As filed with the Securities and Exchange Commission on April 2, 1997
Registration No. 333-__________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------------------
APPLIED VOICE RECOGNITION, INC.
(Exact name of Registrant as specified in its charter)
UTAH 87-042552
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
4615 Post Oak Place, Suite 111 Timothy J. Connolly
Houston, Texas 77027 4615 Post Oak Place, Suite 111
(713) 621-5678 Houston, Texas 77027
(Address, including zip code, and (Name, address, including zip code,
telephone number, including and telephone number, including
area code of registrant's area code, of agent for service)
principal executive offices)
WARRANT TO
TIM CONNOLLY
(Full Title of the Plan)
-----------------
COPY TO:
Thomas C. Pritchard
Brewer & Pritchard, P.C.
1111 Bagby, 24th Floor
Houston, Texas 77002
Phone (713) 659-1744
Fax (713) 659-2430
-----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Maximum
Proposed Maximum Aggregate Amount of
TITLE OF SECURITIES Amount Being Offering Price Offering Registration
TO BE REGISTERED Registered(1) Per Share(2) Price(2) Fee
========================= ============= ================== =========== ============
<S> <C> <C> <C> <C>
Common Stock, par value
$.001 per share.......... 182,500 $3.75 $684,375 $208
========================= ============= ================== =========== ============
</TABLE>
(1) Pursuant to Rule 416 under the Securities Act of 1933, as amended, the
number of shares of the issuer's Common Stock registered hereunder will be
adjusted in the event of stock splits, stock dividends or similar
transactions.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457, on the basis of the last sales price
of the Common Stock for March 27, 1997.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed by Applied Voice Recognition, Inc.
("Company" or "Registrant") with the Securities and Exchange Commission are
incorporated herein by reference.
1. The Company's latest annual report filed pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended ("Exchange Act"),
or, either (i) the Company's latest prospectus filed pursuant to Rule 424(b)
under the Securities Act of 1933, as amended ("Securities Act") that contains
audited financial statements for the Company's latest fiscal year for which such
statements have been filed, or (ii) the Company's effective Registration
Statement on Form 10 or Form 10-SB filed under the Exchange Act containing
audited financial statements for the Company's latest fiscal year.
2. All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the document referred
to in (1) above.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment to the Registration Statement which indicates that all
shares of common stock offered have been sold or which deregisters all of such
shares then remaining unsold, shall be deemed to be incorporated by reference in
the Registration Statement and to be a part thereof from the date of filing of
such documents.
ITEM 4. DESCRIPTION OF SECURITIES
Under the Company's Articles of Incorporation, the authorized capital
stock of the Company consists of 50 million shares of Common Stock. As of the
date of this Prospectus, the Company had outstanding 10,829,602 shares of Common
Stock. The Company has reserved 660,000 shares for issuance upon exercise of
outstanding Options and 770,000 shares for issuance upon exercise of Warrants.
The following summary description of the securities of the Company is
qualified in its entirety by reference to the Certificate of Incorporation, a
copy of which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share with
respect to all matters required by law to be submitted to stockholders of the
Company. The holders of Common Stock have the sole right to vote, except as
otherwise provided by law or by the Company's Articles. The Common Stock does
not have any cumulative voting, preemptive, subscription or conversion rights.
Election of directors and other general shareholder action requires the
affirmative vote of a majority of shares represented at a meeting in which a
quorum is represented. The outstanding shares of Common Stock are, and the
shares of Common Stock offered hereby will be, upon payment therefor as
contemplated herein, validly issued, fully paid and non-assessable.
II-1
<PAGE>
WARRANTS
There are warrants outstanding authorizing the holders to purchase an
aggregate of 770,000 shares of Common Stock, currently exercisable and expiring
between two and five years from the date of this Prospectus at exercise prices
between $.14 and $3.00.
OPTIONS
The Company has established a 1996 Stock Option Plan pursuant to which
there are options to purchase 660,000 shares of Common Stock currently
outstanding.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
A. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
B. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
C. To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (A) and (B), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
D. Any indemnification under subsections (A) and (B) (unless ordered by
a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set
II-2
<PAGE>
forth in subsections (A) and (B). Such determination shall be made (i) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (ii) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (iii) by the stockholders.
E. Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized by the Certificate of Incorporation. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
F. The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
G. The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the Certificate of Incorporation.
H. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ITEM 8. EXHIBITS
The following exhibits are filed as part of this Registration
Statement:
4.1(1) Form of specimen Common Stock
5.1(2) Opinion Regarding Legality
10.1(2) Warrant to Tim Connolly
24.1(2) Consent of Malone & Bailey
24.2(2) Consent of Brewer & Pritchard (Contained in Exhibit 5.1)
- ---------------------
(1) The information required by this exhibit is incorporated by reference to
the exhibits filed in connection with the Company's Registration Statement
on Form S-18 (Commission File No. 333-1210-D).
(2) Filed herewith.
ITEM 9. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
II-3
<PAGE>
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
i. To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
ii. To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement; and
iii. To include any additional or changed material
information with respect to the plan of distribution.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining liability under the Securities Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and authorized this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Houston, State of Houston, on the 2nd day of April, 1997.
Applied Voice Recognition, Inc.
By /s/ TIMOTHY J. CONNOLLY
Timothy J. Connolly,
Chief Executive Officer,
Chief Financial Officer,
Principal Accounting
Officer and Director
----------------------------
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ TIMOTHY J. CONNOLLY Chief Executive Officer, April 2, 1997
Timothy J. Connolly Chief Financial Officer,
Principal Accounting
Officer and Director
/s/ CHARLES W. SKAMSER President and April 2, 1997
Charles W. Skamser Chief Operating Officer
/s/ JAN CARSON CONNOLLY Vice President Operations April 2, 1997
Jan Carson Connolly and Director
/s/ H. RUSSEL DOUGLAS Vice President Research and April 2, 1997
H. Russel Douglas Development and Director
/s/ JESSE MARION Director April 2, 1997
Jesse Marion
/s/ G. EDWARD POWELL Director April 2, 1997
G. Edward Powell
II-5
April 2, 1997
Applied Voice Recognition
Suite 211
4615 Post Oak Place
Houston, Texas 77027
Re: Applied Voice Recognition, Inc.
Registration Statement on Form S-8
Gentlemen:
We have represented Applied Voice Recognition, Inc., a Utah corporation
("Company"), in connection with the preparation of a registration statement
filed with the Securities and Exchange Commission on Form S-8 ("Registration
Statement") relating to the proposed issuance of up to 182,500 shares ("Shares")
of the Company's common stock, par value $.01 per share ("Common Stock")
pursuant to the terms of Timothy Connolly's Warrant Agreement. In this
connection, we have examined originals or copies identified to our satisfaction
of such documents, corporate and other records, certificates, and other papers
as we deemed necessary to examine for purposes of this opinion, including but
not limited to the Plan, the Certificate of Incorporation of the Company, the
Bylaws of the Company, and resolutions of the Board of Directors of the Company.
We are of the opinion that the Shares will be, when issued pursuant to
the Plan, legally issued, fully paid and nonassessable.
We hereby consent to the filing of this Opinion as an Exhibit to the
Registration Statement.
Very truly yours,
BREWER & PRITCHARD
Thomas C. Pritchard
APPLIED VOICE RECOGNITION, INC.
WARRANT AGREEMENT
December 15, 1996
Timothy J. Connolly
4615 Post Oak Place, Suite 277
Houston, Texas 77027
Dear Mr. Connolly:
Applied Voice Recognition, Inc., a Utah corporation (the "Company"), for
value received, hereby agrees to issue a stock purchase warrant entitling you to
purchase 182,500 shares of the Company's common stock (the "Common Stock"). Such
warrants are evidenced by warrant certificates in the form attached hereto as
EXHIBIT A (each such instrument being hereinafter referred to as a "Warrant,"
and each Warrant and all instruments hereafter issued in replacement,
substitution, combination or subdivision thereof being hereinafter collectively
referred to as the "Warrants"). The Warrants will be issued in consideration of
an investment in the Company by you. The number of shares of Common Stock
purchasable upon exercise of the Warrants is subject to adjustment as provided
in Section 5 below. The Warrants will be exercisable by each you or any other
Warrant holder (as defined below) as to all or any lesser number of shares of
Common Stock covered thereby, at an initial Purchase Price of $.14 per share,
subject to adjustment as provided in Section 5 below, for the exercise period
defined in Section 3(a) below. The term "Warrant holder" refers to each person
whose name appears on the signature page of this agreement and any transferee or
transferees of any of them permitted by Section 2(a) below. Such term, when used
in this Warrant Agreement in reference to or in the context of a person who
holds or owns shares of Common Stock issued upon exercise of a Warrant, refers
where appropriate to such person who holds or owns such shares of Common Stock.
1. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to you as follows:
(a) CORPORATE AND OTHER ACTION. The Company has all requisite power and
authority (corporate and other), and has taken all necessary corporate action,
to authorize, execute, deliver and perform this Warrant Agreement, to execute,
issue, sell and deliver the Warrants and a certificate or certificates
evidencing the Warrants, to authorize and reserve for issue and, upon payment
from time to time of the Purchase Price, to issue, sell and deliver, the shares
of the Common Stock issuable upon exercise of the Warrants (the "Shares"), and
to perform all of its obligations under this Warrant Agreement and the Warrants.
The Shares, when issued in accordance with this Agreement, will be duly
authorized and validly issued and outstanding, fully paid and nonassessable and
free of all liens, claims, encumbrances and preemptive rights. This Warrant
Agreement and, when issued, each
<PAGE>
Warrant issued pursuant hereto, has been or will be duly executed and delivered
by the Company and is or will be a legal, valid and binding agreement of the
Company, enforceable in accordance with its terms. No authorization, approval,
consent or other order of any governmental entity, regulatory authority or other
third party is required for such authorization, execution, delivery,
performance, issue or sale.
(b) NO VIOLATION. The execution and delivery of this Warrant Agreement,
the consummation of the transactions herein contemplated and the compliance with
the terms and provisions of this Warrant Agreement and of the Warrants will not
conflict with, or result in a breach of, or constitute a default or an event
permitting acceleration under, any statute, the Articles of Incorporation or
Bylaws of the Company or any indenture, mortgage, deed of trust, note, bank
loan, credit agreement, franchise, license, lease, permit, or any other
agreement, understanding, instrument, judgment, decree, order, statute, rule or
regulation to which the Company is a party or by which it is or may be bound.
2. TRANSFER.
(a) TRANSFERABILITY OF WARRANTS. You agree that the Warrants are being
acquired as an investment and not with a view to distribution thereof and that
the Warrants may not be transferred, sold, assigned or hypothecated except as
provided herein and in compliance with all applicable securities and other laws.
(b) REGISTRATION OF SHARES. You agree not to make any sale or other
disposition of the Shares except pursuant to a registration statement which has
become effective under the Securities Act of 1933, as amended (the "Act"),
setting forth the terms of such offering, the underwriting discount and
commissions and any other pertinent data with respect thereto, unless you have
provided the Company with an opinion of counsel reasonably acceptable to the
Company that such registration is not required. Certificates representing the
Shares, which are not registered as provided in Section 2, shall bear an
appropriate legend and be subject to a "stop-transfer" order.
3. EXERCISE OF WARRANTS, PARTIAL EXERCISE.
(a) EXERCISE PERIOD. This Warrant is exercisable from the date hereof and
expires August 30, 2001.
(b) EXERCISE IN FULL. Subject to Section 3(a), Warrants may be exercised
in full by the Warrant holder by surrender of the Warrants, with the form of
subscription at the end thereof duly executed by such Warrant holder, to the
Company at its principal office at 4615 Post Oak Place, Suite 277, Houston,
Texas 77027, Attention: Chief Executive Officer, accompanied by payment, in cash
or by certified or bank cashier's check payable to the order of the Company, in
the amount obtained by multiplying the number of shares of the Common Stock
represented by the respective Warrant or Warrants by the Purchase Price per
share (after giving effect to any adjustments as provided in Section 5 below).
