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As filed with the Securities and Exchange Commission on February 24, 2000.
Registration No. 333-___________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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APPLIED VOICE RECOGNITION, INC.
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE 76-0513154
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
1717 ST. JAMES PLACE, SUITE 242
HOUSTON, TEXAS 77056
(Address of Principal Executive Offices)
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FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT (TIMOTHY J. CONNOLLY)
FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT (MILTON A. SPIEGELHAUER)
FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT (ROBIN P. RITCHIE)
(Full Title of the Plan)
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Name, Address and Telephone Copy of Communications to:
Number of Agent for Service:
SAMUEL N. ALLEN
TIMOTHY J. CONNOLLY ROBERT G. REEDY
APPLIED VOICE RECOGNITION, INC. PORTER & HEDGES, L.L.P.
1717 ST. JAMES PLACE, SUITE 242 700 LOUISIANA STREET
HOUSTON, TEXAS 77056 HOUSTON, TEXAS 77002-2764
(713) 621-3131 (713) 226-0600
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CALCULATION OF REGISTRATION FEE
====================================================================================================================
PROPOSED MAXIMUM PROPOSED
AMOUNT TO OFFERING MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER SHARE(1) OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $.001 per share 1,054,852 $0.5188 $547,258 $145.00
=====================================================================================================================
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(1) Pursuant to Rule 457(c), the registration fee is calculated on the basis of
the average of the high and low prices for the Common Stock on The Nasdaq
Over-the-Counter Bulletin Board on February 23, 2000, $0.5188.
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The following documents listed under this Part I and the documents
incorporated by reference under Item 3 of Part II to this Form S-8, taken
together, constitute a prospectus that meets the requirements of Section 10(a)
of the Securities Act, and are incorporated herein by reference.
ITEM 1. PLAN INFORMATION
The information required to be provided to participants pursuant to this
Item is set forth in the Information Memorandum for the First Amended and
Restated Employment Agreement (Timothy J. Connolly), the First Amended and
Restated Employment Agreement (Milton A. Spiegelhauer), and the First Amended
and Restated Employment Agreement (Robin P. Ritchie) (collectively, the "Written
Compensation Contracts").
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION
The written statement required to be provided to participants pursuant to
this Item is set forth in the Information Memorandum referenced in Item 1
above.
I-1
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PROSPECTUS
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APPLIED VOICE RECOGNITION, INC.
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656,703 Shares
Common Stock
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Applied Voice Recognition, Inc. has prepared this prospectus for use by the
selling stockholder listed on page 12 of this prospectus to allow them to sell
such shares without restriction. The selling stockholder has indicated that
sales may be made by the methods described in the section entitled "Plan of
Distribution" in this prospectus. We will file a supplemental prospectus if
required to do so by applicable securities laws to describe specific sales of
shares or to identify any selling stockholders not listed in this prospectus.
Our common stock trades on the Over-the-Counter Bulletin Board under the
symbol "EDOC." On February 23, 2000, the last reported sale price of the common
stock was $0.4375 per share.
We will not receive any portion of the proceeds resulting from the sale of
the shares offered by the selling stockholders under this prospectus. In
addition, we will pay for certain of the expenses relating to the registration
of the shares. See "Plan of Distribution" and "Selling Stockholders."
Our principal executive offices are located at 1717 St. James Place, Suite
242, Houston, Texas 77056, and our telephone number is (713) 621-3131.
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YOU SHOULD CAREFULLY CONSIDER THE "RISK FACTORS" ON PAGES 3-11
OF THIS PROSPECTUS BEFORE DECIDING TO BUY OUR SECURITIES.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved of the securities to be issued under this prospectus or
determined if this prospectus is accurate or adequate. Any representation to
the contrary is a criminal offense.
The date of this prospectus is February 24, 2000.
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TABLE OF CONTENTS
Page
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Where You Can Find More Information........................................... 2
Risk Factors.................................................................. 3
About Us......................................................................12
Use of Proceeds...............................................................12
Selling Stockholders..........................................................12
Plan of Distribution..........................................................12
Legal Matters.................................................................13
Experts.......................................................................13
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-8 with the SEC to register
the securities offered hereby. This prospectus does not contain all of the
information contained in the registration statement, including its exhibits and
schedules. You should refer to the registration statement for further
information about us and the securities the selling stockholder is offering.
Statements made in this prospectus about certain contracts or other documents
are not necessarily complete. When we make such statements, we refer you to the
copies of those contracts or other documents that are filed as exhibits to the
registration statement, because those statements are qualified in all respects
by reference to those exhibits. The registration statement, including exhibits
and schedules, is on file at the offices of the SEC and may be inspected without
charge.
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings, including the registration
statement, are available to the public over the Internet at the SEC's website at
http://www.sec.gov. You also may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C.; New York, New York; and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information about the public reference rooms.
SEC rules allow us to include some of the information required to be in the
registration statement by incorporating that information by reference to other
documents we file with them. That means we can disclose important information
to you by referring you to those documents. The information incorporated by
reference is an important part of this prospectus, and information that we file
later with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act of
1934 until all of the securities covered by this prospectus are sold:
. Annual Report on Form 10-KSB for the year ended December 31, 1998, as
amended;
. Quarterly Reports on Form 10-QSB for the quarters ended March 31, June
30, and September 30, 1999, as amended;
. Current Reports on Form 8-K as filed on June 14, August 27, and
November 19, 1999, and January 24, 2000, as amended; and
. The description of our common stock contained in the Form 8-A
effective January 9, 1998 (Commission File No. 000-23607), including
any amendments or reports filed to update the description.
You may request a copy of these filings, which we will provide to you at no
cost, by writing or telephoning us at the following address:
Applied Voice Recognition, Inc.
1717 St. James Place, Suite 242
Houston, Texas 77056
Attention: Corporate Secretary
(telephone: (713) 621-3131)
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RISK FACTORS
You should carefully consider the following risk factors and other
information set forth in this prospectus before deciding to buy our securities.
SUFFICIENCY OF FUNDS
We will be required to raise additional capital in order to continue our current
operations and proceed with the implementation of our new e-commerce initiative.
We expect to continue to incur significant losses on a quarterly and annual
basis in the near future on limited sales of our products and services. In
addition, we may not be successful in increasing sales of our products and
services for the long term, or be able to achieve profitability. Further, we
have had working capital deficits in the past. Our long-term capital
requirements will depend on many factors, including, cash flow from operations,
working capital requirements, product development expenses and capital
expenditures. As a result, we will be required to raise substantial additional
capital during 2000 to fund our current operations. We will also require
substantial additional capital to implement our new business-to-business e-
commerce initiative, the E-DOCS PHYSICIAN NETWORK(TM) (the "EPN") and to
maintain and improve the profitability of our current medical transcription
operations. Historically, we have relied upon the sale of equity securities and
short-term loans as our primary sources of funding to finance operations and
acquisitions. To the extent that existing resources are insufficient to fund
our operations in the short- or long-term, we will need to raise additional
funds through public or private financings. We may not be able to raise
additional financing on terms favorable to us or to our stockholders without
substantial dilution of their ownership and rights. If we are unable to raise
sufficient funds to satisfy either short- or long-term requirements, there would
be substantial doubt as to our ability to continue as a going concern and we may
be required to significantly curtail our operations, significantly alter our
growth strategy, forego market opportunities or obtain funds through
arrangements with strategic partners or others that may require us to relinquish
material rights to certain of our technologies or potential markets.
LIMITED HISTORY OF BUSINESS OPERATIONS; ANTICIPATION OF CONTINUED LOSSES
Due to its limited nature, you should not rely on our operating history as an
indicator of our future performance.
We have incurred significant net losses since our inception and expect to
continue to incur significant losses on a quarterly and annual basis in the
future. For the eleven months ended November 30, 1999, we recorded a net loss
of $6,828,611, or $.45 per share, on net sales of $4,779,906. As of November
30, 1999, our accumulated deficit was $22,285,376. We have achieved only
limited revenues to date, and our ability to generate significant revenues is
subject to substantial uncertainty. Our limited operating history makes the
prediction of future results of operations difficult or impossible, and we may
not be able to sustain revenue growth or achieve profitability. Prior to
January 1998, our marketing and development efforts were focused on the creation
and sale of voice recognition word processing products intended for the general
office market. In January 1998, we began to focus on the medical transcription
needs of the healthcare industry. During this time, we redesigned our principal
product to focus on this new market, worked to develop an integrated, Internet-
based complete medical transcription solution, and acquired traditional medical
transcription companies in the Dallas, Texas; New York, New York; Manila,
Phillippines; and Denver, Colorado areas. However, we have achieved limited
revenues to date from sales of our medical transcription voice recognition
software and the performance of traditional medical transcription services. In
January 2000, we completed the sale of our medical transcription operations
located in Houston, Texas; New York, New York; and Manila, Philippines. Our
restructuring was intended to remove operations that were incurring substantial
losses in excess of $3,600,000 annually to alleviate the strain on our cash
flow. We have retained our Houston corporate operations and some Houston medical
transcription operations, along with our Dallas, Texas; Tyler, Texas; and
Denver, Colorado medical transcription operations, and plan to continue and
expand those operations. We have abandoned our acquisition strategy and the
development and sale of VoiceCOMMANDER(TM) 99, our dictation voice recognition
software application, to focus on developing the EPN. The EPN is a business-to-
business
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e-commerce initiative designed to service other needs of our medical
transcription clients. Although the development of the EPN is in the very early
stages, we intend to integrate the EPN with our Internet-based medical
transcription service. Accordingly, we have a limited operating history upon
which you can base an evaluation of us and our current prospects. You must
consider us and our prospects in light of the risks, expenses and difficulties
frequently encountered by companies in their early stage of development,
particularly companies in new and rapidly evolving markets such as the
electronic and Internet-based medical transcription market and the emerging
business-to-business e-commerce market. To address these risks, we must respond
to competitive developments, continue to attract, retain and motivate qualified
persons, successfully implement our advertising program, continue to upgrade our
technologies, commercialize products and services incorporating such
technologies, and successfully implement our strategic business plan to
penetrate the healthcare transcription market. We may not be successful in
addressing such risks.
RISKS ASSOCIATED WITH A DEVELOPING MARKET AND THE ACCEPTANCE OF OUR PRODUCTS AND
SERVICES
Growth in the use of the Internet and automated speech recognition technology in
the healthcare transcription industry is an important factor in our business
plan.
The medical transcription market is well established; however, the use of the
Internet in the healthcare transcription industry, and the Internet markets in
general, have only recently begun to develop and are characterized by rapidly
changing technology, evolving industry standards and customer demands, and
frequent new product introductions and enhancements. The healthcare
transcription-related Internet markets are highly dependent upon the increased
use of the Internet by healthcare professionals and continued price and
performance improvements in personal computers. Our future operating results
will depend upon the emergence of the Internet in the healthcare transcription
market, our ability to develop and improve our technology and the successful
implementation of our marketing plan and the EPN. However, the healthcare
transcription-related Internet markets may not develop or we may not achieve
market acceptance of our products and services or execute our business plan
successfully. As is typical in the case of a new and rapidly evolving industry,
demand and market acceptance for recently introduced products and services are
subject to a high level of uncertainty. The industry is young and has few
proven products. If widespread use of the Internet does not develop in the
healthcare transcription industry, our business, results of operations and
financial condition will be materially adversely affected. Because the market
for our products and services is new and evolving, it is difficult to predict
the size of this market and growth rate, if any. The market for our products
and services may not develop or the demand for our products or services may not
emerge or become sustainable. If the market fails to develop, develops more
slowly than expected or becomes saturated with competitors, or if our products
and services do not achieve or sustain market acceptance, our business, results
of operations and financial condition will be materially adversely affected.
DEPENDENCE ON PRINCIPAL PRODUCTS AND SERVICES
Our future results depend primarily upon the future success of our latest
product for the healthcare transcription market, the efficient operation of our
transcription operations and the successful introduction of our new
business-to-business e-commerce initiative.
Currently, we primarily derive our revenue from the sale of traditional
transcription services. To date, we have had limited revenues from sales of our
VOICECOMMANDER(TM) line of products and have only derived revenue from the sale
of traditional transcription services since the acquisition of our first
transcription services company in March 1998. Our future financial performance
will depend in part on our ability to continue to develop and establish our
traditional and Internet-based medical transcription service, and to effectively
develop and introduce the EPN. However, we may not be successful in developing
these or other products or services in a manner which meets with market
acceptance. In addition, new product releases by us, whether improved versions
of our current Internet-based products or introductions of other new products,
may contain undetected errors that require significant design modifications,
resulting in a loss of customer confidence and adversely affecting the use of
our product(s) and services. Our future success will depend in significant part
on our ability to develop new product releases and to continually improve the
performance, features and reliability of our current Internet-based products in
response to both evolving demands of the healthcare transcription
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marketplace and competitive product offerings, and we may not be successful in
doing so. Any factors adversely affecting the traditional transcription market,
such as increased price competition or the introduction of technologically
superior products and services, could have a material adverse effect on us.
MANAGEMENT OF GROWTH; NEED TO ESTABLISH INFRASTRUCTURE; ADDITIONAL PERSONNEL
Our success will depend on our ability to effectively manage our growth and
attract and retain additional personnel.
The rapid execution necessary for us to successfully offer our products and
services and implement our business plan in a rapidly evolving market requires
an effective planning and management process. Our rapid growth places a
significant strain on our managerial, operational and financial resources. In
order to manage our growth, we must:
. implement and improve our operational and financial systems;
. expand, train and manage our employee base; and
. hire additional technical support personnel in order to convert healthcare
professionals from traditional to Internet-related transcription methods.
There can be no assurance that we have made adequate allowances for the costs
and risks associated with this expansion, that our systems, procedures or
controls will be adequate to support our operations or that our management will
be able to achieve the rapid execution necessary to successfully offer our
products and services and implement our business plan simultaneously. Our
future operating results will also depend on our ability to expand our sales and
expand our support organization commensurate with the growth of our business.
Any failure by our management to effectively anticipate, implement and manage
the changes required to sustain our growth could have a material adverse effect
on our business, results of operations and financial condition. We may not be
able to effectively manage such change.
RAPID TECHNOLOGICAL CHANGE
We must respond quickly to technological developments and evolving industry
standards in order to remain competitive.
The healthcare information services industry is characterized by rapid
technological change, evolving customer needs and emerging technical standards.
While we believe that utilizing Internet-based technology can significantly
enhance the rendering of transcription services in the healthcare information
services industry, the introduction of competing services or products
incorporating new technologies, and the emergence of new technical standards
could render some or all of our services as unmarketable. We believe that our
future success is dependent in part on our ability to enhance our current
services and develop new services that keep pace with technological developments
and emerging technical standards, and that address the increasingly
sophisticated needs of our customers. We may not be successful in developing
and marketing enhancements to our existing services or new services that respond
to technological developments, emerging technical standards, or evolving
customer needs, on a timely basis or at all, and such enhancements or new
services, if developed and introduced, may not achieve market acceptance. The
failure to develop and introduce service enhancements and new services in a
timely and cost-effective manner in response to changing technologies or
customer requirements, would have a material adverse effect on our business,
financial condition and results of operations.
