EXHIBIT 10.25
Co-Sale and Tag-Along Rights Agreement
By
Applied Voice Recognition, Inc.
and
L & H Investment Company N.V.
This Co-Sale and Tag-Along Rights Agreement is made as of the 31st day of
December, 1998 by and among Voice Technologies Partners LTD, a Texas limited
partnership (the "Partner"), Applied Voice Recognition, Inc., a Delaware
corporation (the "Company"), and L & H Investment Company N.V., a Belgium
corporation ("L & H").
In consideration of the mutual covenants set forth herein, the parties agree
as follows:
1. Definitions.
(a) "Partner's Stock" shall mean shares of the Company's Common
Stock now owned by Partner.
(b) "Preferred Stock" shall mean the Company's outstanding Series D
Preferred Stock.
(b) "Common Stock" shall mean the Company's Common Stock and
shares of Common Stock issued or issuable upon conversion of the
Company's outstanding Series D Preferred Stock.
(c) "Stockholder" shall mean L & H
2. Sales by Partner - Co-Sale Rights.
(a) If Partner proposes to sell or transfer or does actually sell or
transfer any shares of Partner's Stock in the Company in excess of any of 60,000
shares per calendar month, then Partner shall promptly give written notice (the
"Notice") to the Company and the Stockholder of such sale or transfer. Such
Notice shall certify whether the identity of the purchaser(s) of the shares
being sold is known to the Partner. If Partner knows the identity of the
purchaser(s) then Sections 2(c-h) apply.
(b) If the Notice certifies that the identity is not known (e.g., the
sale is taking place on the open market) (an "Unidentified Sale Notice") then
Partner must give the Notice no later than the close of business on the day the
sale is completed and Partner may make such sale without any action on the part
of L & H. The Notice shall state under which subparagraph of this Agreement the
sale or transfer is being made. Upon receipt of such Unidentified Sale Notice
issued by virtue of Subparagraph 2(a), L & H may sell a Pro Rata Portion
(defined below) of its shares (despite its agreement not to in the Series D
Preferred Stock and Warrant Purchase Agreement of even date herewith) for a
period of 20 days following receipt of the Notice. For purposes of this
paragraph (b) "Pro Rata Portion" shall equal the
number of shares of Common Stock times a fraction the numerator of which is the
number of shares of stock to which the Notice pertained and the denominator of
which is the number of shares of Common Stock then held by Partner.
(c) However, if Partner certifies that it knows the identity of the
purchaser(s), then the Notice shall be given to L & H at least 10 days before
the proposed sale and it must describe in reasonable detail the proposed sale or
transfer including, without limitation, the number of shares of Partner's Stock
to be sold or transferred, the nature of such sale or transfer, the
consideration to be paid, and the name and address of each prospective purchaser
or transferee (an "Identified Sale Notice"). The Notice shall state under which
paragraph of this Agreement the sale or transfer is being made.
(d) Stockholder shall have the right, exercisable upon written notice or
by facsimile notice to Partner within 15 days after receipt of the Identified
Sale Notice, to participate in such sale of Common Stock on the same terms and
conditions.
(e) Stockholder may sell all or any part of that number of shares of
Stock equal to the product obtained by multiplying (i) the aggregate number of
shares of Partner's Stock covered by the Notice by (ii) a fraction the numerator
of which is the number of shares of Common Stock owned by the Stockholder at the
time of the sale or transfer and the denominator of which is the total number of
shares of Common Stock owned by Partner and the Stockholder at the time of the
sale or transfer.
(f) Stockholder shall effect its participation in the sale by promptly
delivering to Partner for transfer to the prospective purchaser one or more
certificates, properly endorsed for transfer, which represent:
(i) the type and number of shares of Common Stock which Stockholder
elects to sell; or
(ii) that number of shares of Series D Preferred Stock which is at
such time convertible into the number of shares of Common Stock which
Stockholder elects to sell; provided, however, that if the prospective purchaser
objects to the delivery of Series D Preferred Stock in lieu of Common Stock,
Stockholder shall convert such Preferred Stock into Common Stock and deliver
Common Stock as provided in subparagraph 2(f)(i) above. The Company agrees to
make any such conversion concurrent with the actual transfer of such shares to
the purchaser.
(g) The stock certificate or certificates that Stockholder delivers to
Partners pursuant to paragraph 2(f) shall be transferred to the prospective
purchaser in consummation of the sale of the Stock pursuant to the terms and
conditions specified in the Notice, and Partner shall concurrently therewith
remit to Stockholder that portion of the sale proceeds to which such Participant
is entitled by reason of its participation in such sale. To the extent that any
prospective purchaser (or purchasers) prohibits such assignment or otherwise
refuses to purchase shares or other securities from Stockholder exercising its
rights of co-sale hereunder, Partner shall not sell to such prospective
purchaser or purchasers any Stock unless
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and until, simultaneously with such sale, Partner shall purchase such shares or
other securities from Stockholder.
