EXHIBIT 10.39
STOCK EXCHANGE AGREEMENT
This STOCK EXCHANGE AGREEMENT is entered into on this 20th day of January,
2000, between Entrepreneurial Investors, Ltd. (the "STOCKHOLDER"), who is a
holder of the Company's Series A Preferred Stock, par value $0.10 per share (the
"SERIES A PREFERRED STOCK"), and Applied Voice Recognition, Inc., a Delaware
corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, the Company and the Stockholder are parties to a letter agreement
dated January 7, 2000 (the "LETTER AGREEMENT") pursuant to which the Company
agreed to designate a Series G Preferred Stock, par value $0.10 per share, with
a specified conversion price (the "SERIES G PREFERRED STOCK"), to exchange for
all of the outstanding Series A Preferred Stock held by the Stockholder; and
WHEREAS, the parties desire to consummate their understandings agreed upon
in the Letter Agreement with respect to the exchange of shares of the Series A
Preferred Stock for shares of the Series G Preferred Stock on the terms set
forth therein.
NOW, THEREFORE, for and in consideration of the premises, and the mutual
and dependent promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, each of the following
terms has the meanings set forth below:
(a) "Agreement" means and includes this Stock Exchange Agreement and
the schedules and exhibits hereto.
(b) "Claims" means any claims, demands, actions, costs, damages,
losses, diminution in value, expenses, obligations, liabilities,
recoveries, judgments, settlements, suits, proceedings, causes of action or
deficiencies, including interest, penalties (including civil and criminal
penalties) and reasonable attorneys' fees.
(c) "Encumbrance" means any security interest, mortgage, deed of
trust, pledge, lien, claim or other encumbrance of any third party of any
nature whatsoever.
(d) "knowledge" means, with respect to any representation or warranty
in Article III made to the knowledge of the Stockholder or words of similar
import, receipt of notice by, or actual knowledge of any Stockholder, but
no representation or warranty made by the Stockholder in Article III may be
qualified or limited by reference to "KNOWLEDGE" unless due inquiry has
actually been made of the Stockholder.
(e) "Series A Shares" means at any date all of the shares of the
Series A Preferred Stock issued and outstanding on such date.
(f) "Person" means an individual, corporation, limited liability
company, partnership, limited partnership, joint venture, joint stock
company, firm, company, syndicate, trust, estate, association, governmental
authority, business, organization or any other incorporated or
unincorporated entity.
1.2 OTHER DEFINED TERMS. Words and terms used in this Agreement that are
defined elsewhere in this Agreement are used herein as therein defined.
1.3 OTHER DEFINITIONAL PROVISIONS.
(a) When used in this Agreement, the words "herein," "hereof" and
"hereunder" and words of similar import refer to this Agreement as a whole
and not to any provision of this Agreement, and the words "Article,"
"Section," "Schedule" and "Exhibit" refer to Articles and Sections of, and
Schedules and Exhibits to, this Agreement unless otherwise specified.
(b) Whenever the context so requires, the singular number includes the
plural and vice versa, and a reference to one gender includes the other
gender and the neuter.
(c) The words "shall" and "will" are used interchangeably and have the
same meaning.
1.4 CAPTIONS. Captions to Articles, Sections and subsections of, and
Schedules and Exhibits to, this Agreement are included for convenience of
reference only, and such captions shall not constitute a part of this Agreement
for any other purpose or in any way affect the meaning or construction of any
provision of this Agreement.
ARTICLE II
EXCHANGE OF STOCK
2.1 EXCHANGE OF PREFERRED STOCK. Subject to the terms and conditions of
this Agreement, and based upon the representations, warranties, covenants and
agreements set forth
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herein, at the Closing, Stockholder agrees to convey to the Company, free and
clear of all Encumbrances, and the Company agrees to exchange with and accept
from Stockholder, all of the Series A Shares as hereinafter provided and for the
consideration set forth in Section 2.2 hereof.
