<PAGE>
Exhibit D
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT ("Agreement") is entered into as of
---------
April 14, 1998 by and between LEHA, a Netherlands Foundation ("LEHA"), Oldco
----
N.V., a Belgian corporation ("Oldco"), L&H Holding III S.A. ("Holding"), a
----- -------
Luxembourg corporation, Jo Lernout and Pol Hauspie, jointly and severally (LEHA,
Oldco, Holding and Messrs. Lernout and Hauspie are each a "Seller" and are
------
collectively referred to herein as "Sellers"), and the purchasers ("Purchasers")
------- ----------
set forth on the execution pages hereof.
RECITALS
A. The Sellers and Purchasers are executing and delivering this Agreement
as a private sale in reliance upon the exemption from securities registration
afforded by the Securities Act of 1933, as amended (the "Securities Act"). In
--------------
connection with the transactions contemplated hereby, Sellers and the Purchasers
are entering into a Stock Pledge Agreement (the "Stock Pledge Agreement"), dated
----------------------
as of even date herewith.
B. Sellers desire to irrevocably commit to sell to Purchasers on the
Share Transfer Date (as defined below), upon the terms and conditions stated in
this Agreement, a number of common shares, no par value (the "Common Shares"),
-------------
of Lernout & Hauspie Speech Products, N.V. ("LHSP") determined pursuant to the
----
terms hereof. Sellers beneficially own, directly or indirectly, the Common
Shares as set forth in Schedule 3.3, and each Seller hereby acknowledges that it
will derive substantial benefit from the sale of the Common Shares as
contemplated in this Agreement.
C. The Purchasers desire to purchase, upon the terms and conditions
stated in this Agreement, the Common Shares, and to obtain Sellers' irrevocable
commitment to deliver such Common Shares to the Purchasers pursuant to the terms
hereof. Each Purchaser shall pay the purchase price ("Purchase Price") for such
--------------
Common Shares specified below such Purchaser's name on the signature pages
hereto, with an aggregate Purchase Price for all Common Shares purchased
hereunder equal to Fifty Million Dollars ($50,000,000).
AGREEMENTS
NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, each Seller, jointly and severally, and each
Purchaser, severally, hereby agree as follows:
<PAGE>
ARTICLE I
CLOSING, COMMITMENT TO DELIVER COMMON SHARES, AND
DELIVERY OF COMMON SHARES
1.1 Forward Purchase of Common Shares by the Purchasers. Subject to the
----------------------------------------------------
terms and conditions of this Agreement, on the date of satisfaction of the
conditions set forth in Article VI and Article VII hereof, (i) LEHA, Oldco and
Holding agree to sell to the Purchasers and Jo Lernout and Pol Hauspie agree to
cause such Sellers to sell to the Purchasers the number of Common Shares of LHSP
determined in accordance with Article V hereof and (ii) the Purchasers agree to
purchase from the Sellers the Common Shares for an aggregate Purchase Price of
Fifty Million Dollars ($50,000,000). The Common Shares shall be delivered to
the Purchasers on the Share Transfer Date (as such term is defined in Section
5.2 hereof) and Purchasers severally shall pay (in proportion to the number of
Common Shares sold by each of Oldco and Holding), as directed by Oldco and
Holding, on the Closing (as such term is defined in Section 1.2 hereof), the
amount set forth under each Purchaser's name on the signature page hereto, for
an aggregate Purchase Price of Fifty Million and No/100 US Dollars
($50,000,000.00). Oldco and Holding hereby direct that the Purchase Price, less
certain obligations specified in the Escrow Agreement, be paid to Oldco and
Holding by transfer to the following account for the sole benefit of, and as
directed by Oldco and Holding: Credit Agricole Indosuez Luxembourg, Swift No.
BSUILULL, Account No.: 19543, In the Name of: LEHA.
1.2 Closing Date. Subject to the satisfaction (or waiver) of the
-------------
conditions set forth in Articles VI and VII below, and further subject to the
terms and conditions of the Escrow Agreement, the date and time of the closing
of the commitment of the Sellers to deliver Common Shares on the Share Transfer
Date, and the payment therefor by the Purchasers pursuant to this Agreement (the
"Closing") shall be at 10:00 a.m. Eastern Time on April 14, 1998, or such other
-------
time as the Sellers and the Purchasers shall mutually agree.