WARRANT AGREEMENT PAGE 2
<PAGE>
(c) PARTIAL EXERCISE. Subject to Section 3(a), each Warrant may be
exercised in part by the Warrant holder by surrender of the Warrant, with the
form of subscription at the end thereof duly executed by such Warrant holder, in
the manner and at the place provided in Section 3(b) above, accompanied by
payment, in cash or by certified or bank cashier's check payable to the order of
the Company, in amount obtained by multiplying the number of shares of the
Common Stock designated by the Warrant holder in the form of subscription
attached to the Warrant by the Purchase Price per share (after giving effect to
any adjustments as provided in Section 5 below). Upon any such partial exercise,
the Company at its expense will forthwith issue and deliver to or upon the order
of the Warrant holder a new Warrant of like tenor, in the name of the Warrant
holder thereof or as the Warrant holder (upon payment by such Warrant holder of
any applicable transfer taxes) may request, subject to Section 2(a), calling in
the aggregate for the purchase of the number of shares of the Common Stock equal
to the number of such shares called for on the face of the respective Warrant
(after giving effect to any adjustment herein as provided in Section 5 below)
minus the number of such shares designated by the Warrant holder in the
aforementioned form of subscription.
(d) COMPANY TO REAFFIRM OBLIGATIONS. The Company will, at the time of any
exercise of any Warrant, upon the request of the Warrant holder, acknowledge in
writing its continuing obligation to afford to such Warrant holder any rights to
which such Warrant holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant Agreement; PROVIDED, HOWEVER,
that if the Warrant holder shall fail to make any such request, such failure
shall not affect the continuing obligation of the Company to afford to such
Warrant holder any such right.
4. DELIVERY OF STOCK CERTIFICATES ON EXERCISE.
Any exercise of the Warrants pursuant to Section 3 shall be deemed to have
been effected immediately prior to the close of business on the date on which
the Warrants together with the subscription form and the payment for the
aggregate Purchase Price shall have been received by the Company. At such time,
the person or persons in whose name or names any certificate or certificates
representing the Shares or Other Securities (as defined below) shall be issuable
upon such exercise shall be deemed to have become the holder or holders of
record of the Shares or Other Securities so purchased. As soon as practicable
after the exercise of any Warrant in full or in part, and in any event within 10
days thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of, and delivered to
the purchasing Warrant holder, a certificate or certificates representing the
number of fully paid and nonassessable shares of Common Stock or Other
Securities to which such Warrant holder shall be entitled upon such exercise,
plus in lieu of any fractional share to which such Warrant holder would
otherwise be entitled, cash in an amount determined pursuant to Section 6(g),
together with any other stock or other securities and property (including cash,
where applicable). The term "Other Securities" refers to any stock (other than
Common Stock), other securities or assets (including cash) of the Company or any
other person (corporate or otherwise) which the holders of the Warrants at any
time shall be entitled to receive, or shall have received, upon the exercise of
the Warrants, in lieu of or in addition to Common Stock, or which at any time
shall be issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 5 below or otherwise.
WARRANT AGREEMENT PAGE 3
<PAGE>
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES PURCHASABLE.
The Purchase Price and the number of Shares are subject to adjustment from
time to time as set forth in this Section 5.
(a) In case the Company shall at any time after the date of this Agreement
(i) declare a dividend on the Common Stock in shares of its capital stock, (ii)
subdivide the outstanding Shares, (iii) combine the outstanding Common Stock
into a smaller number of Common Stock, or (iv) issue any shares of its capital
stock by reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then in each case the Purchase Price,
and the number and kind of Shares receivable upon exercise, in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination, or reclassification shall be proportionately adjusted
so that the holder of any Warrant exercised after such time shall be entitled to
receive the aggregate number and kind of Shares which, if such Warrant had been
exercised immediately prior to such time, he would have owned upon such exercise
and been entitled to receive by virtue of such dividend, subdivision,
combination, or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) No adjustment in the Purchase Price shall be required if such
adjustment is less than $.05; PROVIDED, HOWEVER, that any adjustments which by
reason of this subsection (h) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 5 shall be made to the nearest cent or to the nearest
one-thousandth of a share, as the case may be.