RISKS ASSOCIATED WITH OUR DEPENDENCE ON THIRD-PARTY PROPRIETARY RIGHTS
All of our software products currently utilize IBM speech recognition software
engines. The loss of this relationship would force us to redesign our products
to use alternative technology.
All of our speech recognition products utilize third-party speech recognition
software engines. There are currently four major speech recognition software
engine manufacturers: Lernout & Hauspie Speech Products USA, Inc. ("L&H"),
International Business Machines Corp. ("IBM"), Philips Electronics N.V.
("Philips"), and Dragon Systems, Inc ("Dragon"). We currently have a non-
exclusive OEM Distribution Agreement with IBM that entitles us to embed and
utilize IBM's ViaVoice(TM) technology in our products. For each unit of our
product that we license (sell), we must pay a license fee to IBM. IBM may not
continue to manufacture and support ViaVoice(TM) or our arrangement with IBM may
be terminated. The agreement with IBM may be terminated by IBM at any time for
acts or omissions that are considered to be so serious as to warrant
termination. Although we have previously purchased 10,000 licenses of
ViaVoice(TM) from IBM, which can serve the needs of 40,000 customers, we may
need to buy additional licenses from IBM. We
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believe that if IBM discontinued or was unable to manufacture or support
ViaVoice(TM) or terminated our agreement with us that, with adequate time, we
could develop our products to utilize speech technology from other companies. If
we are unable to utilize the IBM technology and are unable to develop products
capable of utilizing alternative technology, our business, results of operations
and financial condition would be materially adversely affected.
COMPETITION
We are in an extremely competitive industry that is dominated by several
companies which have significantly greater financial, technical, and marketing
resources than we have.
The transcription services industry remains highly fragmented and primarily
consists of small, local or regional companies. As a result, we compete with a
large number of third-party transcription companies that offer services similar
to ours and that target the same customers and qualified transcriptionists. In
addition, there are several large national transcription service providers:
Medquist, Inc. (which recently acquired MRC Group, Inc., another large
transcription service provider), Transcend Services, Inc., Harris Corp. and
Rodeer Systems, Inc. These competitors have significantly greater resources
than us. We believe that our ability to compete depends upon many factors
within and outside of our control, including the timing and market acceptance of
our Internet-based transcription services, the successful development and market
acceptance of the EPN, the development of other service enhancements by us and
our competitors, service quality, performance, price, reliability, customer
service and support, and ability to attract qualified transcriptionists. In
addition, the potential exists for large companies that do not currently provide
transcription services, but which currently provide other services to the
healthcare industry, to enter the transcription services field. For example,
IDX Systems Corporation ("IDX") recently announced the acquisition of EDIX
Transcription, one of our larger competitors. IDX is a provider of healthcare
information services and stated that it acquired EDIX because of perceived
synergies of the medical transcription business (data input) and health
information management businesses and is an example of an existing company that
could and has become a competitor. Such potential competitors could have
substantially greater financial, technical and marketing resources than us. As
a result, such potential competitors, if they were to enter the transcription
business, could be able to respond more quickly to evolving technological
developments, changing customer needs or emerging technical standards or to
devote greater resources to the development, promotion or sale of their
services. Our services also compete with the in-house transcription staffs of
our potential customers. While we believe that our growth and earnings will
benefit from the outsourcing by healthcare providers of non-patient care
functions, including transcription services, the current trend could change
direction and cause healthcare providers to bring all or some of those services
in-house. In addition, competition may increase due to consolidation of
transcription companies. Increased competition may result in price reductions
for our services, reduced operating margins and an inability to increase our
market share, any of which would have a material adverse effect on our business,
financial condition and results of operations. We may not be able to compete
successfully against current or future competitors, and competitive pressures
may have a material adverse effect on our business, financial condition and
results of operations.
DEPENDENCE ON KEY PERSONNEL
Our success is heavily dependent upon our retention of certain of our key
officers.
Our performance is substantially dependent on the performance of our current
executive officers and key employees and the successful replacement of certain
executive officers and key employees who left the Company as part of the recent
corporate restructuring. In particular, the services of Timothy J. Connolly, our
current Chairman, would be difficult to replace. We have entered into an
employment agreement with Mr. Connolly, although we do not currently have a key
person life insurance policy on his life. However, any key person life insurance
policy we do put in place for Mr. Connolly may not be sufficient to compensate
us for the loss of his services. The loss of the services of any other key
employees and/or our inability to successfully replace those executive officers
we have lost could have a material adverse effect on our business, results of
operations or financial condition.
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We are heavily dependent upon our ability to attract, retain and motivate
skilled technical and managerial personnel. Our future success also depends on
our continuing ability to identify, hire, train and retain other highly
qualified technical and managerial personnel. Competition for such personnel is
intense, and we may not be able to attract, assimilate or retain other highly
qualified technical and managerial personnel in the future. The inability to
attract, hire or retain the necessary technical and managerial personnel could
have a material adverse effect upon our business, results of operations or
financial condition.
ABILITY TO ATTRACT QUALIFIED TRANSCRIPTIONISTS
Competition for qualified transcriptionists is intense.
Our success is also dependent, in part, upon our ability to attract and retain
qualified transcriptionists, who can provide the accuracy and turnaround time
required by our customers. Competition for transcriptionists is intense. We
may not be successful in attracting and retaining the personnel necessary to
conduct our business successfully. In addition, our inability to attract, hire,
assimilate and retain such personnel could have a material adverse effect upon
our business, financial condition and results of operations. We may ultimately
prove unable to attract sufficient qualified transcriptionists to operate our
facilities.
UNCERTAINTY REGARDING GOVERNMENT HEALTHCARE REFORM AND REGULATION
Our business may be adversely affected by future changes in governmental
regulations relating to the healthcare industry.
The healthcare industry is subject to changing political, economic and
regulatory influences that may affect the outsourcing arrangements of healthcare
providers. Several states and the United States federal government are
investigating a variety of alternatives to reform the healthcare delivery system
and further reduce and control healthcare spending. These reform efforts
include proposals to limit spending on healthcare items and services, limit
coverage for new technology, limit or control directly the prices healthcare
providers and drug and device manufacturers may charge for their services and
products, and otherwise change the environment in which providers operate. The
scope and timing of such reforms cannot be predicted at this time, but if
adopted and implemented, they could have a material adverse effect on our
business. Healthcare providers may react to these proposals and the uncertainty
surrounding such proposals by curtailing outsourcing arrangements or deferring
decisions regarding the use of outsourced services. In response to this
environment, many healthcare providers are consolidating to create larger
healthcare delivery organizations. This consolidation reduces the number of
potential customers for our products and services, and increases the bargaining
power of these organizations, which could lead to reductions in the amount we
are able to charge for our products and services. The impact of these
developments in the healthcare industry is difficult to predict and could have a
material adverse effect on our business, operating results and financial
condition.
In providing our services, we are subject to certain statutory, regulatory and
common law requirements regarding the confidentiality of such medical
information. We require our personnel to agree to keep all medical information
confidential and monitor compliance with applicable confidentiality
requirements. However, the failure to comply with such confidentiality
requirements could have a material adverse effect on our business, operating
results and financial condition.
INTELLECTUAL PROPERTY AND PROPERTY RIGHTS
Our success is heavily dependent upon a combination of proprietary software
technology and hardware purchased and licensed from third parties. Our current
protections may not be sufficient to protect these technologies.
We currently have only two issued patents and three patent applications pending,
and rely on a combination of trade secret, copyright and trademark laws, non-
disclosure agreements and contractual provisions to protect our proprietary
rights in our software and technology. However, these protections may not
prevent misappropriation of this technology. Moreover, third parties could
independently develop competing technologies that are substantially equivalent
or superior to our technologies. As part of our recent sale of certain of our
medical transcription operations to Lonestar Medical Transcription USA, Inc., a
wholly-owned subsidiary of L & H Investment Co., N.V., we assigned Lonestar and
LHIC non-exclusive rights to our VC99 code. Although we believe that our
services and products and the proprietary rights developed or licensed by us do
not infringe patents and proprietary
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rights of other parties, those parties may assert infringement claims,
regardless of merit, against us in the future. In addition, we have applied for
several federal service mark and trademark registrations for certain of the
marks we use, and have been granted U.S. Trademarks for various marks, including
Applied Voice Recognition and "VOICE-COMMANDER(TM)." There can be no assurance
that any further trademark registrations will be issued or, if issued, will
provide us with adequate protection against competitors.
Any patent applications now pending or filed in the future may not result in
patents being issued or, if patents are issued, the claims allowed may not be
sufficiently broad to protect what we believe to be our proprietary rights. In
addition, pending applications or any patents licensed to us or issued or
licensed to us in the future may not afford any competitive advantages to us or
may be challenged by third parties or circumvented or designed around by others.
The cost of litigation to uphold the validity and prevent infringement of
patents and to enforce licensing rights can be substantial. Furthermore, others
may independently develop similar technologies or duplicate the technology owned
by or licensed to us or design around the patented aspects of such technology.
Our services and products may or may not infringe patents or other rights owned
by others, licenses for which may not be available to us.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS
Various market and economic factors may cause our future quarterly operating
results to vary.
Because of our limited operating history, we do not have historical financial
data for any significant period of time on which to base planned operating
expenses. Our expense levels are based in part on our expectations as to future
revenues and, to a large extent, are fixed. Quarterly sales and operating
results are generally difficult to forecast. We may not be able to adjust
spending in a timely manner to compensate for any unexpected revenue shortfall.
Accordingly, any significant shortfall in relation to our expectations would
have an immediate adverse impact on our business, results of operations and
financial condition. In addition, we plan to significantly increase our
operating expenses to fund greater levels of research and development, increase
our sales and marketing operations, broaden our customer support capabilities
and establish brand identity and strategic alliances. To the extent that such
expenses precede or are not subsequently followed by increased revenues, our
business, results of operations and financial condition will be materially
adversely affected.
Our operating results may fluctuate significantly in the future because of a
variety of factors, some of which are beyond our control. These factors include
general economic conditions, specific economic conditions in the transcription
industry in general and the healthcare transcription industry specifically,
usage of healthcare transcription related and Internet-based technology,
seasonal trends in sales, capital expenditures and other costs relating to the
expansion of operations, the introduction of new products or services by us or
our competitors, the mix of the services sold and the channels through which
those services are sold and pricing changes. As a strategic response to a
changing competitive environment, we may elect from time to time to make certain
pricing, service or marketing decisions or acquisitions that could have a
material adverse effect on our business, results of operations and financial
condition. We believe that period to period comparisons of our operating
results are not meaningful and should not be relied upon for an indication of
future performance. Due to all of the foregoing factors, it is likely that in
some future quarter, our operating results may be below the expectations of
public market analysts and investors. In such event, the price of our common
stock would likely be materially adversely affected.
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CONCENTRATION OF STOCK OWNERSHIP
Our insiders beneficially own a majority of our common stock.
Our officers, directors and holders of more than 5% of our outstanding voting
securities beneficially own or have voting control over a total of 26,023,115
shares, which if all were issued today, would represent approximately 61% of the
total outstanding common stock. Accordingly, these stockholders will have
substantial influence over our policies and management, and if these
stockholders act as a group, they will be able to elect substantially all of our
directors, to dissolve, merge, or sell our assets. In addition pursuant to
their certificates of designation and other agreements, certain of our common
and preferred stockholders have the right to designate members of the Board of
Directors, as follows:
. SERIES A PREFERRED STOCK -- For so long as Entrepreneurial Investors, Ltd.
("EIL") owns at least 156,250 shares of the Series A Preferred Stock, we
have agreed to use our best efforts to have one member of the Board of
Directors be chosen by Equity Services, Ltd. ("ESL"). EIL currently holds
186,000 shares of the Series A Preferred Stock, although EIL has entered
into a stock exchange agreement with us for the exchange of all their
Series A shares for shares of Series G Preferred Stock, which have no
rights of designation.
. SERIES C PREFERRED STOCK -- For so long as the current holders of the
Series C Preferred Stock hold at least 77,263 shares of the Series C
Preferred Stock, we have agreed to use our best efforts to have one member
of the Board of Directors be chosen by ESL. The holders of the Series C
Preferred Stock currently hold 153,538 shares of the Series C Preferred
Stock, although they have entered into a stock exchange agreement with us
for the exchange of all their Series C shares for shares of Series G
Preferred Stock, which have no rights of designation.
As a result of such director designation rights, ESL renominated Mr. Daniel S.
Dornier to our Board of Directors in July 1999. Mr. Dornier has been appointed
to the Board of Directors.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
The market price of our common stock could be adversely affected by sales of
restricted and other securities.
As of February 17, 1999, there were approximately 18,240,411 shares of our
common stock issued and outstanding. Approximately 1,333,052 shares of common
stock are issuable upon exercise of employee and director stock options under
our 1997 Incentive Plan and will become eligible for sale in the public markets
at prescribed times in the future. Our issuance of such 1,333,052 shares is
registered on a Form S-8 Registration Statement. We also have outstanding
warrants which are exercisable into an aggregate of 4,091,245 shares of common
stock. In addition, our series of preferred stock are convertible into
additional shares of our common stock. The following table illustrates the
maximum number of shares of common stock issuable upon the conversion of our
outstanding preferred stock:
PREFERRED STOCK
- -------------------------------------------------------------------------------
Issued and Convertible into
Class of Preferred Authorized Outstanding Common Stock (max.)
- ----------------------------------------------------- ---------------------
Series A Preferred Stock* 312,500 186,000 5,075,722
Series B Preferred Stock 3,000 1,440 2,571,464
Series C Preferred Stock* 231,788 153,538 5,213,713
Series E Preferred Stock* 5,000 2,000 6,756,433
Series 2 Preferred Stock 250,000 1,756.66 175,666
- ------------
* The holders of the Series A, Series C and Series E Preferred Stock have
entered into Stock Exchange Agreements as of February 17, 2000, to exchange
their shares of preferred stock for shares of Series G Preferred Stock. The
Series G Preferred Stock must be converted into common stock within seven days
of its
9
<PAGE>
issuance. The number of shares of common stock to be issued pursuant to
that conversion will be the same as the number listed in the table above for
each of the series.
In addition to the shares of preferred stock listed in the table above, we are
obligated to issue another 7,386.01 shares of Series 2 Preferred Stock as
consideration in three of our acquisitions. The remaining shares of Series 2
Preferred Stock will be issued in equal annual installments on the anniversary
of the pertinent acquisition dates. Furthermore, we may be obligated to issue
another 2,350 shares of Series 1 Preferred Stock and 2,990 shares of Series 2
Preferred Stock as contingent consideration in three of our acquisitions should
the acquired operations meet certain annual financial targets. All the shares
of Series 1 Preferred Stock and Series 2 Preferred Stock remaining to be issued
will be convertible into an estimated maximum of 235,000 (based on an average
stock price of $1.00) and 1,037,602 shares of common stock, respectively.
In addition to the shares of common stock registered for resale by the selling
stockholder herein, we have registered 10,362,520 shares of common stock for
resale by certain other selling stockholders. The issuance and sale of a
significant number of shares of common stock upon the exercise of stock options
and warrants, the conversion of our outstanding preferred stock, or the sales of
a substantial number of shares of common stock pursuant to Rule 144 or
otherwise, could adversely affect the market price of the common stock.
