. Obligations of the Company. Whenever required under Section 2 to use
commercially reasonable efforts to effect the registration of any Registrable
Stock, the Company shall, as expeditiously as possible:
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(a) prepare and file with the Commission, not later than sixty (60)
days after receipt of a request to file a registration statement with
respect to such Registrable Stock, a registration statement on any form for
which the Company then qualifies or which counsel for the Company shall
deem appropriate and which form shall be available for the sale of such
issue of Registrable Stock in accordance with the intended method of
distribution thereof, and use commercially reasonable efforts to cause such
registration statement to become effective as promptly as practicable
thereafter; provided that before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company will (i)
furnish to one (1) counsel selected by the Requesting Holders copies of all
such documents proposed to be filed, and (ii) notify each such Holder of
any stop order issued or threatened by the Commission and take all
reasonable actions required to prevent the entry of such stop order or to
remove it if entered. Holders agree to cooperate with the Company in
providing information reasonably necessary to the preparation of such
registration statement;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for (i) six (6) months from the effective date of said
registration statement other than a Shelf Registration Statement; (ii) in
the case of a Shelf Registration Statement, for the period of time required
by Section 2(f) hereof; or (iii) such shorter period which will terminate
when all Registrable Stock covered by such registration statement has been
sold (but not before the expiration of the forty (40) or ninety (90) day
period referred to in Section 4(3) of the 1933 Act and Rule 174 thereunder,
if applicable), and comply with the provisions of the 1933 Act with respect
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition
by the sellers thereof set forth in such registration statement;
(c) furnish to each Holder and any underwriter of Registrable Stock to
be included in a registration statement copies of such registration
statement as filed and each amendment and supplement thereto (in each case
including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus) and such
other documents as such Holder may reasonably request in order to
facilitate the disposition of the Registrable Stock owned by such Holder;
(d) use commercially reasonable efforts to register or qualify such
Registrable Stock under such other securities or blue sky laws of such
jurisdictions as any selling Holder or any underwriter of Registrable Stock
reasonably requests, and do any and all other acts which may be reasonably
necessary or advisable to enable such Holder to consummate the disposition
in such jurisdictions of the Registrable Stock owned by such Holder;
provided that the Company will not be required to (i) qualify generally to
do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3.(d) hereof, (ii) subject itself to taxation
in any such jurisdiction, or (iii) consent to general service of process in
any such jurisdiction;
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(e) use commercially reasonable efforts to cause the Registrable Stock
covered by such registration statement to be registered with or approved by
such other governmental agencies or other authorities as may be necessary
by virtue of the business and operations of the Company to enable the
selling Holders thereof to consummate the disposition of such Registrable
Stock;
(f) notify each selling Holder of such Registrable Stock and any
underwriter thereof, at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act (even if such time is after the
period referred to in Section 3.(b)), of the happening of any event as a
result of which the prospectus included in such registration statement
contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances being made not misleading,
and prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Stock, such
prospectus will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein in light of the circumstances being made not
misleading;
(g) make available for inspection by any selling Holder, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by any such
seller or underwriter (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of the Company
(collectively, the "Records"), and cause the Company's officers, directors
and employees to supply all information reasonably requested by any such
Inspector, as shall be reasonably necessary to enable them to exercise
their due diligence responsibility, in connection with such registration
statement. Records or other information which the Company determines, in
good faith, to be confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records or other information is necessary to avoid or
correct a misstatement or omission in the registration statement, or (ii)
the release of such Records or other information is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction. Each
selling Holder shall, upon learning that disclosure of such Records or
other information is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of the Records or other
information deemed confidential;
(h) furnish, at the request of any Requesting Holder, on the date that
such shares of Registrable Stock are delivered to the underwriters for sale
pursuant to such registration or, if such Registrable Stock is not being
sold through underwriters, on the date that the registration statement with
respect to such shares of Registrable Stock becomes effective, (1) a signed
opinion, dated such date, of the legal counsel representing the Company for
the purposes of such registration, addressed to the
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underwriters, if any, and if such Registrable Stock is not being sold
through underwriters, then to the Requesting Holders as to such matters as
