EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of the 18 day of August, 1999 (the "Effective Date") by and between
APPLIED VOICE RECOGNITION, INC., a Delaware corporation doing business as
x-XXXX.xxx (the "Company"), and each of the shareholders described on the
signature page hereto (individually, a "Shareholder" and collectively, the
"Shareholders").
R E C I T A L S:
WHEREAS, while there is only one Shareholder that is a party to this
Agreement as of the date hereof, the parties anticipate that this Agreement may
be amended in the future to provided for additional Shareholders and additional
shares of Series E Preferred Stock (as hereafter defined) to be sold in
accordance with the terms of this Agreement;
WHEREAS, the Shareholders are acquiring up to an aggregate of Two
Thousand (2,000) shares of the Company's Series E Preferred Stock, par value
$0.10 per share (such number of shares as are actually issued to the
Shareholders being referred to as the "Series E Preferred Stock") pursuant to
that certain Applied Voice Recognition, Inc., d/b/a x-XXXX.xxx Series E
Preferred Stock and Warrant Purchase Agreement dated of even date herewith (the
"Purchase Agreement");
WHEREAS, the Series E Preferred Stock is convertible into shares of the
Company's common stock, $0.001 par value per share (the "Common Stock");
WHEREAS, pursuant to the terms of the Purchase Agreement, the Company
has issued in favor of the Shareholders warrants to purchase an aggregate of
400,000 shares of Common Stock of the Company (the "Purchase Agreement
Warrants");
WHEREAS, pursuant to the terms of that certain Convertible Promissory
Note and Warrant Purchase Agreement dated July 20, 1999, the Company has issued
in favor of the Stockholders warrants to purchase a number of shares of Common
Stock of the Company to be determined by formula, which number the parties
hereto agree to be 75,000 shares of Common Stock (the "Convertible Note
Warrants" and, together with the Purchase Agreement Warrants, being referred to
as the "Warrants");
WHEREAS, the Company desires to grant to the Shareholders certain
registration rights relating to the shares of Common Stock issuable upon
conversion of any of the Series E Preferred Stock and upon exercise of any one
or more of the Warrants (the "Shares"), and the Shareholders desire to obtain
such registration rights, subject to the terms and conditions 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 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, (ii) any shares of Common Stock issued to a
Holder, relating to the Shares, by way of a stock split, reorganization,
merger or consolidation; (iii) any Common Stock issued to a Holder,
relating to the Shares, as a dividend on the Shares; and (iv) any shares
of Common Stock that would be Registrable Stock" in a Registration
Rights Agreement entered into between the Company and other purchasers
of Series E Preferred Stock, relating to the registration of Common
Stock issued upon conversion of such Series E Preferred Stock. For
purposes of this Agreement, any Registrable Stock shall cease to be
Registrable Stock when (u) five years have passed since an underwritten
public offering has been completed for the account of the Company, (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. Nothing contained in this Agreement shall be construed as
requiring a Holder to exercise their Warrants prior to the initial
filing of any registration statement or the effectiveness thereof.
(d) The terms "Holder" and "Holders" shall mean a Shareholder or
the Shareholders or any transferee or assignee thereof to whom the
rights under this Agreement are assigned in accordance with Section 10
hereof, PROVIDED that the Holder or Holders or such transferee or
assignee shall then own the Registrable Stock. In addition thereto,
"Holder" and "Holders" shall also refer to a shareholder or any
transferee or assignee thereof that is a party to any other Registration
Rights Agreement entered into with the Company relating to the
registration of shares of Common Stock following their issuance upon
conversion of Series E Preferred Stock of the Company.
(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.
(h) The term "Requesting Holder" and "Requesting Holders" shall
mean a Holder or the Holders of in the aggregate at least fifty percent
(50%) 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 ninety (90) days following the date hereof, any
Requesting Holders may make a 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 five (5) days thereafter notify in writing all
other Holders of Registrable Stock of such request, and (y) use its
reasonable efforts to cause to be registered under the 1933 Act all
Registrable Stock that the Requesting Holders and such other Holders
have, within fifteen (15) days after the Company has given such notice,
requested be registered. Notwithstanding the foregoing, the Company
shall not be obligated to file the above described registration
statement if the aggregate proceeds from the registration would
reasonably be expected to be less than $300,000.
(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 and the inclusion of such
Holder's Registrable Stock in the 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, such registration
shall not count against the number of demand registrations the
Requesting Holders are permitted to request hereunder. 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 effective date of, a registration statement pertaining to
an underwritten 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) Subject to the additional terms contained herein, the
Requesting Holders shall be entitled to an unlimited number of
registrations on Form S-3, but shall only be allowed three demands that
utilize forms other than Form S-3. The Company shall use Form S-3 for
registrations pursuant hereto if such form is available to the Company.
If federal law precludes the use of Form S-3, the Company shall use
whatever form is necessary; however, the Company shall not be obligated
to use such non Form S-3 forms more than a total of three times, 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 3(b), (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.