2.2 EXCHANGE. At Closing, the Stockholder shall deliver to the Company
certificates representing all the Series A Shares, each such certificate to be
duly endorsed in blank and in good form for transfer, or accompanied by stock
powers duly executed in blank, sufficient and in good form to properly transfer
such shares to the Company. In exchange therefor, the Company shall issue to
the Stockholder an aggregate of 15,227.166 shares of Series G Preferred Stock
(the "STOCK CONSIDERATION"). At Closing, the Company shall record in its books
the exchange and issuance of such shares representing the Stock Consideration to
the Stockholder registered in the name of the Stockholder for the amount of
shares set forth above.
2.3 CLOSING. Consummation of the transactions contemplated by this
Agreement (the "CLOSING") shall take place on the date hereof, via the
telephone, facsimile, e-mail and regular mail. The date upon which the Closing
occurs is referred to herein as the "CLOSING DATE."
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF STOCKHOLDER
Stockholder represents and warrants to, and agrees with, the Company that,
the following representations, warranties and agreements are true and correct as
the date hereof.
3.1 AUTHORITY AND CONSENT. Stockholder has the requisite power and
authority to enter into, and perform their obligations under this Agreement, and
no approval or consent of any Person is necessary in connection therewith. This
Agreement, together with all other agreements, documents and instruments
executed in connection herewith by Stockholder constitutes valid and legally-
binding obligations of Stockholder, and are enforceable against Stockholder in
accordance with their terms, subject to bankruptcy, receivership, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
creditors' rights generally and subject to general principles of equity.
3.2 TITLE TO SERIES A SHARES. Stockholder holds good and valid title to
all of the Series A Shares set forth opposite its name on Schedule A attached
hereto and incorporated herein for all purposes, free and clear of all
Encumbrances. Stockholder possesses full authority and legal right to sell,
transfer and assign to the Company such Series A Shares, free and clear of all
Encumbrances. Upon transfer to the Company by Stockholder of such Series A
Shares, the Company will own such Series A Shares free and clear of all
Encumbrances. There are no Claims pending or, to Stockholder's knowledge,
threatened against Stockholder that concern or affect title to the Series A
Shares.
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3.3 UNREGISTERED SHARES. Stockholder acknowledges, represents and agrees
that:
(a) the Stock Consideration has not been registered under the
Securities Act of 1933, as amended (the "1933 ACT"), or registered or
qualified under any applicable state securities laws;
(b) Stockholder has had the opportunity to ask questions of, and
receive answers from, the Company's officers and directors concerning
Stockholder's acquisition of the Stock Consideration, and to obtain such
other information concerning the Company and the Stock Consideration, to
the extent they possessed the same or could acquire it without unreasonable
effort or expense, as Stockholder deemed necessary; and
(c) The Company has made no representations or warranties to the
Stockholder as to the Stockholder's federal, state, local or foreign tax
consequences from the consummation of the transactions contemplated by this
Agreement, and the Company has urged and advised the Stockholder to consult
his, her or its personal tax advisor with respect to such matters.
3.4 NO ADVERSE CONSEQUENCES. Neither the execution and delivery of this
Agreement by Stockholder nor the consummation of the transactions
contemplated by this Agreement will (a) to the knowledge of Stockholder,
violate any statute, judgment, order, injunction, decree, rule, regulation
or ruling of any governmental authority applicable to Stockholder, or (b)
either alone or with the giving of notice or the passage of time or both,
conflict with, constitute grounds for termination of, accelerate the
performance required by, accelerate the maturity of any indebtedness or
obligation under, result in the breach of the terms, conditions or
provisions of or constitute a default under any mortgage, deed of trust,
indenture, note, bond, lease, license, permit or other agreement,
instrument or obligation to which Stockholder is a party or by which it is
bound.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Stockholder that as of
the date hereof and the closing Date:
4.1 ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of Delaware. The Company has
all necessary corporate power and authority to own, operate, and lease its
properties and to carry on its business as now owned or leased and operated
by it. The Company is qualified to do business under the laws of any
jurisdiction in which such qualification is required.