CERTAIN ANTI-TAKEOVER PROVISIONS AFFECTING STOCKHOLDERS
Our Board of Directors may authorize the issuance of preferred stock without
stockholder approval.
Our Certificate of Incorporation and Bylaws contain provisions that might
diminish the likelihood that a potential acquiror would make an offer for the
common stock, impede a transaction favorable to the interest of the stockholders
or increase the difficulty of removing incumbent Board of Directors or
management. Currently, our Board of Directors has the authority, without
further stockholder approval, to issue up to 2,000,000 shares of preferred stock
in one or more series and to determine the price, rights, preferences and
privileges of those shares. We currently have nine series of preferred stock
designated as more fully described in the table contained in the previous risk
factor. See "Shares Eligible for Future Sale; Registration Rights." The rights
of our common stockholders will be subject to, and may be adversely affected by,
the rights of the holders of any preferred stock that is currently issued or may
be issued in the future. The issuance of additional shares of preferred stock,
while potentially providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of our outstanding voting
stock. We anticipate issuing additional shares of preferred stock through one
or more private placements during 2000. In addition, certain provisions of our
Certificate of Incorporation, including provisions that provide for the Board of
Directors to be divided into three classes to serve for staggered three-year
terms, may have the effect of delaying or preventing a change of control, which
could adversely affect the market price of our common stock.
LIMITED MARKET FOR SECURITIES; LACK OF LIQUIDITY
The current public market for our common stock is limited and highly volatile.
The shares of common stock offered hereby are traded on the Over-the-Counter
Bulletin Board ("OTCBB"). Trading activity in our common stock should be
considered sporadic, illiquid and highly volatile, and an active trading market
for our common stock may not exist in the future. Even if a market for the
common stock offered by this prospectus continues to exist, investors may not be
able to resell their common stock at or above the purchase price for which such
investors purchased such shares. In addition, the SEC has adopted regulations
that generally define a penny stock to be any equity security that has a market
price (as defined in such regulations) of less than $5.00 per share, subject to
certain exceptions. If the common stock meets the definition of a penny stock,
it will be subjected to these regulations which impose additional sales practice
requirements on broker-dealers
10
<PAGE>
who sell such securities to persons other than established customers and
accredited investors (generally institutions with assets in excess of $5,000,000
and individuals with a net worth in excess of $1,000,000 or annual income
exceeding $200,000 (individually) or $300,000 (jointly with their spouse)).
These regulations are currently not applicable to trading in our common stock,
however, if they become applicable, these regulations could affect a holder's
ability to sell any of the shares offered by this prospectus.
DIVIDENDS
We do not intend to pay cash dividends on our common stock in the near future
and are required to pay dividends on our outstanding series of preferred stock.
Our proposed operations may not result in sufficient revenues to enable us to
operate at a profitable level. We have not paid any dividends on our common
stock to date, and have no plans to pay any dividends on our common stock for
the foreseeable future. Our Series A and C Preferred Stock accrue a dividend of
4% per year, payable in shares of our common stock based on a share price equal
to the average closing price of our common stock for the 30 days prior to the
particular dividend date. Our Series B Preferred Stock accrues a dividend of 5%
per year, payable in cash or shares of our common stock based on a share price
equal to 78% of the 5 day average closing bid price of our common stock upon the
date of each conversion. Our Series E Preferred Stock accrues a dividend of 6%
per year, payable in cash or in shares of our common stock based on a share
price equal to the average closing price of our common stock for the 30 days
prior to the particular dividend date. Our Series 1 and 2 Preferred Stock,
accrue an 8% dividend payable in cash or in shares of common stock based upon
the greater of $1.00 or the average closing price of our common stock for the 30
days prior to the particular dividend date. Dividends on all of our shares of
preferred stock are cumulative. In addition, we anticipate that any preferred
stock issued in the future will also include dividend rights, including any
issued in connection with our strategy of acquiring healthcare transcription
companies.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
Certain statements in this prospectus are based upon our management's beliefs
and expectations and may not be correct.
This Prospectus contains certain statements that are "Forward Looking
Statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of 1934, as amended.
Those statements include, among other things, the discussions of our business
strategy and expectations concerning market position, future operations,
margins, profitability, liquidity and capital resources. Forward Looking
Statements are included in this section under "Limited History of Business
Operations; Anticipation of Continued Losses," "Sufficiency of Funds," "Risks
Associated with a Developing Market and the Acceptance of our Products and
Services," "Dependence on Principal Products and Services," "Management of
Growth; Need to Establish Infrastructure; Additional Personnel," "Rapid
Technological Change," "Risks Associated with Our Dependence on Third-Party
Proprietary Rights," "Competition," "Dependence on Key Personnel," "Ability to
Attract Qualified Transcriptionists," "Uncertainty Regarding Government
Healthcare Reform and Regulation," "Intellectual Property and Property Rights,"
"Potential Fluctuations in Quarterly Results," "Concentration of Stock
Ownership," "Shares Eligible for Future Sale; Registration Rights," "Certain
Anti-Takeover Provisions Affecting Stockholders," "Limited Market for
Securities; Lack of Liquidity" and "Dividends." Although we believe that the
expectations reflected in Forward Looking Statements are reasonable, we can give
no assurance that such expectations will prove to have been correct. Generally,
these statements relate to business plans or strategies, projected or
anticipated benefits or other consequences of such plans or strategies, or
projections involving anticipated revenues, expenses, earnings, levels of
capital expenditures, liquidity or indebtedness or other aspects of operating
results or financial position. All phases of our operations are subject to a
number of uncertainties, risks and other influences, many of which are outside
our control and any one of which, or any combination of which, could materially
affect the results of our operations and whether the Forward Looking Statements
made by us ultimately prove to be accurate. Important factors that could cause
actual results to differ materially from our expectations are disclosed in this
"Risk Factors" section of this prospectus.
11
<PAGE>
ABOUT US
We provide traditional and Internet-based transcription services to
healthcare professionals. Our principal executive offices are located at 1717
St. James Place, Suite 242, Houston, Texas 77056, and our telephone number is
(713) 621-3131.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the common
stock offered by the selling stockholders.
SELLING STOCKHOLDER
The following table sets forth certain information concerning the selling
stockholder. Assuming that the selling stockholders offer all of their shares of
common stock, the selling stockholder will not have any beneficial ownership.
The shares are being registered to permit the selling stockholders and certain
of their respective pledgees, donees, transferors or other successors in
interest to offer the shares for resale from time to time. See "Plan of
Distribution."
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF PERCENTAGE
OWNED AND TO BE NUMBER OF SHARES OF SHARES
OWNED PRIOR TO SHARES BEING OWNED AFTER OWNED AFTER
SELLING STOCKHOLDER OFFERING (1)(2) OFFERED (2) OFFERING (3) OFFERING
------------------------------------- -------------------- ---------------- ---------------- -----------
<S> <C> <C> <C> <C>
Timothy J. Connolly (4)............... 6,374,696 656,703 7,031,399 38.55%
</TABLE>
(1) The selling stockholder has sole voting and sole investment power with
respect to all shares owned.
(2) Ownership is determined in accordance with Rule 13d-3 under the Exchange
Act. The actual number of shares beneficially owned and offered for sale
hereunder is subject to adjustment and could be materially less or more
than the estimated account indicated depending upon factors which we cannot
predict at this time.
(3) Assumes the sale of all shares offered hereby to persons who are not
affiliates of the selling stockholder.
(4) Represents shares issuable upon exercises of three-year warrants issued in
connection with the certain bridge loan financing agreements entered into
with these selling stockholders over two periods during May through July
1997, and December 1998. The warrants issued during 1997 and 1998 have
exercise prices of $1.60 and $1.00 per share, respectively, and are all
fully vested.
Mr. Timothy J. Connolly is the President and sole owner of Voice
Technologies Management Corp. ("VTMC"), which serves as the general partner
of Voice Technologies Partners, Ltd. ("VTP"). Mr. Connolly has served as
our Chairman of the Board and as a Director since August 1996. The
additional shares listed as beneficially held, which will be owned after
completion of this offering, include 5,590,000 shares of common stock owned
by VTP, 32,143 shares of common stock owned by Mr. Connolly, 126,970 shares
of common stock owned by Jan Carson Connolly, his wife, and 500 and 100,000
shares of common stock issuable upon exercise of currently exercisable
employee stock options owned by Mr. and Mrs. Connolly, respectively.
PLAN OF DISTRIBUTION
Pursuant to this prospectus, the selling stockholder may sell shares of
common stock from time to time in transactions on such exchanges or markets as
the common stock may be listed for trading from time to time, in separately-
negotiated transactions, in an underwritten offering, or by a combination of
such methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. As used herein, "selling stockholder" includes
pledgees, donees, transferees and other successors in interest to the selling
stockholder selling shares received from a selling stockholder after the date of
this prospectus. The selling stockholder may effect such transactions by
selling the
12
<PAGE>
shares of common stock to or through broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the selling stockholder or the purchasers of the shares for whom such broker-
dealers may act as agent or to whom they sell as principal, or both (which
compensation to a particular broker-dealer might be in excess of customary
commissions).
Other methods by which the shares of common stock may be sold include,
without limitation: (i) transactions which involve cross or block trades or any
other transaction permitted by the OTCBB or other trading markets, (ii) "at the
market" to or through market makers or into an existing market for the common
stock, (iii) in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected through agents,
(iv) through transactions in options or swaps or other derivatives (whether
exchange-listed or otherwise), (v) through short sales, or (vi) any combination
of any such methods of sale. The selling stockholder may also enter into option
or other transactions with broker-dealers which require the delivery to such
broker dealers of the common stock offered hereby, which common stock such
broker-dealers may resell pursuant to this prospectus. The selling stockholder
may also make sales pursuant to Rule 144 under the Securities Act of 1933, as
amended, if such exemption from registration is otherwise available.
The selling stockholder and any broker-dealers who act in connection with
the sale of shares of common stock hereunder will be subject to the prospectus
delivery requirements because they may be deemed to be "underwriters" as that
term is defined in the Securities Act, and any commissions received by them and
profit on any resale of the Shares as principal might be deemed to be
underwriting discounts and commissions under the Securities Act. All costs,
expenses and fees in connection with the registration of the common stock
offered hereby will be borne by us. Brokerage commissions attributable to the
sale of common stock, if any, will be borne by the selling stockholder. We
have informed the selling stockholder that the anti-manipulative provisions of
Regulation M promulgated under the Securities Exchange Act of 1934 may apply to
their sales in the market.
LEGAL MATTERS
The legality of the securities offered hereby will be passed on for us by
Porter & Hedges, L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of Applied Voice Recognition, Inc.
appearing in Applied Voice Recognition, Inc.'s Annual Report (Form 10-KSB) for
the year ended December 31, 1998, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon (which contains an
explanatory paragraph describing conditions that raise substantial doubt about
the Company's ability to continue as a going concern as described in Note 2 to
the consolidated financial statements) included therein and incorporated herein
by reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
13
<PAGE>
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR ANY OTHER PERSON TO GIVE
ANY INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU
MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT OFFER
TO SELL OR BUY ANY SHARES IN ANY JURISDICTION WHERE IT IS UNLAWFUL. THE
INFORMATION IN THIS PROSPECTUS IS CURRENT AS OF THE DATE BELOW.
-------------
TABLE OF CONTENTS
Page
----
Where You Can Find More Information......................................... 2
Risk Factors................................................................ 3
About Us.................................................................... 12
Use of Proceeds............................................................. 12
Selling Stockholders........................................................ 12
Plan of Distribution........................................................ 12
Legal Matters............................................................... 13
Experts..................................................................... 13
-------------
APPLIED VOICE RECOGNITION, INC.
656,703 SHARES
OF
COMMON STOCK
--------------
PROSPECTUS
--------------
-------------
February 24, 2000
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The contents of the following documents filed by Applied Voice Recognition,
Inc., a Delaware corporation (the "Company" or "Registrant"), with the
Securities and Exchange Commission ("Commission") are incorporated into this
registration statement ("Registration Statement") by reference:
(i) Annual Report on Form 10-KSB for the year ended December 31, 1998, as
amended;
(ii) Quarterly Reports on Form 10-QSB for the quarters ended March 31,
June 30, and September 30, 1999;
(iii) Current Reports on Form 8-K as filed on June 14, August 27, and
November 19, 1999, and January 24, 2000; and
(iv) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A effective January 9,
1998 (Commission File No. 000-23607), including any amendments or
reports filed for the purpose of updating such description.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), subsequent to the filing date of this Registration
Statement and prior to the filing of a post-effective amendment to this
Registration Statement which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold shall be deemed
to be incorporated by reference in this Registration Statement and to be a part
hereof from the date of filing such documents. The Company will provide without
charge to each participant in the written compensation contracts, upon written
or oral request of such person, a copy (without exhibits, unless such exhibits
are specifically incorporated by reference) of any or all of the documents
incorporated by reference pursuant to this Item 3.
ITEM 4. DESCRIPTION OF SECURITIES
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL permits a corporation to 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, 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,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action. In an action brought to obtain a
judgment in the corporation's favor, whether by the corporation itself or
derivatively by a stockholder, the corporation may only indemnify for expenses,
including attorney's fees, actually and reasonably incurred in connection with
the defense or settlement of such action, and the corporation may not indemnify
for amounts paid in satisfaction of a judgment or in settlement of the claim. In
any such action, no indemnification may be paid in respect of any claim, issue
or matter as to which such person shall have been adjudged liable to the
corporation except as otherwise approved by the Delaware Court of Chancery or
the court in which the claim was
II-1
<PAGE>
brought. In any other type of proceeding, the indemnification may
extend to judgments, fines and amounts paid in settlement, actually and
reasonably incurred in connection with such other proceeding, as well as to
expenses.
The statute does not permit indemnification unless the person seeking
indemnification has acted in good faith and in a manner reasonably believed to
be in, or not opposed to, the best interests of the corporation and, in the case
of criminal actions or proceedings, the person had no reasonable cause to
believe his conduct was unlawful. The statute contains additional limitations
applicable to criminal actions and to actions brought by or in the name of the
corporation. The determination as to whether a person seeking indemnification
has met the required standard of conduct is to be made (1) by a majority vote of
a quorum of disinterested members of the board of directors, (2) by independent
legal counsel in a written opinion, if such a quorum does not exist or if the
disinterested directors so direct, or (3) by the stockholders.
The Certificate of Incorporation and Bylaws of the Company require it to
indemnify its directors to the fullest extent permitted under Delaware law.
Pursuant to employment agreements entered into by the Company with its executive
officers and certain other key employees, the Company must indemnify such
officers and employees in the same manner and to the same extent that the
Company is required to indemnify its directors under the Company's Bylaws. The
Certificate of Incorporation limits the personal liability of a director to the
corporation or its stockholders to damages for breach of the director's
fiduciary duty.
The Company maintains officers' and directors' indemnity insurance against
expenses of defending claims or payment of amounts arising out of good-faith
conduct believed by the officer or director to be in or not opposed to the best
interest of the Company.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
ITEM 8. EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------
4.1 First Amended and Restated Employment Agreement (Timothy J.
Connolly) effective as of January 1, 2000 (filed herewith).
