EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of the 12th day of August, 1997 by and between APPLIED VOICE
RECOGNITION, INC., a Utah corporation (the "Company") and ENTREPRENEURIAL
INVESTORS, LTD., a Bahamas company (the "Shareholder").
R E C I T A L S:
---------------
WHEREAS, the Shareholder is acquiring One Hundred Eighty Seven Thousand
Five Hundred (187,500) 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 of even date herewith (the "Investor Agreement");
and
WHEREAS, the Company desires to grant to the Shareholder certain
registration rights relating to the shares of Common Stock issuable upon
conversion of any of the Series A Preferred Stock and the Shareholder desires 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 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
REGISTRATION RIGHTS AGREEMENT Page 1
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, 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 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 Holders and such
other Holders have, within forty-five (45) days after the Company has given such
notice, requested be registered.
(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 above, and
the Company shall include such information in the written notice referred to in
clause (x) of Section 2 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
REGISTRATION RIGHTS AGREEMENT Page 2
Holder's Registrable Stock in the underwritten offering to the extent provided
in this Section 0. 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 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 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, 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, (iii) the offering of Registrable Stock pursuant to such registration
is not
REGISTRATION RIGHTS AGREEMENT Page 3
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 hereof.
(f) The Company shall use commercially reasonable efforts to have such
Shelf Registration Statement declared effective as soon as reasonably
practicable after such filing, and to keep such Shelf Registration Statement
continuously effective until two (2) years following the date on which such
Shelf Registration Statement becomes effective under the Securities Act;
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 two (2) years following the date of the effectiveness
thereof 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:
(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 RIGHTS AGREEMENT Page 4
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; or (ii) 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 hereof, (ii) subject itself to taxation in any such jurisdiction, or
(iii) consent to general service of process in any such jurisdiction;
(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), 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;
REGISTRATION RIGHTS AGREEMENT Page 5
(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;
(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
REGISTRATION RIGHTS AGREEMENT Page 6
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 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 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) by the number
of days during the period from and including the date of the giving of such
notice pursuant to Section 3 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 hereof.
4. Incidental Registration. Commencing immediately after the date of
Closing (as defined in the Investor Agreement), 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.
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
REGISTRATION RIGHTS AGREEMENT Page 7
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.
(a) 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.
(b) Restrictions on Public Sale by the Company and Others. 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 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
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.
REGISTRATION RIGHTS AGREEMENT Page 8
(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 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
REGISTRATION RIGHTS AGREEMENT Page 9
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, 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 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 and 7 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. 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
REGISTRATION RIGHTS AGREEMENT Page 10
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 transferee of such 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; 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 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.
REGISTRATION RIGHTS AGREEMENT Page 11
(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 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 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.
REGISTRATION RIGHTS AGREEMENT Page 12
(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.
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. Xxxxxxx
-----------------------------
Name: XXXXXXX X. XXXXXXX
Title: President
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
REGISTRATION RIGHTS AGREEMENT Page 13