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4.2 AUTHORITY. The Company has the requisite power and authority
to enter into and perform its obligations under this Agreement, and
except as otherwise provided herein, no approval or consent of any
Person is necessary in connection therewith. This Agreement, together
with all other agreements, documents, certificates and instruments
executed by the Company in connection herewith, constitute valid and
legally-binding obligations of the Company, and are enforceable against
the Company in accordance with their terms, subject to bankruptcy,
receivership, insolvency, reorganization, moratorium or other similar
laws affecting or relating to creditors' rights generally and subject to
general principles of equity.
4.3 VALID ISSUANCE OF STOCK CONSIDERATION. The Stock Consideration
that is being received by the Stockholder in exchange for the Series A
Shares hereunder, when issued, sold and delivered in accordance with the
terms of this Agreement for the consideration expressed herein, will be
duly and validly issued, fully paid, and nonassessable, will be free of
all Claims and restrictions on transfer other than restrictions on
transfer under this Agreement and under applicable state and federal
securities laws and will not subject the holders thereof to personal
liability by reason of being such holder. The common stock of the
Company, par value $.001per share (the "COMMON STOCK") issuable upon
conversion of the Stock Consideration purchased under this Agreement
(based on an initial conversion price of $.30 per share), has been duly
and validly reserved for issuance and, upon issuance in accordance with
the terms of the Certificate of Designation for the Series G Preferred
Stock (the "SERIES G DESIGNATION") will be duly and validly issued,
fully paid, and nonassessable and will be free of all Claims and
restrictions on transfer other than restrictions on transfer under this
Agreement and under applicable state and federal securities laws, and
will not subject the holders thereof to personal liability by reason of
being such holders.
4.4 COMPLIANCE WITH SECURITIES EXCHANGE ACT OF 1934. The Company is
in full compliance with all reporting requirements of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the Company's
Common Stock is quoted on the Nasdaq Over-the-Counter Bulletin Board
(trading symbol "EDOC").
4.5 GOVERNMENTAL CONSENTS. No consent, approval, qualification,
order or authorization of, or filing with, any local, state, or federal
governmental authority is required on the part of the Company in
connection with the Company's valid execution, delivery, or performance
of this Agreement, the offer, sale or issuance of the Stock
Consideration by the Company or the issuance of Common Stock upon
conversion of the Stock Consideration, except (i) the filing of the
Series G Designation with the Secretary of State of the State of
Delaware, and (ii) such filings as have been made prior to the Closing,
except that any notices of sale required to be filed with the Securities
and Exchange Commission under Regulation D of the Securities Act of
1933, as amended (the "SECURITIES ACT"), or such post-closing filings as
may be required under applicable state securities laws, which will be
timely filed within the applicable periods therefor.
4.6 CAPITALIZATION AND VOTING RIGHTS. The authorized capital of the
Company consists, or will consist prior to the Closing, of:
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(i) Preferred Stock. 2,000,000 shares of Preferred Stock, par value $0.10
(the "PREFERRED STOCK"), 312,500 of which shares have been designated Series A
Preferred Stock, of which 186,500 are issued and outstanding, 3,000 of which
have been designated Series B Preferred Stock of which 1,680 are issued and
outstanding, 231,788 of which have been designated Series C Preferred Stock of
which 153,538 are issued and outstanding, 5,000 of which have been designated
Series D Preferred Stock of which none are issued and outstanding, 2,000 of
which have been designated Series 1 Preferred Stock of which none are issued and
outstanding, and 250,000 of which have been designated Series 2 Preferred Stock
of which 500 are issued and outstanding, 5,000 of which have been designated
Series E Preferred Stock of which 2,000 are issued and outstanding, and 100,000
of which have been designated Series G Preferred Stock of which 51,137.755 will
be issued pursuant to this Agreement and the other stock exchange agreements
that are substantially similar in form to this Agreement. The rights,
privileges and preferences of the Series G Preferred Stock will be as stated in
the Series G Designation.