4.2 First Amended and Restated Employment Agreement (Milton A.
Spiegelhauer) effective as of January 1, 2000 (filed herewith).
4.3 First Amended and Restated Employment Agreement (Robin P. Ritchie)
effective January 1, 2000 (filed herewith).
5.1 Opinion of Porter & Hedges, L.L.P. with respect to legality of
securities (filed herewith).
23.1 Consent of Ernst & Young LLP (filed herewith).
23.2 Consent of Porter & Hedges, L.L.P. (included in Exhibit 5.1).
24.1 Powers of Attorney (included on signature page).
II-2
<PAGE>
ITEM 9. UNDERTAKINGS
(a) Undertaking to Update
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to:
(i) include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) 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 in the Registration Statement; and
(iii) include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, 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) Undertaking With Respect to Documents Incorporated by Reference
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of
the Exchange Act that is incorporated by reference in this 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) Undertaking With Respect to Indemnification
Insofar as indemnification for liabilities arising under the
Securities Act 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 Securities 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 Securities Act and will be
governed by the final adjudication of such issue.
II-3
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Timothy J. Connolly his true and lawful attorney-
in-fact and agent, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
pre- and post-effective amendments and supplements to this Registration
Statement, and to file the same, or caused to be filed the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto such attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or the substitute or
substitutes of him, may lawfully do or cause to be done by virtue hereof.
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 has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on this 22nd day of
February, 2000.
APPLIED VOICE RECOGNITION, INC.
By: /s/ Timothy J. Connolly
---------------------------------------
Timothy J. Connolly,
Chairman of the Board and Director
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated and on this 22nd day of February, 2000.
SIGNATURE TITLE
--------- -----
/s/ Timothy J. Connolly Chairman of the Board and Director
- --------------------------------
Timothy J. Connolly
/s/ Mark Navarro Principal Financial Officer &
- -------------------------------- Principal Accounting Officer
Mark Navarro
/s/ J. William Boyar Director
- --------------------------------
J. William Boyar
/s/ James S. Cochron Director
- --------------------------------
James S. Cochron
/s/ Daniel Dornier Director
- --------------------------------
Daniel Dornier
/s/ N. Rudy Garza Director
- --------------------------------
N. Rudy Garza
II-4
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------
4.1 First Amended and Restated Employment Agreement (Timothy J.
Connolly) effective as of January 1, 2000 (filed herewith).
4.2 First Amended and Restated Employment Agreement (Milton A.
Spiegelhauer) effective as of January 1, 2000 (filed herewith).
4.3 First Amended and Restated Employment Agreement (Robin P. Ritchie)
effective as of January 1, 2000 (filed herewith).
5.1 Opinion of Porter & Hedges, L.L.P. with respect to legality of
securities (filed herewith).
23.1 Consent of Ernst & Young LLP (filed herewith).
23.2 Consent of Porter & Hedges, L.L.P. (included in Exhibit 5.1).
24.1 Powers of Attorney (included on signature page).
6
<PAGE>
EXHIBIT 4.1
FIRST AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
(TIMOTHY J. CONNOLLY)
THIS FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Amended
Agreement") is made effective as of January 1, 2000 (the "Effective Date"), by
and among APPLIED VOICE RECOGNITION, INC., a Delaware corporation doing business
as E-DOCS.NET ("Employer"), and TIMOTHY J. CONNOLLY, an individual residing in
Harris County, Texas ("Employee").
W I T N E S S E T H:
WHEREAS, Employer, as successor by merger of Applied Voice
Recognition, Inc., originally a Utah corporation, and Employee executed that
certain Employment Agreement dated effective as of July 1, 1997 (the
"Agreement");
WHEREAS, Employer and Employee executed that certain First Amendment
to Employment Agreement dated effective as of August 2, 1999 (the "Amendment");
WHEREAS, Employer and Employee orally agreed to allow any salary
payments due to Employee to be paid in common stock of the Company at the option
of Employee and under conditions acceptable to the Employee; and
WHEREAS, Employer and Employee now desire to amend and restate the
Agreement, as amended by the Amendment, pursuant to the terms and provisions set
forth herein.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants contained herein, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the parties hereby covenant and agree to modify and
restate the Agreement as follows:
1. EMPLOYMENT. Employer hereby employs Employee and Employee hereby
accepts employment with Employer on the terms and conditions set forth in this
Amended Agreement.
2. TERM OF EMPLOYMENT. The term of Employee's employment hereunder
(the "Term") shall commence as of July 1, 1997 (the "Commencement Date") and
shall continue (subject to termination by either Employer or Employee as
hereinafter provided) for an initial term (the "Initial Term") expiring on
December 31, 2001 (the "Expiration Date"). The Expiration Date shall be
automatically extended unless terminated by Employer or Employee for successive
one year periods following the expiration of the Initial Term. If Employer
achieves its budgeted gross revenues and EBITDA for the year 2001, this
Agreement will be automatically renewed for a one year period expiring December
31, 2002. If Employer desires to terminate Employee's
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employment under this Amended Agreement at the end of the Initial Term or at the
end of any succeeding one year term, Employer shall give written notice of such
desire to Employee at least one month prior to the expiration of the Initial
Term or any succeeding one year term. If Employee desires to terminate
Employee's employment under this Amended Agreement at the end of the Initial
Term or at the end of any succeeding one year term, Employee shall give written
notice of such desire to Employer at least one month prior to the expiration of
the Initial Term or any succeeding one year term. At the expiration of the then
existing term, Employer shall have no further obligation to Employee other than
payment of earned and unpaid Commissions (as hereafter defined) under Section
3(b), and Employee shall have no further obligation to Employer except as set
forth in Sections 7, 8, 9 and 10.
3. COMPENSATION AND OTHER BENEFITS.
a. As compensation for all services rendered by Employee in
performance of Employee's duties or obligations under this Amended Agreement,
Employer shall pay Employee the following base salary (the "Base Salary"):
(1) from July 1, 1997 until December 31, 1997, a monthly
base salary of SIXTEEN THOUSAND SIX HUNDRED SIXTY-SIX AND 66/100
DOLLARS ($16,666.66);
(2) from January 1, 1998 until December 31, 1998, a
monthly base salary of EIGHTEEN THOUSAND SEVEN HUNDRED FIFTY AND
00/100 DOLLARS ($18,750.00); and
(3) from January 1, 1999 until the Expiration Date, a
monthly base salary of TWENTY THOUSAND EIGHT HUNDRED THIRTY-THREE AND
33/100 DOLLARS ($20,833.33).
Employee's Base Salary shall be payable in equal semi-monthly installments or in
the manner and on the timetable which Employer's payroll is customarily handled
or at such intervals as Employer and Employee may hereafter agree to from time
to time. Notwithstanding the foregoing, any base salary due and payable to
Employee during the Term, may, at the Employee's option, be paid to Employee in
shares of the Company's common stock, par value $.001 per share (the "Common
Stock"), on terms acceptable to the Employee and approved by the Board of
Directors of the Employer.
c. In addition to receiving the Base Salary provided for in
Section 3(a), for calendar year 1999, Employee shall be entitled to a bonus of
up to One Hundred Twenty Five Thousand Dollars ($125,000.00). Seventy Five
Thousand Dollars ($75,000) of the 1999 bonus shall be earned and paid upon
execution of this Amendment, and the remaining $50,000 shall be earned if the
performance criteria set forth on ATTACHMENT I hereto are achieved by December
31, 1999 and paid by January 31, 2000. For each year thereafter, Employee shall
be entitled to a bonus of up to fifty percent (50%) of Employee's Base Salary;
provided, however, Employee shall be entitled to such bonus if, and only if,
Employee has met the performance
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criteria set by the Compensation Committee of the Board of Directors of Employer
(the "Compensation Committee") for the applicable period. Criteria set by the
Compensation Committee shall be set on a quarterly basis for the quarters ending
March 31, June 30, September 30, December 31, and bonuses earned pursuant hereto
shall be on a quarterly basis. Employer agrees that performance criteria for
Employee's bonus to be earned commencing January 1of each year shall be set on
or before January 1 of such year. Employee shall have the opportunity to meet
with and discuss such criteria with the Compensation Committee prior to the
finalization of such criteria. Upon completion of the criteria for the
applicable year, such criteria shall be communicated to Employee in writing. If
Employee successfully meets the performance criteria established by Employer (in
the discretion of Employer), Employer shall pay to Employee the bonus within
thirty (30) days of the end of the applicable quarterly period. Notwithstanding
the foregoing, if the Compensation Committee and Employee fail to agree on
Performance Criteria for any bonus period, then Employee's bonus shall be deemed
to be earned if Employer's Chief Executive Officer has earned his performance
bonus for such period under his Employment Agreement with Employer.
d. Employee shall be entitled to be reimbursed by Employer for
all reasonable and necessary expenses incurred by Employee in carrying out
Employee's duties under this Amended Agreement in accordance with Employer's
standard policies regarding such reimbursements.
e. Employee shall be entitled during the Term, upon
satisfaction of all eligibility requirements, if any, to participate in all
health, dental, disability, life insurance and other benefit programs now or
hereafter established by Employer which cover substantially all other of
Employer's employees and shall receive such other benefits as may be approved
from time to time by Employer.
f. Commencing August 1, 1999, Employee shall be entitled to
receive four weeks of paid vacation for each year during the Term and shall be
entitled to receive paid holidays as enjoyed by all other employees of Employer.
g. Effective as of September 1, 1997, Employee shall be
entitled to receive an automobile allowance of $750 per month, payable on the
first day of each month during the remainder of the Term. Employee shall be
responsible for paying all costs related to ownership of Employee's vehicle,
including maintenance and repairs, insurance and fuel, except when related to
travel to other cities on behalf of Employer.
h. Employee shall be entitled to a disability policy at the
expense of Employer that provides for payments in the amount of one-half of
Employee's Base Salary during such period as Employee is disabled, as set forth
in and subject to the limitations contained in such policy.
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4. DUTIES.
(a) Employee is employed to act as Chairman of the Board
of Employer and Chairman of the Strategic and Compensation Committees of
Employer. Employee shall be available to consult with the Chief Executive
Officer of Employer on an as needed basis as reasonably determined by Employer's
Board of Director.
(b) Employee agrees that during the period of employment,
Employee shall devote full-time efforts to Employee's duties as an employee of
Employer and Employee shall use Employee's best efforts to perform the duties of
Employee's position in an efficient and competent manner and shall use
Employee's best efforts to promote the interests of Employer and any affiliated
companies.
(c) During the period of employment, Employee agrees not
to (i) solely or jointly with others undertake or join any planning for or
organization of any business activity competitive with the business activities
of Employer, and (ii) directly or indirectly, engage or participate in any other
activities in conflict with the best interests of Employer.
(d) Employee agrees that during the period of employment
Employee shall refer to Employer all opportunities in the computer industry
related to voice recognition software designs and applications to which Employee
might become exposed in carrying out Employee's duties and responsibilities
hereunder.
5. TERMINATION OF EMPLOYMENT. Employee's employment and this
Amended Agreement shall terminate upon the earliest to occur of any of the
following events (the actual date of such termination being referred to herein
as the "Termination Date"):
a. The termination of the Amended Agreement pursuant to
Section 2.
b. Employee's employment pursuant hereto shall terminate
in the event of the death of Employee.
c. Employer may terminate Employee's employment under this
Amended Agreement for cause without any prior notice, upon the occurrence of any
of the following events:
(2) any embezzlement or wrongful diversion of funds
of Employer or any affiliate of Employer by Employee;
(3) gross malfeasance by Employee in the conduct of
Employee's duties;
(4) material breach of this Amended Agreement;
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(5) gross neglect by Employee in carrying out
Employee's duties; or
(6) the failure of Employee to be able to perform
Employee's duties hereunder for a period of not less than ninety (90)
days by reason of disability. For purposes of this Amended Agreement,
Employee shall be deemed to have become disabled when the Board of
Directors of Employer, upon the advice of a qualified physician, shall
have determined that Employee has become physically or mentally
incapable (excluding infrequent and temporary absences due to ordinary
illness) of performing Employee's duties under this Amended Agreement.
Before making any termination decision pursuant to this Section 5
(c)(5), the Board of Directors of Employer shall determine whether
there is any reasonable accommodation (within the meaning of the
Americans with Disabilities Act) which would enable Employee to
perform the essential functions of Employee's position under this
Amended Agreement despite the existence of any such disability. If
such a reasonable accommodation is possible, Employer shall make that
accommodation and shall not terminate Employee's employment hereunder
based on such disability.
d. If Employee's employment is terminated for any of the
reasons specified in Section 5(b) or (c), Employer shall no longer be obligated
to make the payments specified under Section 3 or to pay to Employee any other
compensation or benefits whatsoever. Notwithstanding the foregoing, if for any
reason Employee's employment is terminated hereunder, any salary payable under
Sections 3(a) or 3(b) which shall have been earned but not yet paid shall be
paid by Employer to Employee or Employee's estate, as the case may be.
6. INVENTIONS AND CREATIONS BELONG TO EMPLOYER.
a. Any and all inventions, discoveries, improvements or
creations (collectively, "Creations") which Employee has conceived or made or
may conceive or make during the period of employment in any way, directly or
indirectly, connected with Employer's business shall be the sole and exclusive
property of Employer. Employee agrees that all copyrightable works created by
Employee or under Employer's direction in connection with Employer's business
are "works made for hire" and shall be the sole and complete property of
Employer and that any and all copyrights to such works shall belong to Employer.
To the extent any of the works described in the preceding sentence are not
deemed to be "works made for hire," Employee hereby assigns all proprietary
rights, including copyright, in these works to Employer without further
compensation.
b. Employee further agrees to (i) disclose promptly to
Employer all such Creations which Employee has made or may make solely, jointly
or commonly with others during the period of employment to the extent connected
with Employer's business, (ii) assign all such Creations to Employer, and (iii)
execute and sign any and all applications, assignments or other instruments
which Employer may deem necessary in order to enable Employer, at Employer's
expense, to apply for, prosecute and obtain copyrights, patents or other
proprietary rights in the
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United States and foreign countries or in order to transfer to Employer all
right, title and interest in said Creations.