(h) The exercise or non-exercise of the rights of the Stockholder
hereunder to participate in one or more sales of Stock made by Partners shall
not adversely affect its rights to participate in subsequent sales of Stock
subject to paragraphs 2(a-c).
(i) In each calendar year, upon duly notifying L & H, Partner may pledge
up to 480,000 shares of Partner's Stock free from any of L & H's rights to sell
shares with or in addition to Partner's Stock imposed by this Section 2 and
without the legend required by Section 6 so long as the pledge is subject to
bona fide loan and stock pledge agreements. In such case, the shares pledged
under this Subsection (i) shall be in place of the 60,000 share per month
exemption provided for in Section 2(a) (For example: if the full 480,000 shares
are pledged, there may be no additional shares sold or transferred under the
60,000 per month exemption in Section 2(a) for eight months following the
pledge.) Further, any shares pledged under this Subsection (i) shall count
toward the aggregate 50% limit described in Section 3 below.
3. Sales by Partner - Tag-Along Rights. In the event that Partner sells in
one transaction, or in a series of transactions, in aggregate, fifty percent
(50%) or more of the Partner's Shares held as of December 31, 1998, then the
Stockholder shall have the right to have all of its Common Stock sold prior to
the sale of additional shares of the Partner's Stock and accordingly, Partner
must:
(a) Promptly give Notice to the Company and the Stockholder at least 10
days prior to the closing of such sale or transfer. The Notice shall describe in
reasonable detail the proposed sale or transfer including, without limitation,
the number of shares of Partner's Stock to be sold or transferred, the nature of
such sale or transfer, the consideration to be paid, and the name and address of
each prospective purchaser or transferee. The Notice shall state under which
paragraph of this Agreement the sale or transfer is being made;
(b) Stockholder shall have the right, exercisable upon written notice to
such Partner within 15 days after receipt of the Notice, to participate in such
sale of Common Stock on the same terms and conditions;
(c) Stockholder shall effect its participation in the sale by promptly
delivering to Partner for transfer to the prospective purchaser one or more
certificates, properly endorsed for transfer, which represent:
(i) the type and number of shares of Common Stock which Stockholder
elects to sell; or
(ii) that number of shares of Series D Preferred Stock which is at
such time convertible into the number of shares of Common Stock which
Stockholder elects to sell; provided, however, that if the prospective purchaser
objects to the delivery of Series D Preferred Stock in lieu of Common Stock,
such Participant shall convert such Preferred Stock into Common Stock and
deliver Common Stock as provided in subparagraph 2(f)(i) above. The
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Company agrees to make any such conversion concurrent with the actual transfer
of such shares to the purchaser.
(d) The stock certificate or certificates that Stockholder delivers to
Partner pursuant to paragraph 2(e) shall be transferred to the prospective
purchaser in consummation of the sale of the Stock pursuant to the terms and
conditions specified in the Notice, and Partner shall concurrently therewith
remit to such Stockholder that portion of the sale proceeds to which such
Stockholder is entitled by reason of its participation in such sale. To the
extent that any prospective purchaser or purchasers prohibits such assignment or
otherwise refuses to purchase shares or other securities from Stockholder
exercising its rights of co-sale hereunder, Partner shall not sell to such
prospective purchaser or purchasers any Stock unless and until, simultaneously
with such sale, Partner shall purchase such shares or other securities from
Stockholder.
(e) The exercise or non-exercise of the rights of the Stockholder
hereunder to participate in one or more sales of Partner's Stock made by Partner
shall not adversely affect their rights to participate in subsequent sales of
Partner's Stock subject to paragraph 2(a).
4. Exempt Transfers.
(a) Notwithstanding the foregoing, the co-sale rights of the Stockholder
in Section 2 and the Tag Along Rights in Section 3 shall not apply to (i) any
pledge of Stock made pursuant to a bona fide loan transaction that creates a
mere security interest, (ii) any transfer to the ancestors, descendants or
spouse of Partner or to trusts for the benefit of such persons listed in this
subsection 4(a)(ii) or of Partner; or (iii) any bona fide gift; provided that
(A) Partner shall inform the Stockholder of such pledge, transfer or gift prior
to effecting it and (B) the pledgee, transferee or donee shall furnish the
Stockholder with a written agreement to be bound by and comply with all
provisions of Section 2. Stock transferred under this subsection 4(a) shall
remain "Stock" hereunder, and such pledgee, transferee or donee shall be treated
as a "Partner" for purposes of this Agreement.