(c) Upon each adjustment of the Purchase Price as a result of the
calculations made in any of subsection (a) of this Section 5, each Warrant
outstanding prior to the making of the adjustment in the Purchase Price shall
thereafter evidence the right to purchase, at the adjusted Purchase Price, that
number of Shares (calculated to the nearest thousandth) obtained by (i)
multiplying the number of Shares purchasable upon exercise of a Warrant
immediately prior to adjustment of the number of Shares by the Purchase Price in
effect prior to adjustment of the Purchase Price and (ii) dividing the product
so obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price.
(d) In case of any capital reorganization of the Company, or of any
reclassification of the Common Stock (other than a reclassification of the
Common Stock referred to in subsection (a) of this Section 5), or in the case of
the consolidation of the Company with or the merger of the Company into any
other corporation or of the sale, transfer, or lease of the properties and
assets of the Company as, or substantially as, an entirety to any other
corporation, each Warrant shall after such capital reorganization,
reclassification of the Common Stock, consolidation, merger, sale, transfer, or
lease be exercisable, upon the terms and conditions specified in this Agreement,
for the number of shares of stock or other securities, assets, or cash to which
a holder of the number of shares of Common Stock purchasable (at the time of
such capital reorganization, reclassification of shares, consolidation, merger,
sale, transfer, or lease) upon exercise of such Warrant would have been
WARRANT AGREEMENT PAGE 4
<PAGE>
entitled upon such capital reorganization, reclassification of the Common Stock,
consolidation, merger, sale, transfer, or lease; and in any such case, if
necessary, the provisions set forth in this Section 5 with respect to the rights
and interests thereafter of the holders of the Warrants shall be appropriately
adjusted so as to be applicable, as nearly as may reasonably be, to any shares
of stock or other securities, assets, or cash thereafter deliverable upon the
exercise of the Warrants. The subdivision or combination of the Common Stock at
any time outstanding into a greater or lesser number of shares shall not be
deemed to be a reclassification of the Common Stock for the purposes of this
paragraph. The Company shall not effect any such consolidation, merger,
transfer, or lease, unless prior to or simultaneously with the consummation
thereof, the successor corporation (if other than the Company) resulting from
such consolidation or merger or the corporation purchasing, receiving, or
leasing such assets or other appropriate corporation or entity shall assume, by
written instrument executed and delivered to the Warrant holder, the obligation
to deliver to the Warrant holder such shares of stock, securities, or assets as,
in accordance with the foregoing provisions, such holders may be entitled to
purchase, and to perform the other obligations of the Company under this Warrant
Agreement.
6. FURTHER COVENANTS OF THE COMPANY.
(a) DILUTION OR IMPAIRMENTS. The Company will not, by amendment of its
certificate or articles of incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of the Warrants or of this Warrant Agreement, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Warrant holders against dilution or other impairment. Without
limiting the generality of the foregoing, the Company:
(i) shall at all times reserve and keep available, solely for
issuance and delivery upon the exercise of the Warrants, all shares of
Common Stock (or Other Securities) from time to time issuable upon the
exercise of the Warrants and shall take all necessary actions to ensure
that the par value per share, if any, of the Common Stock (or Other
Securities) is at all times equal to or less than the then effective
Purchase Price per share;
(ii) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock or Other Securities upon the exercise
of the Warrants from time to time outstanding;
(iii) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets upon
voluntary or involuntary dissolution, liquidation or winding-up, unless
the rights of the holders thereof shall be limited to a fixed sum or
percentage of par value in respect of participation in dividends and in
any such distribution of assets; and
(iv) will not transfer all or substantially all of its properties
and assets to any person (corporate or otherwise), or consolidate with or
merge into any other person or permit any
WARRANT AGREEMENT PAGE 5
<PAGE>
such person to consolidate with or merge into the Company (if the Company
is not the surviving corporation), unless such other person shall
expressly assume in writing and will be bound by all the terms of this
Warrant Agreement and the Warrants.
(b) TITLE TO STOCK. All shares of Common Stock delivered upon the exercise
of the Warrants shall be validly issued, fully paid and nonassessable; each
Warrant holder shall, upon such delivery, receive good and marketable title to
the Shares, free and clear of all voting and other trust arrangements, liens,
encumbrances, equities and claims whatsoever; and the Company shall have paid
all taxes, if any, in respect of the issuance thereof.