7. CONFIDENTIALITY; OWNERSHIP OF INFORMATION. Employer
promises that Employer will, during the Term, provide Employee with access to
such Confidential Information (as defined in Section 7(a)) owned by Employer and
that is used in the operation of Employer's business as reasonably necessary to
allow Employee to perform Employee's obligations hereunder. Employee
acknowledges that Employer has agreed to provide Employee with a definite term
of employment and with access to such Confidential Information of Employer
during that term of employment.
a. DEFINITION. For purposes of this Amended Agreement,
"Confidential Information" means any and all information relating directly or
indirectly to Employer that is not generally ascertainable from public or
published information or trade sources and that represents proprietary
information to Employer, excluding, however, (i) Employees' business contacts,
(ii) information already known to Employee prior to Employee's employment with
Employer, and (iii) information required to be divulged in any legal or
administrative proceeding in which Employee is involved. Confidential
Information shall consist of, for example, and not intending to be inclusive,
(A) software (source and object codes), algorithms, computer processing systems,
techniques, methodologies, formulae, processes, compilations of information,
drawings, proposals, job notes, reports, records and specifications, and (B)
information concerning any matters relating to the business of Employer, any of
its customers, prospective customers, customer contacts, licenses, the prices it
obtains or has obtained for the licensing of its software products and services,
or any other information concerning the business of Employer and Employer's good
will.
b. NO DISCLOSURE. During the Term and at all times there
after, Employee shall not disclose or use in any manner, directly or indirectly,
and shall use Employee's best efforts and shall take all reasonable precautions
to prevent the disclosure of, any such trade secrets or other Confidential
Information, except to the extent required in the performance of Employee's
duties or obligations to Employer hereunder or by express prior written consent
of a duly authorized officer or director of Employer (other than Employee).
c. OWNERSHIP OF INFORMATION. Such Confidential
Information is and shall remain the sole and exclusive property and proprietary
information of Employer or Employer's customers, as the case may be, and is
disclosed in confidence by Employer or permitted to be acquired from such
customers in reliance on Employee's Amended Agreement to maintain such
Confidential Information in confidence and not to use or disclose such
Confidential Information to any other person except in furtherance of Employer's
business.
d. RETURN OF MATERIAL. Upon the expiration or earlier
termination of this Amended Agreement for any reason, Employee shall immediately
turn over to Employer all documents, disks or other magnetic media, or other
material in Employee's possession or under Employee's control that (i) may
contain or be derived from Creations or Confidential Information, or (ii) are
connected with or derived from Employee's services to Employer. Employee shall
not
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retain any Confidential Information in any form (e.g., computer hard drive,
microfilm, etc.) upon the expiration or earlier termination of this Amended
Agreement.
8. NONCOMPETE; WORKING FOR COMPETITOR. In consideration of
Employee's employment by Employer, Employee will not, at any time during the
Term or at any time for twenty-four (24) months subsequent to any termination of
Employee's employment pursuant to the provisions of Section 5(c) or the
voluntary termination of employment by Employee pursuant to Section 2, directly
or indirectly, within the United States, Canada, Mexico, South America or
Europe, for Employee's own account or on behalf of any direct competitors of
Employer, engage in any business or transaction involving the design,
installation, integration, service or consulting with respect to voice
recognition software designs and applications (whether as an employee, employer,
independent contractor, consultant, agent, principal, partner, stockholder,
corporate officer, director or in any other individual or representative
capacity), without the prior written consent of Employer, which consent may be
withheld by Employer in Employer's sole and absolute discretion.
9. NON-SOLICITATION OF EMPLOYEES. During the Term and for a
period of twenty-four (24) months after the date of termination of employment,
Employee will not in any way, directly or indirectly (i) induce or attempt to
induce any employee of Employer to quit employment with Employer; (ii) otherwise
interfere with or disrupt Employer's relationship with its employees; (iii)
solicit, entice or hire away any employee of Employer; or (iv) hire or engage
any employee of Employer or any former employee of Employer whose employment
with Employer ceased less than one year before the date of such hiring or
engagement. Employee acknowledges that any attempt on the part of Employee to
induce others to leave Employer's employ, or any effort by Employee to interfere
with Employer's relationship with its other employees would be harmful and
damaging to Employer.
10. EMPLOYEE'S ACKNOWLEDGEMENT. It is the express intention of
Employee and Employer to comply with sections 15.50 et seq. of the Texas
Business and Commerce Code in effect as of the date of execution hereof.
Employee stipulates that the provisions of this Amended Agreement are not
oppressive or overly burdensome to Employee and will not prevent Employee from
earning an income following termination of this Amended Agreement. Employee
warrants and represents that:
a. Employee is familiar with non-compete and
non-solicitation covenants;
b. Employee has discussed or acknowledges the opportunity
to discuss the provisions of the non-compete and non-solicitation covenants
contained herein with Employee's attorney and has concluded that such provisions
(including, without limitation, the right to equitable relief and the length of
time provided for herein) are fair, reasonable and just under the circumstances;
c. Employee is fully aware of the obligations,
limitations and liabilities included in the non-compete and non-solicitation
covenants contained in this Amended Agreement;
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d. The scope of activities covered hereby are
substantially similar to those activities to be performed by Employee under this
Amended Agreement;
e. The twenty-four (24) month non-compete and non-
solicitation period is a reasonable restriction, giving consideration to the
following factors: (1) Employee and Employer reasonably anticipate that this
Amended Agreement, although terminable under certain provisions, will continue
in effect for sufficient duration to allow Employee to attain superior
bargaining strength and an ability for unfair competition with respect to the
customers covered hereby; (2) the duration of the twenty-four (24) month non-
compete and non-solicitation period is a reasonably necessary period to allow
Employer to restore its position of equivalent bargaining strength and fair
competition with respect to those customers covered hereby; and (3)
historically, employees of all types have remained with Employee for a duration
of longer than the duration of the twenty-four (24) month non-compete and non-
solicitation period; and
f. The limitations contained in this Amended Agreement
with respect to geographic area, duration and scope of activity are reasonable;
however, if any court shall determine that the geographic area, duration or
scope of activity of any restriction contained in this Amended Agreement is
unenforceable, it is the intention of the parties that such restrictive
covenants set forth herein shall not thereby be terminated, but shall be deemed
amended to the extent required to render such covenants valid and enforceable.
11. REMEDIES; INJUNCTION. In the event of a breach or
threatened breach by Employee of any of the provisions of this Amended
Agreement, Employee agrees that Employer, in addition to and not in limitation
of any other rights, remedies or damages available to Employer at law or in
equity, shall be entitled to a permanent injunction without the necessity of
proving actual monetary loss in order to prevent or restrain any such breach by
Employee or by Employee's partners, agents, representatives, servants, employees
and/or any and all persons directly or indirectly acting for or with Employee.
It is expressly understood between the parties that this injunctive or other
equitable relief shall not be Employer's exclusive remedy for any breach of this
Amended Agreement, and Employer shall be entitled to seek any other relief or
remedy which it may have by contract, statute, law or otherwise for any breach
hereof.
12. ARBITRATION. The parties agree that all disputes or
questions arising in connection with this Amended Agreement and/or the
termination of Employee's employment hereunder shall be settled by a single
arbitrator pursuant to the rules of the American Arbitration Association in the
City of Houston, Texas, and the award of the arbitrators shall be final, non-
appealable, conclusive and enforceable in a court of competent jurisdiction;
provided, however, notwithstanding the foregoing, in no event shall any dispute,
claim or this Amended Agreement arising under Sections 6, 7, 8, and 9 of this
Amended Agreement that requires injunctive or other equitable relief be required
to be submitted to arbitration pursuant to this provision or otherwise.
13. NOTICES. Any notice, demand or request which may be
permitted, required or desired to be given in connection therewith shall be
given in writing and directed to Employer and Employee as follows:
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If to Employer, at: Applied Voice Recognition, Inc.
1717 St. James Place, Suite 242
Houston, Texas 77057
Attention: Executive Committee
with a copy to: Boyar, Simon & Miller
4265 San Felipe, Suite 1200
Houston, Texas 77027
Attention: J. William Boyar, Esq.
Facsimile No.: (713) 552-1758
or, if to Employee, at: Mr. Timothy J. Connolly
8602 Pasture View Lane
Houston, Texas 77024
Notices shall be deemed properly delivered and received when and if either: (i)
personally delivered; (ii) delivered by nationally-recognized overnight courier;
(iii) when deposited in the U.S. Mail, by registered or certified mail, return
receipt requested, postage prepaid; or (iv) sent via facsimile transmission with
confirmation mailed by regular U.S. mail. Any party may change its notice
address for purposes hereof to any address within the continental United States
by giving written notice of such change to the other parties hereto at least
fifteen days prior to the intended effective date of such change.
14. SEVERABILITY. If any provision of this Amended Agreement
is rendered or declared illegal or unenforceable by reason of any existing or
subsequently enacted legislation or by decree of a court of last resort,
Employer and Employee shall promptly meet and negotiate substitute provisions
for those rendered or declared illegal or unenforceable, but all the remaining
provisions of this Amended Agreement shall remain in full force and effect.
15. ASSIGNMENT. This Amended Agreement may not be assigned by
any party without the prior written consent of the other parties.
16. BINDING AMENDED AGREEMENT. This Amended Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, and their
respective legal representatives, heirs, successors and permitted assigns.
17. GOVERNING LAW. This Amended Agreement shall be governed by
and construed in accordance with the laws of the State of Texas.
18. ATTORNEYS FEES. In the event of any dispute between the
parties regarding this Amended Agreement, the prevailing party shall be entitled
to be reimbursed for such prevailing party's attorneys fees and costs of court
by the non-prevailing party.
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19. AMENDED AGREEMENT READ, UNDERSTOOD AND FAIR. Employee has
carefully read and considered all provisions of this Amended Agreement and
agrees that all of the restrictions set forth are fair and reasonable and are
reasonably required for the protection of the interests of Employer.
20. STOCK OPTION PLAN. On the date, if ever, that Employer
completes a spin-off of any of its wholly-owned subsidiaries in an initial
public offering (the "Spin-Off IPO"), Employee shall be granted stock options
entitling Employee to purchase two percent (2%) of the shares of the spun off
subsidiary outstanding after the completion of the Spin-Off IPO (the "Options").
Employer agrees to take all reasonable steps to make such Options available in
conjunction with the Spin-Off IPO. The granting instrument for the Options will
provide, in addition to other terms set forth therein, that (i) the purchase
price for the Options shall be the lowest price of any options granted to
employees of Employer or such spun off subsidiary in connection with the Spin-
Off IPO, and (ii) the Options will vest monthly over the greater of (A) 12
months after the grant or (B) the remaining term of this Agreement.
21. CHANGE OF CONTROL. A "Change in Control" shall be deemed
to have occurred if (i) in the context of a single event or series of related
events, more than 50% of the voting power of Employer's outstanding securities
entitled to vote in elections of directors shall be acquired by any person (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended) other than by any person which includes Employee, or (ii) as
the result of a tender offer, merger, consolidation, sale of assets or contested
election, or any combination of such transactions, the persons who were
directors of Employer immediately before the transaction shall cease to
constitute a majority of the Board of Directors of Employer or any successor to
Employer. In the event of a Change in Control and any Change in Control
Qualifying Event (as herein defined) shall occur, Employee shall be permitted to
terminate his employment within six (6) months of such Change in Control
Qualifying Event and notwithstanding such termination, Employee shall be
entitled to receive his Base Salary for the remaining Term of this Agreement. In
addition, any stock options granted to Employee pursuant to this Agreement shall
immediately vest as of such termination date; however, Employee shall not be
eligible to receive any bonus earned pursuant to Section 3(c) of this Agreement
for any quarter beyond the quarter in which Employee's employment is terminated.
For purposes hereof, a Change in Control Qualifying Event shall include (i) a
significant diminution, without mutual agreement of the parties, in the nature
and scope of Employee's authority, power, functions or duties, (ii) Employer
assigns to Employee, without mutual agreement of the parties, substantial
additional duties or responsibilities which are inconsistent with the duties of
Employee under this Agreement, or (iii) Employer transfers Employee from the
principal office of Employer. Employer and Employee agree that if Employee does
a spin-off initial public offering of e-DOCS Health Care Information Services,
Inc., and none of the circumstances described in subsections (i), (ii) or (iii)
above apply, such transaction will not be a Change of Control for purposes of
this Section 20. Employer and Employee further agree that notwithstanding the
foregoing provisions of this Section 21, there will be no Change of Control
Qualifying Event if Employee and/or his controlled entities in their capacities
as shareholders of Employer vote in favor of such transaction that results in a
Change of Control if such transaction is an all cash transaction.
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22. GROSS-UP PROVISION. If any portion of any payments received
by Employee from Employer shall be subject to tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended or any successor statutory provision,
Employer shall pay to Employee such additional amounts as are necessary so that,
after taking into account any tax imposed by Section 4999 (or any successor
statutory provision), and any federal and state income taxes payable on any such
tax, the Employee is in the same after-tax position that he would have been if
such Section 4999 or any successor statutory provision did not apply and no
payments were made pursuant to this Section 22.
23. OFF-SITE OFFICE. During the term of this Agreement, Employer
shall bear the cost of an office for Employee and Employee's executive assistant
at a location mutually acceptable to Employer and Employee, including rent,
telephone, computer, internet access, cellular phone, office supplies and
entertainment expenses, all according to budgets established from time to time
by the mutual agreement of Employer and Employee.
24. MISCELLANEOUS. This Amended Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns permitted pursuant to the terms hereof. Except as amended hereby,
the Agreement, as amended by the Amendment, is presently in full force and
effect in accordance with its terms. If any part of this Amended Agreement shall
be held invalid, illegal or unenforceable, then such provision shall be deleted
from this Amended Agreement and the remainder of this Amended Agreement shall
not be affected thereby.
(Remainder of Page Intentionally Left Blank)
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IN WITNESS WHEREOF, the parties have executed this Amended Agreement
on this 2nd day of February, 2000, effective as of the Effective Date.
EMPLOYER:
APPLIED VOICE RECOGNITION, INC., a
Delaware corporation
By: /s/ Mark Navarro
-------------------------------
Mark Navarro,
Secretary
EMPLOYEE:
/s/ Timothy J. Connolly
-------------------------------
TIMOTHY J. CONNOLLY
Signature Page to
First Amended and Restated
Employment Agreement
(Timothy J. Connolly)
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ATTACHMENT I
1999 BONUS PERFORMANCE CRITERIA
Employer will have achieved both (i) a Revenue Run Rate based on the
average accrual basis gross revenues from medical transcription services and
sales of products (but not extraordinary consulting services) for November and
December, 1999 of no less than $898,000 per month, and (ii) average EBITDA for
November and December, 1999 of no less than $227,000 per month.
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EXHIBIT 4.2
FIRST AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
(Milton A. Spiegelhauer)
THIS FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Amended
Agreement") is made effective as of January 1, 2000 (the "Effective Date"), by
and between APPLIED VOICE RECOGNITION, INC., a Delaware corporation
("Employer"), and MILTON A. SPIEGELHAUER, an individual residing in Spring,
Texas ("Employee").
W I T N E S S E T H:
WHEREAS, Employer, as successor by merger of Applied Voice
Recognition, Inc., originally a Utah corporation, and Employee executed that
certain Employment Agreement dated effective as of July 1, 1997 (the
"Agreement");
WHEREAS, prior to Employee's termination, Employer and Employee orally
agreed to allow any remaining salary payments due to Employee under the
Agreement to be paid in common stock of the Company; and
WHEREAS, Employer and Employee now desire to amend and restate the
Agreement pursuant to the terms and provisions set forth herein.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants contained herein, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the parties hereby covenant and agree to modify and
restate the Agreement as follows:
1. EMPLOYMENT. Employer hereby employs Employee and Employee
hereby accepts employment with Employer on the terms and conditions set forth in
this Amended Agreement.