3. OBLIGATIONS OF THE COMPANY. Whenever required under Section 2 to use
its reasonable efforts to effect the registration of any Registrable Stock, the
Company shall, as expeditiously as possible:
(a) prepare and file with the Commission, not later than ninety
(90) days after receipt of a request to file a registration statement
with respect to such Registrable Stock, a registration statement on Form
S-3 if available or, if not, 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 its 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;
(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 such period of time as would satisfy the holding
period requirements of Rule 144(k) promulgated by the Commission with
respect to the Shares or 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 its 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;
(e) use its 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 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;
and
(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.
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 statement shall have received the copies of the supplemented or
amended prospectus contemplated by Section 3(f) hereof.
4. INCIDENTAL REGISTRATION. Commencing ninety (90) days after the date
hereof, 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 thirty (30) days from the date of
such notice, and advising each Holder of its right to have Registrable Stock
included in such registration. 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 include the shares in such registration statement and
use its 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.
(a) To the extent not inconsistent with applicable law, each
Holder 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 thirty (30) day period
beginning on, the effective date of any registration statement filed by
the Company in connection with an underwritten public offering in which
the Holder is not participating, if and to the extent requested by the
managing underwriter or underwriters.
(b) The Company agrees (i) not to effect any public sale or
distribution of any securities similar to those being registered, or any
securities convertible into or exchangeable or exercisable for such
securities, during the fourteen (14) days prior to, and during the
ninety (90) day period beginning on, the effective date of any
registration statement in which Holders are participating (except as
part of such registration), if and to the extent requested by the
Holders in the case of a non-underwritten public offering or if and to
the extent requested by the managing underwriter or underwriters in the
case of an underwritten public offering; and (ii) that any agreement
entered into after the date of this Agreement pursuant to which the
Company issues or agrees to issue any securities convertible into or
exchangeable or exercisable for such securities (other than pursuant to
an effective registration statement) shall contain a provision under
which holders of such securities agree not to effect any public sale or
distribution of any such securities during the periods described in (i)
above, in each case including a sale pursuant to Rule 144 under the 1933
Act.
6. EXPENSES OF REGISTRATION. The Company shall bear all expenses
incurred in connection with a registration pursuant to Section 2 or Section 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
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 fees of their counsel.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify, to the full extent permitted by law, each selling 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 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.
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 arrangements, 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. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to making
available to the Holder the benefits of Rule 144 promulgated under the 1933 Act
and any other rule or regulation of the Commission that may at any time permit
the Holder to sell securities of the Company to the public without registration,
the Company agrees to: (a) make and keep public information available, as those
terms are understood and defined in Rule 144, at all times after the date
hereof; (b) file with the Commission in a timely manner all reports and other
documents required of the Company under the 1933 Act and the Securities Exchange
Act of 1934, as amended (the "1934 Act"); and (c) furnish to the Holder, so long
as the Holder owns any Registrable Securities, forthwith upon request (i) a
written statement by the Company that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested in availing the Holder of any rule or regulation of the
Commission which permits the selling of any such securities without registration
or pursuant to such form.
10. TRANSFER OF REGISTRATION RIGHTS. The registration rights of any
Holder under this Agreement with respect to any Registrable Stock may only be
transferred to an affiliate of such Holder or to a transferee of at least
$150,000 in Registrable Stock; 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; PROVIDED FURTHER, that all
registration rights shall terminate upon the termination of registration rights
of any Holder under this Agreement as a result of any Registrable Stock being
eligible to be sold pursuant to Rule 144(k) under the 1933 Act; PROVIDED
FURTHER, that no transfer may be made while a registration statement with
respect to the Shares is on file; 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 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 OR SENIOR 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. The Company will not hereafter enter into any agreement with
respect to its securities which confers upon any party any registration
rights that would pre-empt the registration rights granted pursuant
hereto
(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 Registrable Stock then outstanding affected by such
amendment, modification, supplement, waiver or departure.
(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 DELAWARE
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 other communication hereunder shall
be deemed to have been duly given or served on the date on which
personally delivered, or on the date actually received, if sent by
telecopy or overnight courier service, with receipt acknowledged.
(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) RECITALS. The recitals are hereby incorporated in the
Agreement as if fully set forth herein.
(l) ATTORNEYS FEES. If any action is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees and costs, in addition to any
other relief to which he is or may be entitled. This provision shall be
construed as applicable to the entire Agreement.
(m) ENFORCEABILITY. This Agreement shall remain in full force and
effect notwithstanding any breach or purported breach of, or relating to, the
Purchase Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
COMPANY:
APPLIED VOICE RECOGNITION, INC.
By: /s/ XXXXXXX X. XXXXXX
Xxxxxxx X. Xxxxxxx, Chief Financial Officer
0000 Xxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
SHAREHOLDERS:
GREENWICH, AG
By: /s/ XXXXXX XXXXXXX
Xxxxxx Xxxxxxx, Chief Executive Officer
Xxxxx Xxxx 00
00000 Xxxxxxx, Xxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Signature Page
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Registration Rights Agreement