(b) Notwithstanding the foregoing, the co-sale rights of the Stockholder
in Section 2 and the Tag Along Rights in Section 3 shall not apply to the sale
of any Partner's Stock (i) to employees, officers or directors of the
Corporation pursuant to stock option or stock purchase plans or agreements on
terms approved by the Board of Directors or (ii) if prior to such sale, Partner
held less than 5% of the Company's outstanding shares.
5. Prohibited Transfers.
(a) In the event a Partner should sell any Stock in contravention of the
co-sale rights of the Stockholder in Section 2 or the Tag Along Rights in
Section 3 under this agreement (a "Prohibited Transfer"), the Stockholder, in
addition to such other remedies as may be available at law, in equity or
hereunder, shall have the put option provided below, and Partner shall be bound
by the applicable provisions of such option.
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(b) In the event of a Prohibited Transfer, Stockholder shall have the
right to sell to Partner the type and number of shares of Stock equal to the
number of shares Stockholder would have been entitled to transfer to the
purchaser had the Prohibited Transfer under Section 2(c) or Section 3(c), as the
case may be, hereof been effected pursuant to and in compliance with the terms
hereof. Such sale shall be made on the following terms and conditions:
(i) The price per share at which the shares are to be sold to Partner
shall be equal to the price per share paid by the purchaser to Partner in the
Prohibited Transfer. Partner shall also reimburse Stockholder for any and all
fees and expense, including legal fees and expense, incurred pursuant to the
exercise or the attempted exercise of the Stockholder's rights under Section 2
and Section 3, whichever is applicable.
(ii) Within 90 days after the later of the dates on which the
Stockholder (A) received notice of the Prohibited Transfer, or (B) otherwise
become aware of the Prohibited Transfer, Stockholder shall, if exercising the
option created hereby, deliver to Partner the certificate or certificates
representing shares to be sold, each certificate to be properly endorsed for
transfer.
(iii) Partner shall, upon receipt of the certificate or certificates
for the shares to be sold by Stockholder, pursuant to this subparagraph 4(b),
pay the aggregate purchase price therefor and the amount of reimbursable fees
and expense, as specified in subparagraph 4(b)(i), in cash or by other means
acceptable to the Stockholder.
(iv) Notwithstanding the foregoing, any attempt by Partner to
transfer Partner's Stock in violation of Section 2 and Section 3 hereof shall be
void and the Company agrees it will not effect such a transfer nor will it treat
any alleged transferee as the holder of such shares without the written consent
of the Stockholder.
6. Legend.
(a) Each certificate representing shares of Stock now or hereafter owned
by Partner or issued to any person in connection with a transfer pursuant to
Section 4(a) hereof shall be endorsed with the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN CO-SALE
AND TAG-ALONG AGREEMENT BY AND BETWEEN THE STOCKHOLDER, THE CORPORATION AND
CERTAIN HOLDERS OF STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION."
(b) The Company and Partner shall, within 20 days of the date of this
Agreement instruct the Company's transfer agent to impose transfer restrictions
on the shares represented by certificates bearing the legend referred to in
Section 6(a) above to enforce the
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provisions of this Agreement. They shall also instruct the transfer agent to
analyze each sale made by Partner, and if such sale is found to be within the
volume limitations described in Section 2(a) or if such shall is pursuant to an
Unidentified Sale Notice, to remove the legend prior to the transfer of such
shares. In the alternative, if the transfer agent is unwilling or unable to make
the analysis described above, then upon each proposed transfer or sale, Partner
shall provide the transfer agent an opinion of the Company's counsel that the
transfer or sale is permitted under this Agreement and that the legend may be
removed in which event the transfer agent shall be instructed to remove the
legend with respect to the shares covered by the certificate. Further, the
transfer agent shall be instructed to remove the legend upon termination of this
Agreement.
7. Miscellaneous.
7.1 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware.
7.2 Amendment. Any provision may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by the written consent of (i) as to the
Company, only by the Company, (ii) as to each Stockholder, such Stockholder,
provided that any Stockholder may waive any of his rights hereunder without
obtaining the consent of any other Stockholder. Any amendment or waiver effected
in accordance with clauses (i) and (ii) of this paragraph shall be binding upon
each Stockholder, its successors and assigns, the Company and Partner.
7.3 Assignment of Rights. This Agreement and the rights and obligations
of the parties hereunder shall inure to the benefit of, and be binding upon,
their respective successors, assigns and legal representatives. The rights of
the Stockholder hereunder are only assignable (i) by each of such Stockholders
to any other Stockholder or (ii) to an assignee or transferee who acquires all
of the Common Stock purchased by a Stockholder or at least 500,000 shares of
such Common Stock.