2. TERM OF EMPLOYMENT. The term of Employee's employment
hereunder (the "Term") shall commence as of September 1, 1998 (the "Commencement
Date") and shall continue (subject to termination by either Employer or Employee
as hereinafter provided) for an initial term (the "Initial Term") expiring on
August 31, 2001 (the "Expiration Date"). The Expiration Date shall be
automatically extended unless terminated by Employer or Employee for successive
one year periods following the expiration of the Initial Term. If Employer
desires to terminate Employee's employment under this Amended Agreement at the
end of the Initial Term or at the end of any succeeding one year term, Employer
shall give written notice of such desire to Employee at least one month prior to
the expiration of the Initial Term or any succeeding one year term. If Employee
desires to terminate Employee's employment under this Amended Agreement at the
end of the Initial Term or at the end of any succeeding one year term, Employee
shall give written notice of such desire to Employer at least one month prior to
the expiration of the Initial Term or any succeeding one year term. At the
expiration of the then existing term, Employer shall
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have no further obligation to Employee other than payment of earned and unpaid
Base Salary (as hereafter defined) and bonuses under Sections 3(a) and 3(b),
respectively, and Employee shall have no further obligation to Employer except
as set forth in Sections 7, 8, 9 and 10.
3. COMPENSATION AND OTHER BENEFITS.
a. As compensation for all services rendered by Employee
in performance of Employee's duties or obligations under this Amended Agreement,
Employer shall pay Employee a monthly base salary (the "Base Salary") as
follows:
(i) for the period from the Commencement Date
through February 28, 1999, the sum of TEN THOUSAND FIVE HUNDRED
EIGHTY-THREE AND NO/100 DOLLARS ($10,583.00);
(ii) for the period of March 1, 1999 through
August 31, 1999, the sum of ELEVEN THOUSAND SEVEN HUNDRED FIFTY AND
NO/100 DOLLARS ($11,750.00); and
(iii) for the period of September 1, 1999 through the
Expiration Date, the sum of TWELVE THOUSAND TWO HUNDRED FIFTY AND
NO/100 DOLLARS ($12,250.00).
Employee's Base Salary shall be payable in equal semi-monthly
installments or in the manner and on the timetable which Employer's payroll is
customarily handled or at such intervals as Employer and Employee may hereafter
agree to from time to time.
b. In addition to receiving the Base Salary provided for
in Section 3(a), for the portion of the calendar year beginning with the
Commencement Date and each calendar year thereafter during the Term hereof,
Employee shall be entitled to a bonus of up to $153,000 per year (or pro rata
for portions of a year) if, and only if, Employee has met the performance
criteria set by Employer for the applicable year. In connection therewith,
Employer agrees that by October 1, 1998 and by January 31 of each year
thereafter, it shall set the performance criteria for Employee's bonus to be
earned during the applicable year and shall communicate such criteria to
Employee in writing. If Employee successfully meets the performance criteria
established by Employer (in the discretion of Employer), Employer shall pay to
Employee the bonus within thirty (30) days of the end of the applicable year.
c. Employee shall be entitled to be reimbursed by
Employer for all reasonable and necessary expenses incurred by Employee in
carrying out Employee's duties under this Amended Agreement in accordance with
Employer's standard policies regarding such reimbursements.
d. Beginning within thirty (30) days of the Commencement
Date, Employee shall be entitled during the Term, upon satisfaction of all
eligibility requirements, if any, to participate in all health, dental,
disability, life insurance and other benefit programs now or
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hereafter established by Employer which cover substantially all other of
Employer's employees and shall receive such other benefits as may be approved
from time to time by Employer.
e. Employee shall be entitled to receive two weeks of paid
vacation for each year during the Term following the first anniversary of the
Commencement Date and shall be entitled to receive paid holidays as enjoyed by
all other employees of Employer.
f. Employee shall be entitled, during the Term of this
Amended Agreement, to receive a monthly automobile allowance of $750.
4. DUTIES.
a. Employee is employed to act as Vice President of Sales
and Marketing of the Employer and in such other office or position as shall be
assigned to Employee from time to time by Employer, and to perform such duties
as are commensurate with Employee's position with Employer.
b. Employee agrees that during the period of employment,
Employee shall devote full-time efforts to Employee's duties as an employee of
Employer and Employee shall use Employee's best efforts to perform the duties of
Employee's position in an efficient and competent manner and shall use
Employee's best efforts to promote the interests of Employer and any affiliated
companies.
c. During the period of employment, Employee agrees not
to (i) solely or jointly with others undertake or join any planning for or
organization of any business activity competitive with the business activities
of Employer, and (ii) directly or indirectly, engage or participate in any other
activities in conflict with the best interests of Employer.
d. Employee agrees that during the period of employment
Employee shall refer to Employer all opportunities in the computer industry
related to voice recognition software designs and applications to which Employee
might become exposed in carrying out Employee's duties and responsibilities
hereunder.
5. STOCK OPTION PLAN. As a further inducement to Employee to
accept employment upon the terms set forth herein and in consideration of
Employee's execution of this Amended Agreement, Employee shall be granted
options entitling Employee to purchase 150,000 shares of Employer's common
stock, par value $0.001 (the "Options"), pursuant to, and Employee shall be
entitled to otherwise participate in, that certain Applied Voice Recognition,
Inc. 1997 Incentive Plan, as amended from time to time. The granting instrument
for the Options will provide, in addition to other terms set forth therein, that
(i) the purchase price for the Options shall be the average bid and ask price
for Employer's shares of common stock on the NASDAQ OTCBB (or any national
securities exchange hereafter listing Employer's common stock) on the day prior
to the Commencement Date, and (ii) one third (1/3rd) of the Options (being
options to purchase 50,000 shares) will vest on the first anniversary date of
the Commencement Date, and approximately one twenty-fourth (1/24th) of the
remaining Options will vest on the last day of each month following the first
anniversary date of the Commencement Date (specifically options to purchase
2,083 shares
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on the last day of months one through twenty-three and 2,091 shares on the last
day of the twenty-fourth month).
6. TERMINATION OF EMPLOYMENT. Employee's employment and this
Amended Agreement shall terminate upon the earliest to occur of any of the
following events (the actual date of such termination being referred to herein
as the "Termination Date"):
a. The termination of the Amended Agreement pursuant to
Section 2.
b. Employee's employment pursuant hereto shall terminate
in the event of the death of Employee.
c. Employer may terminate Employee's employment under
this Amended Agreement for cause without any prior notice (except as set forth
in subparagraph (3) below), upon the occurrence of any of the following events:
(1) any embezzlement or wrongful diversion of funds
of Employer or any affiliate of Employer by Employee;
(2) gross malfeasance by Employee in the conduct of
Employee's duties;
(3) breach of this Amended Agreement and the failure
to cure such breach following reasonable notice thereof;
(4) gross neglect by Employee in carrying out
Employee's duties; or
(5) the failure of Employee to be able to perform
Employee's duties hereunder for a period of not less than ninety (90)
days by reason of disability. For purposes of this Amended Agreement,
Employee shall be deemed to have become disabled when the Board of
Directors of Employer, upon the advice of a qualified physician, shall
have determined that Employee has become physically or mentally
incapable (excluding infrequent and temporary absences due to ordinary
illness) of performing Employee's duties under this Amended Agreement.
Before making any termination decision pursuant to this Section
6(c)(5), the Board of Directors of Employer shall determine whether
there is any reasonable accommodation (within the meaning of the
Americans with Disabilities Act) which would enable Employee to
perform the essential functions of Employee's position under this
Amended Agreement despite the existence of any such disability. If
such a reasonable accommodation is possible, Employer shall make that
accommodation and shall not terminate Employee's employment hereunder
based on such disability.
d. If Employee's employment is terminated for any of the
reasons specified in Section 6, Employer shall no longer be obligated to make
the payments specified under
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Section 3 or to pay to Employee any other compensation or benefits whatsoever,
except as may otherwise be provided in Section 6(e). Notwithstanding the
foregoing, if for any reason Employee's employment is terminated hereunder, any
salary or bonus payable under Sections 3(a) or 3(b) which shall have been earned
but not yet paid shall be paid by Employer to Employee or Employee's estate, as
the case may be.
e. Employer shall have the right to terminate Employee's
employment hereunder without prior notice and without cause; provided, however,
in such event, Employee shall continue to receive his Base Salary for six (6)
months following the date of such termination or, at the Employee's option, any
amount of the severance may be paid to Employee in shares of the Company's
common stock, par value $.001 per share (the "Common Stock"), at a 35% discount
to the Nasdaq Over-the-Counter Bulletin Board closing bid price on the day
before the filing of a Form S-8 covering such shares of Common Stock. If this
Amended Agreement is terminated by Employer under this Section 6(e), any Options
that would otherwise vest on or before the next vesting period (be it annual or
monthly) shall automatically become fully vested immediately upon termination;
however, any additional unvested Options shall be cancelled upon termination.
Notwithstanding the foregoing, the prior provisions of this Section 6(e) shall
be void and of no force or effect in the event of (i) the sale of substantially
all of the assets of Employer, (ii) the merger of Employer into another entity,
or (iii) the merger of another entity into Employer if, as a result of any
transaction described in clause (i), (ii) or (iii), the shareholders of Employer
do not control a majority of the shares of the surviving entity. In the event of
any such sale or merger, any of the Options that have not yet vested shall
immediately vest.
7. INVENTIONS AND CREATIONS BELONG TO EMPLOYER.
a. Any and all inventions, discoveries, improvements or
creations (collectively, "Creations") which Employee has conceived or made or
may conceive or make during the period of employment in any way, directly or
indirectly, connected with Employer's business shall be the sole and exclusive
property of Employer. Employee agrees that all copyrightable works created by
Employee or under Employer's direction in connection with Employer's business
are "works made for hire" and shall be the sole and complete property of
Employer and that any and all copyrights to such works shall belong to Employer.
To the extent any of the works described in the preceding sentence are not
deemed to be "works made for hire," Employee hereby assigns all proprietary
rights, including copyright, in these works to Employer without further
compensation.
b. Employee further agrees to (i) disclose promptly to
Employer all such Creations which Employee has made or may make solely, jointly
or commonly with others during the period of employment to the extent connected
with Employer's business, (ii) assign all such Creations to Employer, and (iii)
execute and sign any and all applications, assignments or other instruments
which Employer may deem necessary in order to enable Employer, at Employer's
expense, to apply for, prosecute and obtain copyrights, patents or other
proprietary rights in the United States and foreign countries or in order to
transfer to Employer all right, title and interest in said Creations.
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8. CONFIDENTIALITY; OWNERSHIP OF INFORMATION. Employer
promises that Employer will, during the Term, provide Employee with access to
such Confidential Information (as defined in Section 8(a)) owned by Employer and
that is used in the operation of Employer's business as reasonably necessary to
allow Employee to perform Employee's obligations hereunder. Employee
acknowledges that Employer has agreed to provide Employee with a definite term
of employment and with access to such Confidential Information of Employer
during that term of employment.
a. DEFINITION. For purposes of this Amended Agreement,
"Confidential Information" means any and all information relating directly or
indirectly to Employer that is not generally ascertainable from public or
published information or trade sources and that represents proprietary
information to Employer, excluding, however, (i) Employees' business contacts,
(ii) information already known to Employee prior to Employee's employment with
Employer, and (iii) information required to be divulged in any legal or
administrative proceeding in which Employee is involved. Confidential
Information shall consist of, for example, and not intending to be inclusive,
(A) software (source and object codes), algorithms, computer processing systems,
techniques, methodologies, formulae, processes, compilations of information,
drawings, proposals, job notes, reports, records and specifications, and (B)
information concerning any matters relating to the business of Employer, any of
its customers, prospective customers, customer contacts, licenses, the prices it
obtains or has obtained for the licensing of its software products and services,
or any other information concerning the business of Employer and Employer's good
will.
b. NO DISCLOSURE. During the Term and at all times there
after, Employee shall not disclose or use in any manner, directly or indirectly,
and shall use Employee's best efforts and shall take all reasonable precautions
to prevent the disclosure of, any such trade secrets or other Confidential
Information, except to the extent required in the performance of Employee's
duties or obligations to Employer hereunder or by express prior written consent
of a duly authorized officer or director of Employer (other than Employee).
c. OWNERSHIP OF INFORMATION. Such Confidential
Information is and shall remain the sole and exclusive property and proprietary
information of Employer or Employer's customers, as the case may be, and is
disclosed in confidence by Employer or permitted to be acquired from such
customers in reliance on Employee's Amended Agreement to maintain such
Confidential Information in confidence and not to use or disclose such
Confidential Information to any other person except in furtherance of Employer's
business.
d. RETURN OF MATERIAL. Upon the expiration or earlier
termination of this Amended Agreement for any reason, Employee shall immediately
turn over to Employer all documents, disks or other magnetic media, or other
material in Employee's possession or under Employee's control that (i) may
contain or be derived from Creations or Confidential Information, or (ii) are
connected with or derived from Employee's services to Employer. Employee shall
not retain any Confidential Information in any form (e.g., computer hard drive,
microfilm, etc.) upon the expiration or earlier termination of this Amended
Agreement.
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9. NONCOMPETE; WORKING FOR COMPETITOR. In consideration of
Employee's employment by Employer, Employee will not, at any time during the
Term or at any time for twenty-four (24) months subsequent to any termination of
Employee's employment pursuant to the provisions of Section 6(c) or the
voluntary termination of employment by Employee pursuant to Section 2, directly
or indirectly, within the United States, Canada, Mexico, South America or
Europe, for Employee's own account or on behalf of any direct competitors of
Employer, engage in any business or transaction involving the design,
installation, integration, service or consulting with respect to voice
recognition software designs and applications (whether as an employee, employer,
independent contractor, consultant, agent, principal, partner, stockholder,
corporate officer, director or in any other individual or representative
capacity), without the prior written consent of Employer, which consent may be
withheld by Employer in Employer's sole and absolute discretion.
10. NON-SOLICITATION OF EMPLOYEES. During the Term and for a
period of twenty-four (24) months after the date of termination of employment,
Employee will not in any way, directly or indirectly (i) induce or attempt to
induce any employee of Employer to quit employment with Employer; (ii) otherwise
interfere with or disrupt Employer's relationship with its employees; (iii)
solicit, entice or hire away any employee of Employer; or (iv) hire or engage
any employee of Employer or any former employee of Employer whose employment
with Employer ceased less than one year before the date of such hiring or
engagement. Employee acknowledges that any attempt on the part of Employee to
induce others to leave Employer's employ, or any effort by Employee to interfere
with Employer's relationship with its other employees would be harmful and
damaging to Employer.
11. EMPLOYEE'S ACKNOWLEDGEMENT. It is the express intention of
Employee and Employer to comply with sections 15.50 et seq. of the Texas
Business and Commerce Code in effect as of the date of execution hereof.