(ii) Common Stock. 50,000,000 shares of Common Stock of which 16,746,875
shares are issued and outstanding.
(iii) The outstanding shares of Series ▇, ▇, ▇, ▇, ▇, ▇, ▇ and 2 Preferred
Stock and Common Stock have been issued in accordance with the registration or
qualification provisions of the Securities Act and any relevant state securities
ARTICLE V
CONDITIONS
5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. The obligations
of the Company to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction of the following conditions, or to the
waiver thereof by the Company in the manner contemplated by Section 6.2 at the
Closing:
(a) Representations and Warranties of Stockholder True on Closing Date.
The representations and warranties of Stockholder herein contained shall be true
as of and at the Closing Date in all material respects with the same effect as
though made at such date, except as affected by transactions permitted or
contemplated by this Agreement; Stockholder shall have performed and complied in
all material respects with all covenants required by this Agreement to be
performed or complied with by Stockholder before the Closing Date;
(b) Tender of Stock. Stockholder shall have delivered to the Company all
certificates or other documents or instruments representing all of the Series A
Shares, duly endorsed for transfer or accompanied by duly executed stock powers,
free and clear of any Encumbrance;
(c) Execution by All Parties to Letter Agreement. Each of the holders of
the Series A, C and E Preferred Stock that are parties to the Letter Agreement
have entered into a Stock Exchange Agreement with the Company substantially
similar in form to this Agreement.
(d) Other. All other items required to be delivered hereunder or as may be
reasonably requested by the Company to facilitate the Closing, in form and
substance reasonably satisfactory to the Company.
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDER. The obligations
of Stockholder to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction of the following conditions, or to the
waiver thereof by Stockholder in the manner contemplated by Section 6.2 at the
Closing:
(a) Representations and Warranties of the Company True on Closing Date.
The representations and warranties of the Company herein contained shall be true
as of and at the Closing Date in all material respects with the same effect as
though made at such date, except as affected by transactions permitted or
contemplated by this Agreement; the Company shall have performed and complied in
all material respects with all covenants required by this Agreement to be
performed or complied with by it before the Closing Date;
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(b) Tender of Stock Consideration. On the Closing Date, the Company shall
have recorded in its books the issuance of the Stock Consideration to the
Stockholder, subject to the provisions of Sections 2.1 and 2.2 hereof;
(c) Execution by All Parties to Letter Agreement. Each of the holders of
the Series A, C and E Preferred Stock that are parties to the Letter Agreement
have entered into a Stock Exchange Agreement with the Company substantially
similar in form to this Agreement.
(d) Other. All other items required to be delivered hereunder or as may be
reasonably requested by Stockholder to facilitate the Closing, in form and
substance reasonably satisfactory to Stockholder.
ARTICLE VI
MISCELLANEOUS
6.1 EXPENSES. Each of the Company and Stockholder shall bear their own
legal and accounting fees, and other costs and expenses with respect to the
negotiation, execution and delivery of this Agreement, and consummation of the
transactions contemplated hereby.
6.2 NOTICES AND WAIVERS. Any notice, instruction, authorization, request,
demand or waiver hereunder shall be in writing, and shall be delivered either by
personal delivery, by telegram, telex, telecopy or similar facsimile means, by
certified or registered mail, return receipt requested, or by courier or
delivery service, addressed to the parties hereto at the address indicated
beneath their respective signatures on the execution pages of this Agreement, or
at such other address and number as a party shall have previously designated by
written notice given to the other parties in the manner hereinabove set forth.