1.3 Form of Payment. Each Purchaser shall pay that portion of the
----------------
Purchase Price for the number of Common Shares specified below such Purchaser's
name on the signature pages hereto on the Closing date by wire transfer to the
account designated pursuant to the Escrow Agreement by and among each Seller,
each Purchaser and the escrow agent ("Escrow Agent") designated therein in the
------------
form attached hereto as Exhibit A ("Escrow Agreement").
----------------
<PAGE>
ARTICLE II
PURCHASER'S REPRESENTATIONS AND
WARRANTIES
Each Purchaser represents and warrants to the Sellers as of the date hereof
(except for representations and warranties that speak as of a specific date,
which representations shall be true and correct as of such date), severally and
solely with respect to itself and its purchase hereunder and not with respect to
any other Purchaser, as set forth in this Article II. Each Purchaser makes no
other representations or warranties, express or implied, to the Sellers in
connection with the transactions contemplated hereby (except as may be contained
in any documents or agreements executed jointly by Sellers and Purchaser in
connection with the transactions contemplated hereby) and any and all prior
representations and warranties, if any, which may have been made by such
Purchaser to the Sellers in connection with the transactions contemplated hereby
shall be deemed to have been merged in this Agreement and any such prior
representations and warranties, if any, shall not survive the execution and
delivery of this Agreement.
2.1 Investment Purpose. Purchaser is committing to purchase the Common
-------------------
Shares for Purchaser's own account for investment only and not with a present
view toward or in connection with the public sale or distribution thereof in
violation of the applicable securities laws. Purchaser will not, directly or
indirectly, offer, sell, pledge or otherwise transfer the Common Shares or any
interest therein except pursuant to transactions that are exempt from the
registration requirements of the Securities Act and/or sales registered under
the Securities Act, the rules and regulations promulgated pursuant thereto and
applicable state securities laws in the United States. Purchaser understands
that Purchaser must bear the economic risk of this investment, unless the Common
Shares are registered pursuant to the Securities Act and any applicable state
securities laws or an exemption from such registration is available. By making
the representations in this Section 2.1, the Purchaser does not agree to hold
the Common Shares or the rights thereto for any minimum or other specific term
and reserves the right, subject to the terms of this Agreement and any other
documents or agreements executed by Purchasers in connection herewith and the
transactions contemplated hereby, to dispose of the Common Shares at any time in
accordance with or pursuant to a registration statement or an exemption from
registration under the Securities Act and any applicable state securities laws.
Sellers have agreed to cause LHSP, and LHSP has agreed, pursuant to a
Registration Rights Agreement of even date herewith (the "Registration Rights
-------------------
Agreement"), to file a Registration Statement with the Securities and Exchange
---------
Commission (the "SEC") registering the resale of the Common Shares by the
---
Purchasers upon delivery of the Common Shares to the Purchasers under Section
5.5 of this Agreement, and the Sellers have agreed to compensate the Purchasers
for illiquidity in the event that the Common Shares are not duly registered
during the Registration Period (as defined below).
<PAGE>
2.2 Accredited Investor Status. Purchaser is an "Accredited Investor" as
---------------------------
that term is defined in Rule 501(a) of Regulation D of the Securities Act and
Purchaser has indicated on a duly executed Purchaser Questionnaire and
Representation Agreement in the form attached hereto as Exhibit B and delivered
to the Sellers that it so qualifies as an "Accredited Investor."
2.3 Reliance on Exemptions. Purchaser understands that the Common Shares
-----------------------
are being offered and sold to Purchaser in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Sellers are relying upon the truth and accuracy of, and
Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility of Purchaser
to acquire the Common Shares.
2.5 Governmental Review. Purchaser understands that no United States
--------------------
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Common Shares.