such underwriters or the Requesting Holders, as the case may be, may
reasonably request and as would be customary in such a transaction; and (2)
a letter dated such date, from the independent certified public accountants
of the Company, addressed to the underwriters, if any, and if such
Registrable Stock is not being sold through underwriters, then to the
Requesting Holders and, if such accountants refuse to deliver such letter
to such Holder, then to the Company (i) stating that they are independent
certified public accountants within the meaning of the 1933 Act and that,
in the opinion of such accountants, the financial statements and other
financial data of the Company included in the registration statement or the
prospectus, or any amendment or supplement thereto, comply as to form in
all material respects with the applicable accounting requirements of the
1933 Act, and (ii) covering such other financial matters (including
information as to the period ending not more than five (5) business days
prior to the date of such letter) with respect to the registration in
respect of which such letter is being given as the Requesting Holders may
reasonably request and as would be customary in such a transaction;
(i) enter into customary agreements (including if the method of
distribution is by means of an underwriting, an underwriting agreement in
customary form) and take such other actions as are reasonably required in
order to expedite or facilitate the disposition of the Registrable Stock to
be so included in the registration statement;
(j) otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, but not later than
eighteen (18) months after the effective date of the registration
statement, an earnings statement covering the period of at least twelve
(12) months beginning with the first full month after the effective date of
such registration statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the 1933 Act; and
(k) use commercially reasonable efforts to cause all such Registrable
Stock to be listed on the Nasdaq SmallCap Market and/or any other
securities exchange on which similar securities issued by the Company are
then listed or traded.
The Company may require each selling Holder of Registrable Stock as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Stock as the Company
may from time to time reasonably request In writing.
Each Holder agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3.(f) hereof, such
Holder will forthwith discontinue disposition of Registrable Stock pursuant to
the registration statement covering such Registrable Stock until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3.(f) hereof, and, if so directed by the Company, such Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Stock current at the time of receipt of such notice.
In the event the Company shall give any such notice, the Company shall extend
the period during which such registration statement shall be maintained
effective pursuant to this Agreement (including the period referred to in
Section 3.(b)) by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 3.(f) hereof to and
including the date when each selling Holder of Registrable Stock covered by such
registration
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statement shall have received the copies of the supplemented or amended
prospectus contemplated by Section 3.(f) hereof.
4. Incidental Registration. Commencing immediately after the date of
Closing (as defined in the Investor Agreement) and prior to August 31, 1999, if
the Company determines that it shall file a registration statement under the
1933 Act (other than a registration statement on a Form S-4 or S-8 or filed in
connection with an exchange offer or an offering of securities solely to the
Company's existing stockholders) on any form that would also permit the
registration of the Registrable Stock and such filing is to be on its behalf
and/or on behalf of selling holders of its securities for the general
registration of its Common Stock to be sold for cash, at each such time the
Company shall promptly give each Holder written notice of such determination
setting forth the date on which the Company proposes to file such registration
statement, which date shall be no earlier than twenty (20) days from the date of
such notice, and advising each Holder of its right to have Registrable Stock
included in such registration. In the event such an offering is underwritten,
each such Holder's right to include its Registrable Stock in such registration
shall be conditioned upon such Holder's participation in such underwritten
offering on the same terms as provided in Section 2(b) above. Upon the written
request of any Holder received by the Company no later than twenty (20) days
after the date of the Company's notice, the Company shall use commercially
reasonable efforts to cause to be registered under the 1933 Act all of the
Registrable Stock that each such Holder has so requested to be registered. If,
in the written opinion of the managing underwriter or underwriters (or, in the
case of a non-underwritten offering, in the written opinion of the placement
agent, or if there is none, the Company), the total amount of such securities to
be so registered, including such Registrable Stock, will exceed the maximum
amount of the Company's securities which can be marketed (i) at a price
reasonably related to the then current market value of such securities, or (ii)
without otherwise materially and adversely affecting the entire offering, then
the amount of Registrable Stock to be offered for the accounts of Holders shall
be reduced pro rata to the extent necessary to reduce the total amount of
securities to be included in such offering to the recommended amount; provided,
that if securities are being offered for the account of other Persons as well as
the Company, such reduction shall not represent a greater fraction of the number
of securities intended to be offered by Holders than the fraction of similar
reductions imposed on such other Persons other than the Company over the amount
of securities they intended to offer.