Employee stipulates that the provisions of this Amended Agreement are not
oppressive or overly burdensome to Employee and will not prevent Employee from
earning an income following termination of this Amended Agreement. Employee
warrants and represents that:
a. Employee is familiar with non-compete and non-
solicitation covenants;
b. Employee has discussed or acknowledges the opportunity
to discuss the provisions of the non-compete and non-solicitation covenants
contained herein with Employee's attorney and has concluded that such provisions
(including, without limitation, the right to equitable relief and the length of
time provided for herein) are fair, reasonable and just under the circumstances;
c. Employee is fully aware of the obligations,
limitations and liabilities included in the non-compete and non-solicitation
covenants contained in this Amended Agreement;
d. The scope of activities covered hereby are
substantially similar to those activities to be performed by Employee under this
Amended Agreement;
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e. The twenty-four (24) month non-compete and non-
solicitation period is a reasonable restriction, giving consideration to the
following factors: (1) Employee and Employer reasonably anticipate that this
Amended Agreement, although terminable under certain provisions, will continue
in effect for sufficient duration to allow Employee to attain superior
bargaining strength and an ability for unfair competition with respect to the
customers covered hereby; (2) the duration of the twenty-four (24) month non-
compete and non-solicitation period is a reasonably necessary period to allow
Employer to restore its position of equivalent bargaining strength and fair
competition with respect to those customers covered hereby; and (3)
historically, employees of all types have remained with Employee for a duration
of longer than the duration of the twenty-four (24) month non-compete and non-
solicitation period; and
f. The limitations contained in this Amended Agreement
with respect to geographic area, duration and scope of activity are reasonable;
however, if any court shall determine that the geographic area, duration or
scope of activity of any restriction contained in this Amended Agreement is
unenforceable, it is the intention of the parties that such restrictive
covenants set forth herein shall not thereby be terminated, but shall be deemed
amended to the extent required to render such covenants valid and enforceable.
12. REMEDIES; INJUNCTION. In the event of a breach or
threatened breach by Employee of any of the provisions of this Amended
Agreement, Employee agrees that Employer, in addition to and not in limitation
of any other rights, remedies or damages available to Employer at law or in
equity, shall be entitled to a permanent injunction without the necessity of
proving actual monetary loss in order to prevent or restrain any such breach by
Employee or by Employee's partners, agents, representatives, servants, employees
and/or any and all persons directly or indirectly acting for or with Employee.
It is expressly understood between the parties that this injunctive or other
equitable relief shall not be Employer's exclusive remedy for any breach of this
Amended Agreement, and Employer shall be entitled to seek any other relief or
remedy which it may have by contract, statute, law or otherwise for any breach
hereof.
13. ARBITRATION. The parties agree that all disputes or
questions arising in connection with this Amended Agreement and/or the
termination of Employee's employment hereunder shall be settled by a single
arbitrator pursuant to the rules of the American Arbitration Association in the
City of Houston, Texas, and the award of the arbitrators shall be final, non-
appealable, conclusive and enforceable in a court of competent jurisdiction;
provided, however, notwithstanding the foregoing, in no event shall any dispute,
claim or this Amended Agreement arising under Sections 7, 8, 9 and 10 of this
Amended Agreement that requires injunctive or other equitable relief be required
to be submitted to arbitration pursuant to this provision or otherwise.
14. NOTICES. Any notice, demand or request which may be
permitted, required or desired to be given in connection therewith shall be
given in writing and directed to Employer and Employee as follows:
If to Employer, at: Applied Voice Recognition, Inc.
1717 St. James Place, Suite 242
Houston, Texas 77056
Attention: Chairman
Facsimile No.: (713) 621-7059
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with a copy to: Boyar, Simon & Miller
4265 San Felipe, Suite 1200
Houston, Texas 77027
Attention: Gary W. Miller, Esq.
Facsimile No.: (713) 552-1758
or, if to Employee, at: Mr. Milton A. Spiegelhauer
6602 Chancellor Drive
Spring, Texas 77374
Notices shall be deemed properly delivered and received when and if either: (i)
personally delivered; (ii) delivered by nationally-recognized overnight courier;
(iii) when deposited in the U.S. Mail, by registered or certified mail, return
receipt requested, postage prepaid; or (iv) sent via facsimile transmission with
confirmation mailed by regular U.S. mail. Any party may change its notice
address for purposes hereof to any address within the continental United States
by giving written notice of such change to the other parties hereto at least
fifteen days prior to the intended effective date of such change.
15. SEVERABILITY. If any provision of this Amended Agreement is
rendered or declared illegal or unenforceable by reason of any existing or
subsequently enacted legislation or by decree of a court of last resort,
Employer and Employee shall promptly meet and negotiate substitute provisions
for those rendered or declared illegal or unenforceable, but all the remaining
provisions of this Amended Agreement shall remain in full force and effect.
16. ASSIGNMENT. This Amended Agreement may not be assigned by
any party without the prior written consent of the other parties.
17. BINDING AMENDED AGREEMENT. This Amended Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, and their
respective legal representatives, heirs, successors and permitted assigns.
18. GOVERNING LAW. This Amended Agreement shall be governed by
and construed in accordance with the laws of the State of Texas.
19. ATTORNEYS FEES. In the event of any dispute between the
parties regarding this Amended Agreement, the prevailing party shall be entitled
to be reimbursed for such prevailing party's attorneys fees and costs of court
by the non-prevailing party.
20. AMENDED AGREEMENT READ, UNDERSTOOD AND FAIR. Employee has
carefully read and considered all provisions of this Amended Agreement and
agrees that all of the restrictions set forth are fair and reasonable and are
reasonably required for the protection of the interests of Employer.
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IN WITNESS WHEREOF, the parties have executed this Amended Agreement
on this 9th day of February, 2000, effective as of the Effective Date.
EMPLOYER:
APPLIED VOICE RECOGNITION, INC., a
Delaware corporation
By: /s/ Timothy J. Connolly
---------------------------------
Timothy J. Connolly, Chairman
EMPLOYEE:
/s/ Milton A. Spiegelhauer
------------------------------------
MILTON A. SPIEGELHAUER
Signature Page to
First Amended and Restated
Employment Agreement
(Milton A. Spiegelhauer)
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EXHIBIT 4.3
FIRST AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
(ROBIN P. RITCHIE)
THIS FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Amended
Agreement") is made effective as of January 1, 2000 (the "Effective Date"), by
and between APPLIED VOICE RECOGNITION, INC., a Delaware corporation
("Employer"), and ROBIN P. RITCHIE, an individual residing in Harris County,
Texas ("Employee").
W I T N E S S E T H:
WHEREAS, Employer, as successor by merger of Applied Voice
Recognition, Inc., originally a Utah corporation, and Employee executed that
certain Employment Agreement dated effective as of July 1, 1997 (the
"Agreement");
WHEREAS, prior to Employee's termination, Employer and Employee orally
agreed to allow any remaining salary payments due to Employee under the
Agreement to be paid in common stock of the Company at the Employee's option;
and
WHEREAS, Employer and Employee now desire to amend and restate the
Agreement pursuant to the terms and provisions set forth herein.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants contained herein, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the parties hereby covenant and agree to modify and
restate the Agreement as follows:
1. EMPLOYMENT. Employer hereby employs Employee and Employee hereby
accepts employment with Employer on the terms and conditions set forth in this
Amended Agreement.
2. TERM OF EMPLOYMENT. The term of Employee's employment hereunder
(the "Term") shall commence as of August 1, 1998 (the "Commencement Date") and
shall continue (subject to termination by either Employer or Employee as
hereinafter provided) for an initial term (the "Initial Term") expiring on July
31, 2002 (the "Expiration Date"). The Expiration Date shall be automatically
extended unless terminated by Employer or Employee for successive one year
periods following the expiration of the Initial Term. If Employer desires to
terminate Employee's employment under this Amended Agreement at the end of the
Initial Term or at the end of any succeeding one year term, Employer shall give
written notice of such desire to Employee at least one month prior to the
expiration of the Initial Term or any succeeding one year term. If Employee
desires to terminate Employee's employment under this Amended Agreement at the
end of the Initial Term or at the end of any succeeding one year term, Employee
shall give written notice of such desire to Employer at least one month prior to
the expiration of the Initial Term or any
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succeeding one year term. At the expiration of the then existing term, Employer
shall have no further obligation to Employee other than payment of earned and
unpaid Base Salary (as hereafter defined) and bonuses under Sections 3(a) and
3(b), respectively, and Employee shall have no further obligation to Employer
except as set forth in Sections 7, 8, 9 and 10.
3. COMPENSATION AND OTHER BENEFITS.
a. As compensation for all services rendered by Employee in
performance of Employee's duties or obligations under this Amended Agreement,
Employer shall pay Employee a monthly base salary of TWELVE THOUSAND FIVE
HUNDRED AND 00/100 DOLLARS ($12,500.00) (the "Base Salary"). Employee's Base
Salary shall be payable in equal semi-monthly installments or in the manner and
on the timetable which Employer's payroll is customarily handled or at such
intervals as Employer and Employee may hereafter agree to from time to time.
Employer agrees to review Employee's performance on a quarterly basis and to
consider an increase in Employee's Base Salary on an annual basis, beginning on
the first anniversary of the Commencement Date. Employee's salary may, but is
not required to, be increased from time to time, based upon Employee's
performance and other relevant factors, as Employer may deem appropriate,
without affecting any other provisions of this Amended Agreement.
b. In addition to receiving the Base Salary provided for in Section
3(a), for the portion of the calendar year beginning with the Commencement Date
and each calendar year thereafter during the Term hereof, Employee shall be
entitled to a bonus of up to $100,000 per year (or pro rata for portions of a
year) if, and only if, Employee has met the performance criteria set by Employer
for the applicable year. In connection therewith, Employer agrees that by
September 1, 1998 and by January 31 of each year thereafter, it shall set the
performance criteria for Employee's bonus to be earned during the applicable
year and shall communicate such criteria to Employee in writing. If Employee
successfully meets the performance criteria established by Employer (in the
discretion of Employer), Employer shall pay to Employee the bonus within thirty
(30) days of the end of the applicable year.
c. Employee shall be entitled to be reimbursed by Employer for all
reasonable and necessary expenses incurred by Employee in carrying out
Employee's duties under this Amended Agreement in accordance with Employer's
standard policies regarding such reimbursements.
d. Beginning within thirty (30) days of the Commencement Date,
Employee shall be entitled during the Term, upon satisfaction of all eligibility
requirements, if any, to participate in all health, dental, disability, life
insurance and other benefit programs now or hereafter established by Employer
which cover substantially all other of Employer's employees and shall receive
such other benefits as may be approved from time to time by Employer.
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e. Employee shall be entitled to receive two weeks of paid vacation
for each year during the Term following the first anniversary of the
Commencement Date and shall be entitled to receive paid holidays as enjoyed by
all other employees of Employer.
4. DUTIES.
a. Employee is employed to act as Chief Operating Officer of the
Employer and in such other office or position as shall be assigned to Employee
from time to time by Employer, and to perform such duties as are commensurate
with Employee's position with Employer.
b. Employee agrees that during the period of employment, Employee
shall devote full-time efforts to Employee's duties as an employee of Employer
and Employee shall use Employee's best efforts to perform the duties of
Employee's position in an efficient and competent manner and shall use
Employee's best efforts to promote the interests of Employer and any affiliated
companies.
c. During the period of employment, Employee agrees not to (i) solely
or jointly with others undertake or join any planning for or organization of any
business activity competitive with the business activities of Employer, and (ii)
directly or indirectly, engage or participate in any other activities in
conflict with the best interests of Employer.
d. Employee agrees that during the period of employment Employee shall
refer to Employer all opportunities in the computer industry related to voice
recognition software designs and applications to which Employee might become
exposed in carrying out Employee's duties and responsibilities hereunder.
5. STOCK OPTION PLAN. As a further inducement to Employee to accept
employment upon the terms set forth herein and in consideration of Employee's
execution of this Amended Agreement, Employee shall be granted options entitling
Employee to purchase 300,000 shares of Employer's common stock, par value $0.001
(the "Options"), pursuant to, and Employee shall be entitled to otherwise
participate in, that certain Applied Voice Recognition, Inc. 1997 Incentive
Plan, as amended from time to time. The granting instrument for the Options
will provide, in addition to other terms set forth therein, that (i) the
purchase price for the Options shall be the average bid and ask price for
Employer's shares of common stock on the NASDAQ OTCBB (or any national
securities exchange hereafter listing Employer's common stock) on the day prior
to the Commencement Date, and (ii) one fourth (1/4th) of the Options (being
options to purchase 75,000 shares) will vest on the first anniversary date of
the Commencement Date, and one thirty-sixth (1/36th) of the remaining Options
(being options to purchase 6,250 shares) will vest on the last day of each month
following the first anniversary date of the Commencement Date
6. TERMINATION OF EMPLOYMENT. Employee's employment and this
Amended Agreement shall terminate upon the earliest to occur of any of the
following events (the actual date of such termination being referred to herein
as the "Termination Date"):
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a. The termination of the Amended Agreement pursuant to Section
2.
b. Employee's employment pursuant hereto shall terminate in the
event of the death of Employee.
c. Employer may terminate Employee's employment under this
Amended Agreement for cause without any prior notice (except as set
forth in subparagraph (3) below), upon the occurrence of any of the
following events:
(1) any embezzlement or wrongful diversion of funds of
Employer or any affiliate of Employer by Employee;
(2) gross malfeasance by Employee in the conduct of
Employee's duties;
(3) breach of this Amended Agreement and the failure to cure
such breach following reasonable notice thereof;
(4) gross neglect by Employee in carrying out Employee's
duties; or
(5) the failure of Employee to be able to perform Employee's
duties hereunder for a period of not less than ninety (90) days by
reason of disability. For purposes of this Amended Agreement, Employee
shall be deemed to have become disabled when the Board of Directors of
Employer, upon the advice of a qualified physician, shall have
determined that Employee has become physically or mentally incapable
(excluding infrequent and temporary absences due to ordinary illness)
of performing Employee's duties under this Amended Agreement. Before
making any termination decision pursuant to this Section 6(c)(5), the
Board of Directors of Employer shall determine whether there is any
reasonable accommodation (within the meaning of the Americans with
Disabilities Act) which would enable Employee to perform the essential
functions of Employee's position under this Amended Agreement despite
the existence of any such disability. If such a reasonable
accommodation is possible, Employer shall make that accommodation and
shall not terminate Employee's employment hereunder based on such
disability.
d. If Employee's employment is terminated for any of the reasons
specified in Section 6, Employer shall no longer be obligated to make the
payments specified under Section 3 or to pay to Employee any other compensation
or benefits whatsoever, except as may otherwise be provided in Section 6(e).
Notwithstanding the foregoing, if for any reason Employee's employment is
terminated hereunder, any salary or bonus payable under Sections 3(a) or 3(b)
which shall have been earned but not yet paid shall be paid by Employer to
Employee or Employee's estate, as the case may be.
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e. Employer shall have the right to terminate Employee's employment
hereunder without prior notice and without cause; provided, however, in such
event, Employee shall continue to receive his Base Salary for six (6) months
following the date of such termination or, at the Employee's Option, any amount
of the severance may be paid to Employee in shares of the Company's common
stock, par value $.001 per share (the "Common Stock"), at a 35% discount to the
Nasdaq Over-the-Counter Bulletin Board closing bid price on the day before the
filing of a Form S-8 covering such shares of Common Stock. If this Amended
Agreement is terminated by Employer under this Section 6(e), any Options that
would otherwise vest on or before the next vesting period (be it annual or
monthly) shall automatically become fully vested immediately upon termination;
however, any additional unvested Options shall be cancelled upon termination.