2.6 Transfer or Resale. Purchaser understands that (i) except as provided
-------------------
in this Agreement and the Registration Rights Agreement, the Common Shares have
not been and are not being registered under the Securities Act or any state
securities laws, and may not be offered, sold, pledged or otherwise transferred
unless subsequently registered thereunder, an exemption from such registration
is available, the shares have been sold or transferred to an "affiliate" of such
Purchaser, as permitted pursuant to Section 8.8 hereof, or have been sold
pursuant to Rule 144 (as defined herein); (ii) any sale of such Common Shares
made in reliance on Rule 144 under the Securities Act (or a successor rule)
("Rule 144") may be made only in accordance with the terms of Rule 144 and
--------
further, if Rule 144 is not applicable, any resale of such Common Shares without
registration under the Securities Act under circumstances in which the seller
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the SEC thereunder, and (iii) except as provided
in the Registration Rights Agreement, neither the Sellers nor any other person
is under any obligation to register such Common Shares under the Securities Act
or any state securities laws or to comply with the terms and conditions of any
exemption thereunder (in each case, other than pursuant to this Agreement).
Notwithstanding the foregoing or anything else contained herein to the contrary,
Purchaser shall have the right to borrow funds against the rights granted to the
Purchasers hereunder; provided, however, that any remedies exercised by such
lender are subject to the provisions for assignment of such rights provided in
Section 8.8.
2.7 Legends. Purchaser understands that, subject to Article V hereof, the
--------
certificates for the Common Shares, until such time as (i) the Common Shares
have been
<PAGE>
registered under the Securities Act as contemplated by this Agreement and the
Registration Rights Agreement, (ii) the Purchaser provides to LHSP an opinion of
counsel, such counsel to be reasonably satisfactory to LHSP, in form, substance
and scope reasonably satisfactory to LHSP, to the effect that a public sale or
transfer of such Common Stock may be made without registration under the
Securities Act, or (iii) otherwise may be sold by Purchaser pursuant to Rule
144(k) (or any successor thereto) (subject to and in accordance with the
procedures specified in Article V hereof), will bear a restrictive legend (the
"Legend") in substantially the following form:
------
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS
2.8 Authorization; Enforcement. This Agreement, the Stock Pledge
---------------------------
Agreement, the Registration Rights Agreement and the Escrow Agreement have been
duly and validly authorized, executed and delivered on behalf of Purchaser and
are valid and binding agreements of Purchaser enforceable in accordance with
their respective terms, except to the extent that such validity or
enforceability may be subject to or affected by any bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights or remedies of
creditors generally, or by other equitable principles of general application.
2.9 Residency. Purchaser is a resident of the jurisdiction set forth
----------
under Purchaser's name on the signature page hereto executed by Purchaser.
2.10 Information. Purchaser and its counsel, if any, have been furnished
-----------
all publicly available materials and information relating to the business,
finances and operations of LHSP which have been specifically requested by such
Purchaser or its counsel. No due diligence investigation conducted by any
Purchaser or its counsel or any of its representatives shall modify, amend or
affect any Purchaser's right to rely on the Sellers' representations and
warranties contained in Article III. Purchaser understands that such
Purchaser's investment in the Common Shares involves a high degree of risk.
2.11 No Brokers. Purchaser has taken no action, directly or indirectly,
-----------
which would give rise to any claim by any person for brokerage commissions,
finder's fees or similar payments relating to this Agreement or the transactions
contemplated hereby, except for dealings with Shoreline Pacific Institutional
Finance, the Institutional Division of Financial West Group ("Shoreline"), the
---------
fees of which shall be paid in full by the Sellers.
<PAGE>
Purchaser will indemnify the Sellers from and against any fees and expenses
(including without limitation reasonable attorneys fees and expenses) sought or
other claims made by any person or entity based solely on any actions of the
Purchasers, except with respect to any fees due to Shoreline under Seller's
agreement with Shoreline.
2.12 Transfers to LEHA. Purchaser acknowledges and agrees that each of
-----------------
Oldco and Holding may be liquidated prior to the Share Transfer Date, in which
case the Common Shares of LHSP owned by such entities will be transferred to
LEHA to the extent of the Permitted Maximum Number (as defined in Section 5.3
hereof), which shall not be considered a breach of this Agreement but which
shall in no way relieve any party of its respective obligations hereunder or in
the Registration Rights Agreement, the Stock Pledge Agreement or the Escrow
Agreement; provided, that all material or uncontested creditors of Oldco or
--------
Holding shall be satisfied prior to or simultaneously with such liquidation..