5. Holdback Agreement - Restrictions on Public Sale by Holder. To the
extent not inconsistent with applicable law, each Holder whose Registrable Stock
is included in a registration statement agrees not to effect any public sale or
distribution of the issue being registered or a similar security of the Company,
or any securities convertible into or exchangeable or exercisable for such
securities, including a sale pursuant to Rule 144 under the 1933 Act, during the
fourteen (14) days prior to, and during the ninety (90) day period beginning on,
the effective date of such registration statement (except as part of the
registration), if and to the extent requested by the Company in the case of a
nonunderwritten public offering or if and to the extent requested by the
managing underwriter or underwriters in the case of an underwritten public
offering.
6. Expenses of Registration. The Company shall bear all expenses
incurred in connection with each registration pursuant to Sections 2 and 4 of
this Agreement, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
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expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance), exchange listing fees or National
Association of Securities Dealers fees, messenger and delivery expenses, all
fees and expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for the Company. The selling Holders shall bear and pay
the underwriting commissions and discounts applicable to the Registrable Stock
offered for their account in connection with any registrations, filings and
qualifications made pursuant to this Agreement and Holder shall pay the legal
fees of its counsel in connection with such registrations.
7. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to indemnify,
to the full extent permitted by law, each Holder, its officers, directors
and agents and each person who controls such Holder (within the meaning of
the 0000 Xxx) against all losses, claims, damages, liabilities and expenses
caused by any untrue or alleged untrue statement of material fact contained
in any registration statement, prospectus or preliminary prospectus or any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement therein (in case of a
prospectus or preliminary prospectus, in the light of the circumstances
under which they were made) not misleading. The Company will also indemnify
any underwriters of the Registrable Stock, their officers and directors and
each Person who controls such underwriters (within the meaning of the 0000
Xxx) to the same extent as provided above with respect to the
indemnification of the selling Holders.
(b) Indemnification by Holders. In connection with any registration
statement in which a Holder is participating, each such Holder will furnish
to the Company in writing such information with respect to such Holder as
the Company reasonably requests for use in connection with any such
registration statement or prospectus and agrees to indemnify, to the extent
permitted by law, the Company, its directors and officers and each Person
who controls the Company (within the meaning of the 0000 Xxx) against any
losses, claims, damages, liabilities and expenses resulting from any untrue
or alleged untrue statement of material fact or any omission or alleged
omission of a material fact required to be stated in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or necessary to make the statements therein (in the case
of a prospectus or preliminary prospectus, in the light of the
circumstances under which they were made) not misleading, to the extent,
but only to the extent, that such untrue statement or omission is contained
in any information with respect to such Holder so furnished in writing by
such Holder. Notwithstanding the foregoing, the liability of each such
Holder under this Section 7.(b) shall be limited to an amount equal to the
initial public offering price of the Registrable Stock sold by such Holder,
unless such liability arises out of or is based on willful misconduct of
such Holder.
(c) Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such Person of any written notice
of the commencement of any action, suit, proceeding or investigation or
threat thereof made in writing for which such Person will claim
indemnification or contribution pursuant to this Agreement and, unless in
the
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reasonable judgment of such indemnified party, a conflict of interest may
exist between such indemnified party and the indemnifying party with
respect to such claim, permit the indemnifying party to assume the defense
of such claims with counsel reasonably satisfactory to such indemnified
party. Whether or not such defense is assumed by the indemnifying party,
the indemnifying party will not be subject to any liability for any
settlement made without its consent (but such consent will not be
unreasonably withheld). Failure by such Person to provide said notice to
the indemnifying party shall itself not create liability except to the
extent of any injury caused thereby. No indemnifying party will 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 of such
claim or litigation. If the indemnifying party is not entitled to, or
elects not to, assume the defense of a claim, it will not be obligated to
pay the fees and expenses of more than one (1) counsel with respect to such
claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels.
(d) Contribution. If for any reason the indemnity provided for in
this Section 7 is unavailable to, or is insufficient to hold harmless, an
indemnified party, then the indemnifying party shall contribute to the
amount paid or payable by the indemnified party as a result of such losses,
claims, damages, liabilities or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the other, or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, or provides a lesser sum to the indemnified party than the amount
hereinafter calculated in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnifying party on the one
hand and the indemnified party on the other but also the relative fault of
the indemnifying party and the indemnified party as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among
other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties; and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such action. The amount paid or payable by a party
as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations
set forth in Section 7.(c), any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 7.(d) were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution
from any Person who was not guilty of such fraudulent misrepresentation.