7.4 Term. This Agreement shall terminate upon the earlier of (i) the
redemption or conversion of all shares of Series D Preferred Stock, (ii)
December 31, 2003, (iii) closing of the Company's sale of all or substantially
all of its assets or the acquisition of the Company by another entity by means
of merger or consolidation resulting in the exchange of the outstanding shares
of the Company's capital stock for securities or consideration issued, or caused
to be issued, by the acquiring entity or its subsidiary, or (iv) the termination
by the Company of Xxxxxxx X. Xxxxxxxx'x employment or the failure of the Company
to renew his employment contract; however, if Xxxxxxx X. Xxxxxxxx chooses to
continue working for the Company without an employment contract then this
Agreement does not terminate under this Section 7.4.
7.5 Ownership. Partners represents and warrants that it is the sole legal
and beneficial owner of 5,920,000 shares of the Company's Common Stock and that
no other person has any interest (other than a community property interest) in
such shares.
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7.6 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given upon personal delivery or
facsimile to the party to be notified or five (5) days after deposit in the
United States mail, by registered or certified mail, postage prepaid and
properly addressed to the party to be notified as set forth on the signature
page hereof or at such other address as such party may designate by ten (10)
days advance written notice to the other parties hereto. Notwithstanding the
foregoing, the facsimile notice permitted by Section 2(d) shall be effective at
the time it is given.
7.7 Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision, had
never been contained herein.
7.8 Attorney Fees. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
7.9 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.
7.10 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 Shareholder 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.
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The foregoing agreement is hereby executed as of the date first above, written.
APPLIED VOICE RECOGNITION, INC., a
Delaware corporation,
/s/ Xxxxxxx X. Xxxxxxxx
_______________________________________________________
By: Xxxxxxx X. Xxxxxxxx,
Its President
L & H INVESTMENT CO. N.V. a Belgium
corporation
_______________________________________________________
By: C.V.B.A. Xxxxxx Xxxxx,
its Director
_______________________________________________________
and By: C.V.B.A. Xxxxxxx Vanderhonydonok,
its Director
Address L & H Investment Co.
Merghelynck
X-0000 Xxxxx
Xxxxxxxx, XXXXXXX
Fax: 000-00-0-000-0000
VOICE TECHNOLOGIES PARTNERS,
LTD., a Texas limited partnership
By: Voice Technologies Management Corp.
a Texas limited corporation, its general partner
/s/ Xxxxxxx X. Xxxxxxxx
By: _________________________________________________
Xxxxxxx X. Xxxxxxxx, its President
Address 0000 Xxxx Xxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Fax: 000-000-0000
[SIGNATURE PAGE TO CO-SALE AND TAG-ALONG RIGHTS AGREEMENT]
7.9 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.
The foregoing agreement is hereby executed as of the date first above
written.
APPLIED VOICE RECOGNITION, INC, a
Delaware corporation
_______________________________________________________
By: Xxxxxxx X. Xxxxxxxx,
its President
L & H INVESTMENT CO. N.V. a Belgium
corporation
/s/ Xxxxxx Xxxxx
_______________________________________________________
By: C.V.B.A. Xxxxxx Xxxxx,
its Director
_______________________________________________________
and By: C.V.B.A. Xxxxxxx Vanderhooydonck,
its Xxxxxxxx
Xxxxxxx X & X Xxxxxxxxxx Xx.
Xxxxxxxxxxx
X-0000 Ieper
Brussels, BELGIUM
Fax: 00 0-00-0-000-0000
VOICE TECHNOLOGIES PARTNERS,
LTD., a Texas limited partnership
By: Voice Technologies management Corp.,
a Texas corporation, its general partner
By __________________________________________________
Xxxxxxx X. Xxxxxxxx, its President
Address 0000 Xxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Fax: 000-000-0000
[SIGNATURE PAGE TO CO-SALE AND TAG-ALONG RIGHTS AGREEMENT]
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7.9 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.
The foregoing agreement is hereby executed as of the date first above
written.
APPLIED VOICE RECOGNITION, INC. a
Delaware corporation
______________________________________________________
By: Xxxxxxx X. Xxxxxxxx,
its President
L & H INVESTMENT CO. N.V. a Belgium
corporation
/s/ Xxxxxx Xxxxx
______________________________________________________
By: C.V.B.A. Xxxxxx Xxxxx,
its Director
/s/ Xxxxxxx Vanderhorydonck
______________________________________________________
and By: C.V.B.A. Xxxxxxx Vanderhorydonck,
its Director
Address L & H Investment Co.
Marghelynck
X-0000 Xxxxx
Xxxxxxxx, XXXXXXX
Fax: 000-00-0-000-0000
VOICE TECHNOLOGIES PARTNERS,
LTD., a Texas limited partnership
By: Voice Technologies Management Corp.,
a Texas corporation, its general partner
By _________________________________________________
Xxxxxxx X. Xxxxxxxx, its President
Address 0000 Xxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Fax: 000-000-0000
[SIGNATURE PAGE TO CO-SALE AND TAG-ALONG RIGHTS AGREEMENT]
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