Notwithstanding the foregoing or anything else contained herein to the contrary,
no transaction (whether permitted under Section 4.2 or otherwise) shall take
place causing LEHA to own the Common Shares, of record or beneficially, unless
and until the Purchasers shall have received an opinion of Dutch counsel
reasonably satisfactory to the Purchasers, in form and substance reasonably
satisfactory to the Purchasers, which opinion shall include, among other things,
an opinion that this Agreement, the Stock Pledge Agreement, the Registration
Rights Agreement and the Escrow Agreement constitute a legally valid and binding
obligation of LEHA, enforceable against LEHA under Netherlands law and shall be
in form and substance similar to the opinions delivered by the Luxembourg office
of Loeff Claeys & Verbeke (the "Dutch Counsel Opinion").
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller, jointly and severally, represents and warrants to the
Purchasers as of the date hereof (except for representations and warranties that
speak as of a specific date, which representations shall be true and correct as
of such date), as set forth in this Article III. Each Seller makes no other
representations or warranties, express or implied, to the Purchasers in
connection with the transactions contemplated hereby (except as may be contained
in any documents or agreements executed jointly by Sellers and Purchasers in
connection with the transactions contemplated hereby) and any and all prior
representations and warranties, if any, which may have been made by the Sellers
to the Purchasers in connection with the transactions contemplated hereby shall
be deemed to have been merged in this Agreement and any such prior
representations and warranties, if any, shall not survive the execution and
delivery of this Agreement.
3.1 Organization and Qualification. LEHA is a foundation ("stichting
-------------------------------
administratiekantoor") and each of LHSP, Oldco, Holding and each of their
respective subsidiaries is a corporation, in each case duly organized and
existing in good standing under the laws of the jurisdiction in which it is
formed, and has the requisite power and authority to own its properties and to
carry on its business as now being conducted. Each of LEHA, LHSP, Oldco,
Holding and their respective subsidiaries is duly qualified as a foreign entity
to do business and is in good standing in every jurisdiction where the failure
so to qualify or be in good standing would have a Material Adverse Effect.
"Material Adverse Effect" means any effect which, individually or in the
------------------------
aggregate with all other effects, is or could reasonably be expected to be
materially adverse to the business, operations, properties, financial condition,
operating results or prospects of LEHA, LHSP, Oldco, Holding and their
respective subsidiaries, as the case may be, in each case taken as a whole on a
consolidated basis or on the transactions contemplated hereby or on any of the
Common Shares. Each of Oldco and Holding may be liquidated prior to the Share
Transfer Date, in which case the Common Shares of LHSP owned by such entities
will be transferred to LEHA, subject to the continued pledge of such shares
under the Stock Pledge Agreement, to the extent up to the Permitted Maximum
Number (as defined in Section 5.3 hereof), which shall not be considered a
breach of this Agreement but which shall in no way relieve any other party of
its respective obligations hereunder or in the Registration Rights Agreement,
the Stock Pledge Agreement or the Escrow Agreement; provided, that all material
--------
or uncontested creditors of Oldco or Holding shall be satisfied prior to or
simultaneously with such liquidation. Notwithstanding the foregoing, no
transaction shall take place causing LEHA to own the Common Shares, of record or
beneficially, unless and until the Purchasers shall have received the Dutch
Counsel Opinion.
3.2 Authorization: Enforcement. (a) The Sellers have the requisite power
---------------------------
and authority to enter into and perform this Agreement, the Stock Pledge
Agreement, the
<PAGE>
Registration Rights Agreement and the Escrow Agreement, and to sell the Common
Shares and perform its respective obligations in accordance with the terms
hereof and thereof, and to deliver the Common Shares on the Share Transfer Date;
(b) the execution, delivery and performance of this Agreement, the Stock Pledge
Agreement, the Registration Rights Agreement and the Escrow Agreement by the
Sellers and the consummation by them of the transactions contemplated hereby and
thereby (including without limitation the sale of the Common Shares) have been
duly authorized by all necessary action and, no further consent or authorization
of the Sellers, the board of directors of LEHA or any other person, body or
agency, and no filing with any person, body or agency, is required prior to the
Closing with respect to any of the transactions contemplated hereby or thereby,
except for such consents which have previously been obtained or waived; (c) this
Agreement, the Stock Pledge Agreement, the Registration Rights Agreement and the
Escrow Agreement have been duly executed and delivered by each of the Sellers;
and (d) this Agreement, the Stock Pledge Agreement, the Registration Rights
Agreement and the Escrow Agreement constitute legal, valid and binding
obligations of each of the Sellers enforceable against the Sellers in accordance
with their respective terms, except to the extent that such validity or
enforceability may be subject to or affected by any bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights or remedies of
creditors generally, or by other equitable principles of general application.