(c) REMEDIES. The Company stipulates that the remedies at law of the
Warrant holder or any holder of Shares in the event of any default or threatened
default by the Company in the performance of or compliance with any of the terms
of this Warrant Agreement or the Warrants are not and will not be adequate and
that such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or in the Warrants or by an
injunction against a violation of any of the terms hereof or thereof or
otherwise.
(d) EXCHANGE OF WARRANTS. Subject to Section 2(a) hereof, upon surrender
for exchange of any Warrant to the Company, the Company at its expense will
promptly issue and deliver to or upon the order of the holder thereof a new
Warrant or like tenor, in the name of such holder or as such holder (upon
payment by such Warrant holder of any applicable transfer taxes) may direct,
calling in the aggregate for the purchase of the number of shares of the Common
Stock called for on the face or faces of the Warrant or Warrants so surrendered.
The Warrants and all rights thereunder are transferable in whole or in part upon
the books of the Company by the registered holder thereof, subject to the
provisions of Section 2(a), in person or by duly authorized attorney, upon
surrender of the Warrant, duly endorsed, at the principal office of the Company.
(e) REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company, at the expense of the Warrant holder, will execute
and deliver, in lieu thereof, a new Warrant of like tenor.
(f) REPORTING BY THE COMPANY. The Company agrees that during the term of
the Warrants it will use its best efforts to keep current in the filing of all
forms and other materials, if any, which it may be required to file with the
appropriate regulatory authority pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and all other forms and reports required
to be filed with any regulatory authority having jurisdiction over the Company.
(g) FRACTIONAL SHARES. No fractional Shares are to be issued upon the
exercise of any Warrant, but the Company shall pay a cash adjustment in respect
of any fraction of a share which would otherwise be issuable in an amount equal
to such fraction multiplied by the closing price which shall be the last
reported sales price regular way or, in case no such reported sales takes place
on such
WARRANT AGREEMENT PAGE 6
<PAGE>
day, the average of the closing bid and asked prices regular way, on the
principal national securities exchange in the United States on which the Common
Stock is listed or admitted to trading, or if the Common Stock is not listed or
admitted to trading on any such national securities exchange, the average of the
highest reported bid and lowest reported asked price as furnished by the
National Association of Securities Dealers, Inc. through its automated quotation
system ("Nasdaq") or a similar organization if Nasdaq is no longer reporting
such information.
7. OTHER WARRANT HOLDERS: HOLDERS OF SHARES.
The Warrants are issued upon the following terms, to all of which each
Warrant holder by the taking thereof consents and agrees: (a) any person who
shall become a transferee, within the limitations on transfer imposed by Section
2(a) hereof, of a Warrant properly endorsed shall take such Warrant subject to
the provisions of Section 2(a) hereof and thereupon shall be authorized to
represent himself as absolute owner thereof and, subject to the restrictions
contained in this Warrant Agreement, shall be empowered to transfer absolute
title by endorsement and delivery thereof to a permitted BONA FIDE purchaser for
value; (b) any person who shall become a holder or owner of Shares shall take
such shares subject to the provisions of Section 2(b) hereof; (c) each prior
taker or owner waives and renounces all of his equities or rights in such
Warrant in favor of each such permitted BONA FIDE purchaser, and each such
permitted BONA FIDE purchaser shall acquire absolute title thereto and to all
rights presented thereby; and (d) until such time as the respective Warrant is
transferred on the books of the Company, the Company may treat the registered
holder thereof as the absolute owner thereof for all purposes, notwithstanding
any notice to the contrary.
8. MISCELLANEOUS.
All notices, certificates and other communications from or at the request
of the Company to any Warrant holder shall be mailed by first class, registered
or certified mail, postage prepaid, to such address as may have been furnished
to the Company in writing by such Warrant holder, or, until an address is so
furnished, to the address of the last holder of such Warrant who has so
furnished an address to the Company, except as otherwise provided herein. This
Warrant Agreement and any of the terms hereof may be changed, waived, discharged
or terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Warrant Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Texas. The headings in this Warrant
Agreement are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. This Warrant Agreement, together with the forms
of instruments annexed hereto as exhibits, constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof.
WARRANT AGREEMENT PAGE 7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed on this the 15th day December, 1996, in Houston, Texas, by its proper
corporate officers, thereunto duly authorized.