Notices shall be deemed given when received, if sent by facsimile means
(confirmation of such receipt by confirmed facsimile transmission being deemed
receipt of communications sent by facsimile means); and when delivered and
receipted for (or upon the date of attempted delivery where delivery is
refused), if hand-delivered, sent by express courier or delivery service, or
sent by certified or registered mail, return receipt requested.
6.3 PREVIOUS CONTRACTUAL RIGHTS. The parties to this Agreement hereby
agree that the execution of this Agreement will not change, modify or otherwise
affect (i) any rights provided to Stockholder pursuant to Section 5(g), (h), (m)
and (n) and Section 8 of the Placement Agreement dated July 23, 1997 between
Equity Services, Ltd. and the Company, (ii) any third-party rights provided to
Stockholder pursuant to the Investor Subscription Agreement dated July 31, 1997
between Stockholder and the Company, and (iii) with respect to shares of the
Series A Preferred Stock converted to Common Stock prior to the execution of
this Agreement, any rights still existing as of the date hereof provided to
Stockholder pursuant to the Registration Rights Agreement dated July 31, 1997
between Stockholder and the Company.
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6.4 DESIGNATED BOARD REPRESENTATIVE. The Company will allow one
designated representative of Equity Services, Ltd. to receive timely notice of,
attend and make comments at all meetings of its Board of Directors. Such
designated representative shall also be sent all standard communications and
notifications from the Company to the members of its Board of Directors
concerning annual and special meetings in the same fashion and on the same
basis, including with respect to timing, as he would if he were a member of the
Board of Directors.
6.5 SUCCESSORS AND ASSIGNS. This Agreement shall bind, inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns, and if an individual, by his executors,
administrators, and beneficiaries of his estate by will or the laws of descent
and distribution. This Agreement and the rights and obligations hereunder shall
not be assignable or delegable by any party.
6.6 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas and of the United States
applicable in Texas. Each party hereto hereby acknowledges and agrees that it
has consulted legal counsel in connection with the negotiation of this Agreement
and that it has bargaining power equal to that of the other parties hereto in
connection with the negotiation and execution of this Agreement. Accordingly,
the parties hereto agree that the rule that an agreement shall be construed
against the draftsman shall have no applica tion in the construction or
interpretation of this Agreement.
6.7 AMENDMENT AND ENTIRETY. This Agreement may be amended, modified, or
superseded only by written instrument executed by all parties hereto. This
Agreement and the exhibits and schedules hereto sets forth the entire agreement
and understanding of the parties with respect to the transactions contemplated
hereby and supersedes all prior agreements, arrangements, and understandings
relating to the subject matter hereof. In the event of any conflict or
inconsistency between the provisions of this Agreement and the contents or
provisions of any schedule or exhibit hereto, the provisions of this Agreement
shall control.
6.8 RIGHTS OF PARTIES. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any Persons other than the parties hereto and their respective
successors and assigns, nor shall any provision give any third Persons any right
of subrogation or action over against any party to this Agreement. Without
limiting the generality of the foregoing, it is expressly understood that this
Agreement does not create any third party beneficiary rights.
6.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts by means of original or facsimile signature, each of which shall be
deemed an original and all which together shall constitute one and the same
instrument.
[SIGNATURE PAGE FOLLOWS]
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In Witness Whereof, this Stock Exchange Agreement is executed and delivered as
of the date first above written.
THE COMPANY:
APPLIED VOICE RECOGNITION, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman of the Board
▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
STOCKHOLDER:
ENTREPRENEURIAL INVESTORS, LTD.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------
Title: President
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Address: Box F42544
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Freeport, Bahamas
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Telecopy No. ▇▇▇-▇▇▇-▇▇▇
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SCHEDULE A
SERIES G
SERIES A SHARES TO BE
STOCKHOLDER SHARES HELD RECEIVED
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Entrepreneurial Investors, Ltd. 186,000 15,227.166
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