3.3 Common Shares. Except for the first priority pledge to be granted by
--------------
the Sellers to the Purchasers pursuant to the Stock Pledge Agreement, the Common
Shares are and, as of the Share Transfer Date will be, duly authorized, validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances directly or indirectly imposed or suffered by the Sellers, LHSP
or any of its subsidiaries, are entitled to all rights and preferences accorded
to a holder of Common Stock of LHSP, are entitled to be traded on the same
markets and exchanges as the other shares of Common Stock of LHSP are traded,
and are not subject to restrictions on transfer or other similar rights of
stockholders of LHSP or of any other person or entity (except for restrictions
under applicable securities laws). As of the date hereof Sellers (i)
beneficially and of record own and (ii) subject to any ownership rights of the
Purchasers as a result of the transactions contemplated by this Agreement and
the Stock Pledge Agreement, through the Share Transfer Date, will beneficially
and of record own all of the Common Shares as set forth on Schedule 3.3 hereto.
------------
As a result of such ownership, Sellers Control as defined in Section 5.1 hereof
LHSP. The Sellers have an unqualified right to pledge the Common Shares to the
Purchasers pursuant to the Stock Pledge Agreement and to grant the Purchasers a
first priority security interest in the Common Shares.
3.4 No Conflicts. The execution, delivery and performance of this
-------------
Agreement, the Stock Pledge Agreement, the Registration Rights Agreement and the
Escrow Agreement by the Sellers, and the consummation by the Sellers of the
transactions contemplated hereby and thereby will not (a) result in a violation
of the Articles of
<PAGE>
Association of LEHA, Oldco, Holding or LHSP or (b) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Sellers, LHSP, or any of their respective subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including U.S. federal and state securities laws and regulations, the laws and
regulations of Belgium, the laws and regulations of the Netherlands, the laws
and regulations of Luxembourg and the rules and regulations of Nasdaq)
applicable to the Sellers, LHSP or any of their respective subsidiaries, or by
which any property or asset of the Sellers, LHSP or any of their respective
subsidiaries, is bound or affected (except for such possible conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect
or that are related to any material inaccuracies or omissions in any
representation or warranty of the Purchaser set forth herein). Except for such
consents which have previously been obtained or waived, on or before the
Closing, Sellers are not required to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental agency or
any regulatory or self-regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Stock Pledge Agreement,
the Registration Rights Agreement or the Escrow Agreement or to perform its
obligations in accordance with the terms hereof or thereof. LHSP is not in
violation of the listing requirements of Nasdaq, none of the Sellers know of or
anticipate any event which could be grounds for such delisting nor reasonably
anticipate that the Common Shares will be delisted by Nasdaq for the foreseeable
future and no shareholder approval will be necessary under the rules and
regulations of Nasdaq.
3.5 Acknowledgment Regarding Purchaser's Purchase of the Common Shares.
-------------------------------------------------------------------
The Sellers acknowledge and agree that no Purchaser is acting as a financial
advisor or fiduciary of the Sellers (or in any similar capacity) with respect to
this Agreement or the transactions contemplated hereby, that this Agreement and
the transactions contemplated hereby, and the relationship between the
Purchasers and the Sellers are "arms-length", and that any statement made by any
Purchaser (except as set forth in Article II), or any of its representatives or
agents, in connection with this Agreement and the transactions contemplated
hereby is not advice or a recommendation, is merely incidental to Purchaser's
purchase of the Common Shares and has not been relied upon as such in any way by
the Sellers, or the directors of LEHA. The Sellers further represent to
Purchasers that the Sellers' decision to enter into this Agreement and the
transactions contemplated hereby have been based solely on an independent
evaluation by the Sellers and their representatives.