APPLIED VOICE RECOGNITION, INC.
By________________________________________
JAN CARSON CONNOLLY, Vice President
The above Warrant Agreement is confirmed as of this 15th day of December, 1996.
By:_________________________________
Printed Name: Timothy J. Connolly
WARRANT AGREEMENT PAGE 8
<PAGE>
EXHIBIT A
WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933,
AS AMENDED, IN RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN
SECTIONS 3 AND 4 OF SUCH ACT AND REGULATION D PROMULGATED THEREUNDER; OR (B) ANY
STATE SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
WARRANTS MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR,
AND NEITHER THE WARRANTS NOR THE UNDERLYING STOCK MAY BE TRANSFERRED OR
EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE SECURITIES AND OTHER LAWS.
To Purchase
182,500 Shares of
Common Stock
APPLIED VOICE RECOGNITION, INC.
Incorporated Under the Laws of Utah
This certifies that, for value received, the hereafter named registered owner
is entitled, subject to the terms and conditions of this Warrant, until the
expiration date, to purchase the number of shares set forth above of the common
stock (the "Common Stock"), of Applied Voice Recognition, Inc. (the
"Corporation") from the Corporation at the purchase price per share hereafter
set forth, on delivery of this Warrant to the Corporation with the exercise form
duly executed and payment of the purchase price (in cash or by certified or bank
cashier's check payable to the order of the Corporation) for each share
purchased. This Warrant is subject to the terms of the Warrant Agreement between
the parties thereto dated as of December 10, 1996, the terms of which are hereby
incorporated herein. Reference is hereby made to such Warrant Agreement for a
further statement of the rights of the holder of this Warrant.
Registered Owner: Timothy J. Connolly Date: December 15,1996
Purchase Price
Per Share: $.14
Expiration Date: Subject to Section 3(a) of the Warrant Agreement, August 30,
2001.
WITNESS the signature of the Corporation's authorized officer:
APPLIED VOICE RECOGNITION, INC.
By________________________________________
JAN CARSON CONNOLLY
Vice President
A-1
<PAGE>
FORM OF SUBSCRIPTION
(TO BE SIGNED ONLY UPON EXERCISE OF WARRANT)
To Applied Voice Recognition, Inc.:
The undersigned, the holder of the enclosed Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _________* shares of Common Stock of Applied Voice
Recognition, Inc. and herewith makes payment of $_______________ therefor, and
requests that the certificate or certificates for such shares be issued in the
name of and delivered to the undersigned.
Dated:______________
--------------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the enclosed Warrant)
--------------------------------------------
(Address)
- ---------------------------
(*)Insert here the number of shares called for on the face of the Warrant or, in
the case of a partial exercise, the portion thereof as to which the Warrant
is being exercised, in either case without making any adjustment for
additional Common Stock or any other stock or other securities or property or
cash which, pursuant to the adjustment provisions of the Warrant Agreement
pursuant to which the Warrant was granted, may be delivered upon exercise.
A-2
<PAGE>
FORM OF ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers unto
__________________________________ the right represented by the enclosed Warrant
to purchase _________________ shares of Common Stock of Applied Voice
Recognition, Inc. to which the enclosed Warrant relates, and appoints
_____________________ Attorney to transfer such right on the books of Applied
Voice Recognition, Inc. with full power of substitution in the premises.
The undersigned represents and warrants that the transfer of the enclosed
Warrant is permitted by the terms of the Warrant Agreement pursuant to which the
enclosed Warrant has been issued, and the transferee hereof, by his acceptance
of this Agreement, represents and warrants that he is familiar with the terms of
said Warrant Agreement and agrees to be bound by the terms thereof with the same
force and effect as if a signatory thereto.
Dated:_________________________
--------------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the enclosed Warrant)
--------------------------------------------
(Address)
Signed in the presence of:
- ------------------------------------
A-3
EXHIBIT 24.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Form S-8 registration
statement of our report, dated March 12, 1997, on the financial statements of
Applied Voice Recognition, Inc., and to reference to our firm under the caption
"experts" in the prospectus.
Houston, Texas
April 1, 1997
MALONE & BAILEY, PLLC