Notwithstanding the foregoing, the prior provisions of this Section 6(e) shall
be void and of no force or effect in the event of (i) the sale of substantially
all of the assets of Employer, (ii) the merger of Employer into another entity,
or (iii) the merger of another entity into Employer if, as a result of any
transaction described in clause (i), (ii) or (iii), the shareholders of Employer
do not control a majority of the shares of the surviving entity. In the event of
any such sale or merger, any of the Options that have not yet vested shall
immediately vest.
7. INVENTIONS AND CREATIONS BELONG TO EMPLOYER.
a. Any and all inventions, discoveries, improvements or creations
(collectively, "Creations") which Employee has conceived or made or may conceive
or make during the period of employment in any way, directly or indirectly,
connected with Employer's business shall be the sole and exclusive property of
Employer. Employee agrees that all copyrightable works created by Employee or
under Employer's direction in connection with Employer's business are "works
made for hire" and shall be the sole and complete property of Employer and that
any and all copyrights to such works shall belong to Employer. To the extent any
of the works described in the preceding sentence are not deemed to be "works
made for hire," Employee hereby assigns all proprietary rights, including
copyright, in these works to Employer without further compensation.
b. Employee further agrees to (i) disclose promptly to Employer all
such Creations which Employee has made or may make solely, jointly or commonly
with others during the period of employment to the extent connected with
Employer's business, (ii) assign all such Creations to Employer, and (iii)
execute and sign any and all applications, assignments or other instruments
which Employer may deem necessary in order to enable Employer, at Employer's
expense, to apply for, prosecute and obtain copyrights, patents or other
proprietary rights in the United States and foreign countries or in order to
transfer to Employer all right, title and interest in said Creations.
8. CONFIDENTIALITY; OWNERSHIP OF INFORMATION. Employer promises
that Employer will, during the Term, provide Employee with access to such
Confidential Information (as defined in Section 8(a)) owned by Employer and that
is used in the operation of Employer's business as reasonably necessary to allow
Employee to perform Employee's obligations hereunder. Employee acknowledges
that Employer has agreed to provide Employee with a definite term of
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employment and with access to such Confidential Information of Employer during
that term of employment.
a. DEFINITION. For purposes of this Amended Agreement, "Confidential
Information" means any and all information relating directly or indirectly to
Employer that is not generally ascertainable from public or published
information or trade sources and that represents proprietary information to
Employer, excluding, however, (i) Employees' business contacts, (ii) information
already known to Employee prior to Employee's employment with Employer, and
(iii) information required to be divulged in any legal or administrative
proceeding in which Employee is involved. Confidential Information shall consist
of, for example, and not intending to be inclusive, (A) software (source and
object codes), algorithms, computer processing systems, techniques,
methodologies, formulae, processes, compilations of information, drawings,
proposals, job notes, reports, records and specifications, and (B) information
concerning any matters relating to the business of Employer, any of its
customers, prospective customers, customer contacts, licenses, the prices it
obtains or has obtained for the licensing of its software products and services,
or any other information concerning the business of Employer and Employer's good
will.
b. NO DISCLOSURE. During the Term and at all times thereafter,
Employee shall not disclose or use in any manner, directly or indirectly, and
shall use Employee's best efforts and shall take all reasonable precautions to
prevent the disclosure of, any such trade secrets or other Confidential
Information, except to the extent required in the performance of Employee's
duties or obligations to Employer hereunder or by express prior written consent
of a duly authorized officer or director of Employer (other than Employee).
c. OWNERSHIP OF INFORMATION. Such Confidential Information is and
shall remain the sole and exclusive property and proprietary information of
Employer or Employer's customers, as the case may be, and is disclosed in
confidence by Employer or permitted to be acquired from such customers in
reliance on Employee's Amended Agreement to maintain such Confidential
Information in confidence and not to use or disclose such Confidential
Information to any other person except in furtherance of Employer's business.
d. RETURN OF MATERIAL. Upon the expiration or earlier termination of
this Amended Agreement for any reason, Employee shall immediately turn over to
Employer all documents, disks or other magnetic media, or other material in
Employee's possession or under Employee's control that (i) may contain or be
derived from Creations or Confidential Information, or (ii) are connected with
or derived from Employee's services to Employer. Employee shall not retain any
Confidential Information in any form (e.g., computer hard drive, microfilm,
etc.) upon the expiration or earlier termination of this Amended Agreement.
9. NONCOMPETE; WORKING FOR COMPETITOR. In consideration of
Employee's employment by Employer, Employee will not, at any time during the
Term or at any time for twenty-four (24) months subsequent to any termination of
Employee's employment pursuant to the provisions of Section 6(c) or the
voluntary termination of employment by Employee pursuant to
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Section 2, directly or indirectly, within the United States, Canada, Mexico,
South America or Europe, for Employee's own account or on behalf of any direct
competitors of Employer, engage in any business or transaction involving the
design, installation, integration, service or consulting with respect to voice
recognition software designs and applications (whether as an employee, employer,
independent contractor, consultant, agent, principal, partner, stockholder,
corporate officer, director or in any other individual or representative
capacity), without the prior written consent of Employer, which consent may be
withheld by Employer in Employer's sole and absolute discretion.
10. NON-SOLICITATION OF EMPLOYEES. During the Term and for a period
of twenty-four (24) months after the date of termination of employment, Employee
will not in any way, directly or indirectly (i) induce or attempt to induce any
employee of Employer to quit employment with Employer; (ii) otherwise interfere
with or disrupt Employer's relationship with its employees; (iii) solicit,
entice or hire away any employee of Employer; or (iv) hire or engage any
employee of Employer or any former employee of Employer whose employment with
Employer ceased less than one year before the date of such hiring or engagement.
Employee acknowledges that any attempt on the part of Employee to induce others
to leave Employer's employ, or any effort by Employee to interfere with
Employer's relationship with its other employees would be harmful and damaging
to Employer.
11. EMPLOYEE'S ACKNOWLEDGEMENT. It is the express intention of
Employee and Employer to comply with sections 15.50 et seq. of the Texas
Business and Commerce Code in effect as of the date of execution hereof.
Employee stipulates that the provisions of this Amended Agreement are not
oppressive or overly burdensome to Employee and will not prevent Employee from
earning an income following termination of this Amended Agreement. Employee
warrants and represents that:
a. Employee is familiar with non-compete and non-solicitation
covenants;
b. Employee has discussed or acknowledges the opportunity to discuss
the provisions of the non-compete and non-solicitation covenants contained
herein with Employee's attorney and has concluded that such provisions
(including, without limitation, the right to equitable relief and the length of
time provided for herein) are fair, reasonable and just under the circumstances;
c. Employee is fully aware of the obligations, limitations and
liabilities included in the non-compete and non-solicitation covenants contained
in this Amended Agreement;
d. The scope of activities covered hereby are substantially similar to
those activities to be performed by Employee under this Amended Agreement;
e. The twenty-four (24) month non-compete and non-solicitation period
is a reasonable restriction, giving consideration to the following factors: (1)
Employee and Employer reasonably anticipate that this Amended Agreement,
although terminable under certain
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provisions, will continue in effect for sufficient duration to allow Employee to
attain superior bargaining strength and an ability for unfair competition with
respect to the customers covered hereby; (2) the duration of the twenty-four
(24) month non-compete and non-solicitation period is a reasonably necessary
period to allow Employer to restore its position of equivalent bargaining
strength and fair competition with respect to those customers covered hereby;
and (3) historically, employees of all types have remained with Employee for a
duration of longer than the duration of the twenty-four (24) month non-compete
and non-solicitation period; and
f. The limitations contained in this Amended Agreement with respect to
geographic area, duration and scope of activity are reasonable; however, if any
court shall determine that the geographic area, duration or scope of activity of
any restriction contained in this Amended Agreement is unenforceable, it is the
intention of the parties that such restrictive covenants set forth herein shall
not thereby be terminated, but shall be deemed amended to the extent required to
render such covenants valid and enforceable.
12. REMEDIES; INJUNCTION. In the event of a breach or threatened
breach by Employee of any of the provisions of this Amended Agreement, Employee
agrees that Employer, in addition to and not in limitation of any other rights,
remedies or damages available to Employer at law or in equity, shall be entitled
to a permanent injunction without the necessity of proving actual monetary loss
in order to prevent or restrain any such breach by Employee or by Employee's
partners, agents, representatives, servants, employees and/or any and all
persons directly or indirectly acting for or with Employee. It is expressly
understood between the parties that this injunctive or other equitable relief
shall not be Employer's exclusive remedy for any breach of this Amended
Agreement, and Employer shall be entitled to seek any other relief or remedy
which it may have by contract, statute, law or otherwise for any breach hereof.
13. ARBITRATION. The parties agree that all disputes or questions
arising in connection with this Amended Agreement and/or the termination of
Employee's employment hereunder shall be settled by a single arbitrator pursuant
to the rules of the American Arbitration Association in the City of Houston,
Texas, and the award of the arbitrators shall be final, non-appealable,
conclusive and enforceable in a court of competent jurisdiction; provided,
however, notwithstanding the foregoing, in no event shall any dispute, claim or
this Amended Agreement arising under Sections 7, 8, 9 and 10 of this Amended
Agreement that requires injunctive or other equitable relief be required to be
submitted to arbitration pursuant to this provision or otherwise.
14. NOTICES. Any notice, demand or request which may be permitted,
required or desired to be given in connection therewith shall be given in
writing and directed to Employer and Employee as follows:
If to Employer, at: Applied Voice Recognition, Inc.
1717 St. James Place, Suite 242
Houston, Texas 77056
Attention: Chairman
Facsimile No.: (713) 621-7059
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with a copy to: Boyar, Simon & Miller
4265 San Felipe, Suite 1200
Houston, Texas 77027
Attention: Gary W. Miller, Esq.
Facsimile No.: (713) 552-1758
or, if to Employee, at: Mr. Robin P. Ritchie
1611 Wild Rye Trail
Sugar Land, Texas 77479
Notices shall be deemed properly delivered and received when and if either: (i)
personally delivered; (ii) delivered by nationally-recognized overnight courier;
(iii) when deposited in the U.S. Mail, by registered or certified mail, return
receipt requested, postage prepaid; or (iv) sent via facsimile transmission with
confirmation mailed by regular U.S. mail. Any party may change its notice
address for purposes hereof to any address within the continental United States
by giving written notice of such change to the other parties hereto at least
fifteen days prior to the intended effective date of such change.
15. SEVERABILITY. If any provision of this Amended Agreement is
rendered or declared illegal or unenforceable by reason of any existing or
subsequently enacted legislation or by decree of a court of last resort,
Employer and Employee shall promptly meet and negotiate substitute provisions
for those rendered or declared illegal or unenforceable, but all the remaining
provisions of this Amended Agreement shall remain in full force and effect.
16. ASSIGNMENT. This Amended Agreement may not be assigned by any
party without the prior written consent of the other parties.
17. BINDING AMENDED AGREEMENT. This Amended Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, and their
respective legal representatives, heirs, successors and permitted assigns.
18. GOVERNING LAW. This Amended Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
19. ATTORNEYS FEES. In the event of any dispute between the parties
regarding this Amended Agreement, the prevailing party shall be entitled to be
reimbursed for such prevailing party's attorneys fees and costs of court by the
non-prevailing party.
20. AMENDED AGREEMENT READ, UNDERSTOOD AND FAIR. Employee has
carefully read and considered all provisions of this Amended Agreement and
agrees that all of the restrictions set forth are fair and reasonable and are
reasonably required for the protection of the interests of Employer.
(Remainder of Page Intentionally Left Blank)
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IN WITNESS WHEREOF, the parties have executed this Amended Agreement
on this 14th day of February, 2000, effective as of the Effective Date.
EMPLOYER:
APPLIED VOICE RECOGNITION, INC.,
a Delaware corporation
By: /s/ Timothy J. Connolly
-----------------------
Timothy J. Connolly, Chairman
EMPLOYEE:
/s/ Robin P. Ritchie
----------------------
ROBIN P. RITCHIE
Signature Page to
First Amended and Restated
Employment Agreement
(Robin P. Ritchie)
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PORTER & HEDGES, L.L.P.
ATTORNEYS AT LAW
700 LOUISIANA, 35TH FLOOR
HOUSTON, TEXAS 77002-2764
_________________________
TELECOPIER (713) 228-1331
TELEPHONE (713) 226-0600
MAILING ADDRESS:
P.O. BOX 4744
HOUSTON, TX 77210-4744
February 24, 2000
Applied Voice Recognition, Inc.
d/b/a e-DOCS.net
1717 St. James Place, Suite 242
Houston, Texas 77056
Re: APPLIED VOICE RECOGNITION, INC. REGISTRATION STATEMENT ON FORM S-8:
FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT (TIMOTHY J. CONNOLLY)
FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT (MILTON A. SPIEGELHAUER)
FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT (ROBIN P. RITCHIE)
Gentlemen:
We have acted as counsel to Applied Voice Recognition, Inc., a Delaware
corporation (the "Company"), in connection with the preparation for filing with
the Securities and Exchange Commission of a Registration Statement on Form S-8
(the "Registration Statement") under the Securities Act of 1933, as amended.
The Registration Statement relates, among other things, to an aggregate of
1,054,852 shares (the "Shares") of the Company's common stock, par value $.001
per share (the "Common Stock"), issuable pursuant to the First Amended and
Restated Employment Agreement (Timothy J. Connolly), the First Amended and
Restated Employment Agreement (Milton A. Spiegelhauer) and First Amended and
Restated Employment Agreement (Robin P. Ritchie), each between the Company and
the respective employee as an employment inducement (collectively, the "Written
Compensation Contracts").
We have examined the Written Compensation Contracts and such corporate
records, documents, instruments and certificates of the Company, and have
reviewed such questions of law as we have deemed necessary, relevant or
appropriate to enable us to render the opinion expressed herein. In such
examination, we have assumed without independent investigation the authenticity
of all documents submitted to us as originals, the genuineness of all
signatures, the legal capacity of all natural persons, and the conformity of any
documents submitted to us as copies to their respective originals. As to
certain questions of fact material to this opinion, we have relied without
independent investigation upon statements or certificates of public officials
and officers of the Company.
Based upon such examination and review, we are of the opinion that the Shares
will, upon issuance in accordance with the Written Compensation Contracts, be
validly issued, fully paid and non-assessable outstanding shares of Common
Stock.
This Firm consents to the filing of this opinion as an exhibit to the
Registration Statement.
This opinion is conditioned upon the Registration Statement being declared
effective and upon compliance by the Company with all applicable provisions of
the Securities Act of 1933, as amended, and such state securities rules,
regulations and laws as may be applicable.
Very truly yours,
/s/ Porter & Hedges, L.L.P.
PORTER & HEDGES, L.L.P.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Settlement (Form S-8 No. 333-_______) pertaining to the First
Amended and Restated Employment Agreement (Timothy J. Connolly), First
Amended and Restated Employment Agreement (Milton A. Spiegelhauer), and First
Amended and Restated Employment Agreement (Robin P. Ritchie) and to the
incorporation by reference therein of our report dated March 27, 1999, with
respect to the consolidated financial statements of Applied Voice Recognition,
Inc. (d/b/a e-DOCS.net) included in its Annual Report (Form 10-KSB) for the year
ended December 31, 1998, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Houston, Texas
February 23, 2000