3.6 No Integrated Offering. Neither the Sellers, nor any of their
-----------------------
respective affiliates, nor any person acting on their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would either require registration of
any of the Common Shares under the Securities
<PAGE>
Act or prevent the parties hereto from consummating, or delay or interfere with
the consummation of, the transactions contemplated hereby pursuant to an
exemption from registration under the Securities Act. The transactions
contemplated hereby are exempt from the registration requirements of the
Securities Act, assuming the accuracy of the relevant representations and
warranties herein contained of the Purchasers to the extent relevant for such
determination.
3.7 No Brokers. The Sellers have taken no action, directly or indirectly,
-----------
which would give rise to any claim by any person for brokerage commissions,
finder's fees or similar payments by Purchasers relating to this Agreement or
the transactions contemplated hereby, except for dealings with Shoreline, the
fees of which shall be paid in full by the Sellers (the "Shoreline Fee"). The
-------------
Sellers will indemnify the Purchasers from and against any fees and expenses
(including without limitation reasonable attorneys fees and expenses) sought or
other claims made by Shoreline based solely on any actions of Sellers, except as
may be related to the Shoreline Fee.
3.8 Disclosure. To the knowledge of Sellers, all information relating to
----------
or concerning Sellers or LHSP set forth in this Agreement or provided by such
parties, respectively, to the Purchasers pursuant to Section 2.10 hereof and
otherwise in connection with the transactions contemplated hereby (including,
without limitation, information relating to intellectual property) is true and
correct in all material respects and Sellers have not omitted to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not misleading. As of
the date hereof, no material event or circumstance has occurred or exists with
respect to Sellers, LHSP or their respective subsidiaries or their respective
businesses, properties, prospects, operations or financial conditions which has
not been publicly disclosed but, under applicable law, rule or regulation, would
be required to be publicly disclosed by LHSP.
3.9 No General Solicitation. No Seller nor any person acting on behalf of
-----------------------
any Seller in the transactions contemplated hereby (including Shoreline) has
conducted any "general solicitation," as such term is defined in Regulation D,
with respect to any of the Common Shares being offered hereby.
3.10 SEC Documents, Financial Statements. Since January 1, 1996, LHSP has
-----------------------------------
timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the
--------
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents (other than exhibits)
incorporated by reference therein, being hereinafter referred to herein as the
"SEC Documents"). As of their respective dates, the SEC Documents complied in
--------------
all material respects with the requirements of the 1934 Act or the 1933 Act, as
the case may be, and the rules and regulations of the SEC promulgated
<PAGE>
thereunder applicable to the SEC Documents, and none of the SEC Documents, at
the time they were filed with the SEC, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the statements
made in any such SEC Documents which is required to be updated or amended under
applicable law has not been so updated or amended. As of their respective dates,
the financial statements of LHSP included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with applicable U.S. generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of LHSP as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
3.11 Absence of Certain Changes. To the best knowledge of Sellers, except
--------------------------
as disclosed in the SEC Documents, since December 31, 1996, there has been no
material adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition, prospects or
results of operations of LHSP.
3.12 Solvency; No Impairment. Each of the Sellers represents that on the
-----------------------
date hereof, it is solvent and has sufficient capital for the continuation of
its business as currently conducted by such Seller. Each Seller further
represents that it will not be rendered insolvent or have insufficient capital
for the continuation of its business as currently conducted by such Seller as a
result of the transactions contemplated by this Agreement. Each Seller
represents that it will not take any actions to impair its obligations, or the
obligations of any other Seller, under this Agreement or with respect to the
Registration Rights Agreement, the Stock Pledge Agreement or the Escrow
Agreement. For purposes of this Section 3.12, as of the date hereof, "solvent"
shall mean, in addition to the meaning of such term under the laws applicable to
each Seller, (i) the fair value of the property of such Seller is not less than
the total amount of its liabilities, (ii) the present, fair salable value of the
assets of such Seller is not less than the amount that will be required to pay
the probable liability of such Seller on its existing debts as they become
absolute and matured, (iii) such Seller is able to realize upon its assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (iv) such Seller
does not presently intend to, and does not presently believe that it will, incur
debts or liabilities beyond such Seller's ability to pay as such debts and
liabilities mature and (v) such Seller is not presently engaged in business or a
transaction for which such Seller's property would constitute unreasonably
<PAGE>
small capital. Except as set forth on Schedule 3.12 hereto, there are no
-------------
material liabilities of Oldco or Holding either individually or in the
aggregate.