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If indemnification is available under this Section 7, the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in Sections 7.(a) and 7.(b) without regard to the
relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 7.
8. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's securities on the basis provided in any
underwriting arrangements approved by the Holders entitled hereunder to approve
such arrangement; and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
9. Rule 144. The Company covenants that it will file the reports
required to be filed by it under the 1933 Act and the Securities Exchange Act of
1934, as amended, and the rules and regulations adopted by the Commission
thereunder; and it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Stock without registration under the 1933 Act within the
limitation of the exemptions provided by (a) Rule 144 under the 1933 Act, as
such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any Holder,
the Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
10. Transfer of Registration Rights. The registration rights of any
Holder under this Agreement with respect to any Registerable Stock may be
transferred to any Person who acquires at least 50,000 Shares; provided that
such transfer may otherwise be effected in accordance with applicable securities
laws; provided further, that the transferring Holder shall give the Company
written notice at or prior to the time of such transfer stating the name and
address of the transferee and identifying the securities with respect to which
the rights under this Agreement are being transferred; provided further, that
such transferee shall agree in writing, in form and substance satisfactory to
the Company, to be bound as a Holder by the provisions of this Agreement; and
provided further, that such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by such
transferee is restricted under the 1933 Act. Except as set forth in this
Section 10, no transfer of Registrable Stock shall cause such Registrable Stock
to lose such status.
11. Mergers. Etc. The Company shall not, directly or indirectly, enter
into any merger, consolidation or reorganization in which the Company shall not
be the surviving corporation unless the proposed surviving corporation shall,
prior to such merger, consolidation or reorganization, agree in writing to
assume the obligations of the Company under this Agreement, and for that purpose
references hereunder to "Registrable Stock" shall be deemed to be references to
the securities which the Holders would be entitled to receive in exchange for
Registrable Stock under any such merger, consolidation or reorganization;
provided, however, that the provisions of this Section 11 shall not apply in the
event of any merger, consolidation or reorganization in which the Company is not
the surviving corporation if each Holder is entitled to receive in exchange for
its Registrable Stock consideration consisting solely of (i) cash, (ii)
securities of the acquiring corporation which may be immediately sold to the
public without registration under the 1933 Act, or (iii) securities of the
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acquiring corporation which the acquiring corporation has agreed to register
within ninety (90) days of completion of the transaction for resale to the
public pursuant to the 1933 Act.
12. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent
with the rights granted to the Holders in this Agreement.
(b) Remedies. Each Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled
to specific performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive (to the extent permitted by law) the
defense in any action for specific performance that a remedy of law would
be adequate.
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given unless the Company has obtained
the written consent of the Holders of at least a majority of the Shares and
any Registrable Stock then outstanding and held by the Holders.
(d) Successors and Assigns. Except as otherwise expressly provided
herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties hereto. Nothing in this Agreement, express or implied, is intended
to confer upon any Person other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, except as expressly provided in this
Agreement.
(e) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Texas applicable to
contracts made and to be performed wholly within that state, without regard
to the conflict of law rules thereof.
(f) 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.
(g) Headings. The headings in this Agreement are used for convenience
of reference only and are not to be considered in construing or
interpreting this Agreement.
(h) 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, directed to (i) the Company at the address set forth below its
signature hereof or (ii) a Holder at the address of the Administrator set
forth below its signature hereof. Any party may change its address for
notice by giving ten (10) days advance written notice to the other parties.
Every notice or
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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 (followed up by overnight courier) or
overnight courier service, with receipt acknowledged.
(i) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in
any way impaired thereby, it being intended that all of the rights and
privileges of the Holders shall be enforceable to the fullest extent
permitted by law.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings other than those set
forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such
subject matter.
(k) Enforceability. This Agreement shall remain in full force and
effect notwithstanding any breach or purported breach of, or relating to,
the Investor Agreement.
(l) Recitals. The recitals are hereby incorporated in the Agreement
as if fully set forth herein.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written hereinabove.
APPLIED VOICE RECOGNITION, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------
Name: XXXXXXX X. XXXXXXXX
Title: Chairman and CEO
0000 Xxxx Xxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
ENTREPRENEURIAL INVESTORS, LTD.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: XXXXXX X. XXXXXX
Title: Director
Xxxxxxxx Xxxxxxxx, 0xx Xxxxx
Xxxx Xxxx Xxxxx
X.X. Xxx 00000
Freeport, Bahamas
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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