3.13 Control of Sellers. Jo Lernout and Pol Hauspie Control (as defined
------------------
in Section 5.1 hereof) LHSP, and, directly or indirectly, own at least a
majority of the outstanding shares of each of LEHA, Oldco and Holding.
3.14 No Litigation. Except for the dispute between LHSP and Alpha
-------------
Software Corporation, and such other matters as have been disclosed in LHSP's
SEC Documents, there is no material action, suit, claim, proceeding, inquiry or
investigation before or by any court, public board or body or any governmental
agency or self-regulatory organization pending or, to the knowledge of Sellers,
threatened, against any of the Sellers.
<PAGE>
ARTICLE IV
COVENANTS
4.1 Securities Laws. The Sellers shall, on or prior to the date of
----------------
Closing, take such action as is necessary to qualify the Common Shares for sale
to the Purchaser in compliance with applicable securities laws of the states of
the United States or obtain exemption therefrom, and shall provide evidence of
any such action so taken to the Purchaser on or prior to the date of the
Closing. Each Purchaser agrees to provide such information and take such other
actions as may be reasonably requested by Sellers in connection herewith.
4.2 Corporate Existence. On and following the Closing Date, and
--------------------
continuing throughout the Registration Period (as defined below), each of LEHA
and, (subject to the provisions of Section 3.1 hereof) Oldco and Holding, shall
maintain its corporate existence, except in the event of a merger, consolidation
or sale of all or substantially all of the assets of such entity, as long as the
surviving or successor entity in such transaction assumes the obligations of
LEHA, Oldco and Holding, collectively, hereunder and under the agreements and
instruments (including the Stock Pledge Agreement, the Escrow Agreement and the
Registration Rights Agreement) entered into in connection herewith. No such
transaction shall result in LEHA owning the Common Shares, of record or
beneficially, until the Purchasers shall have received the Dutch Counsel
Opinion. On and following the date of Closing, and continuing throughout the
Registration Period (as defined below), the Sellers shall use best efforts to
cause LHSP to maintain its corporate existence, except in the event of a merger,
consolidation or sale of all or substantially all of the assets of LHSP, as long
as the surviving or successor entity in such transaction assumes LHSP's
obligations hereunder and under the agreements and instruments (including the
Registration Rights Agreement) entered into in connection herewith and
Purchasers receive notice of any such action prior to the applicable record
date.
4.3 Information and Reports. Sellers shall cause LHSP to deliver to each
------------------------
Purchaser any information delivered by LHSP to LHSP's shareholders. In
addition, Purchasers shall have the right to receive any management accounts or
other information regarding Oldco, Holding or LEHA distributed by such
companies.
4.4 Resale of Common Shares. Each Purchaser covenants and agrees that in
-----------------------
connection with any sale of the Common Shares pursuant to a resale Registration
Statement, it will comply with the prospectus delivery requirement, to the
extent such requirement is applicable.
4.5 Right of First Refusal. Each Purchaser agrees that following the
----------------------
Share Transfer Date, it will offer to Messrs. Lernout and Hauspie the right to
purchase any Common Shares not previously sold (including but not limited to
derivative sales) which
<PAGE>
it intends to sell in a block sale of at least 50,000 Common Shares (subject to
adjustment pursuant to Section 5.4) on terms no less advantageous to the
Purchaser than those available from a third party purchaser. Messrs. Lernout and
Hauspie shall have two (2) Business Days following such offer to elect to
purchase the shares and an additional three (3) Business Days following such
election to complete the purchase thereof (the "Required Purchase Date").
----------------------
Thereafter, Purchaser shall have the right to sell the Common Shares to such
third party purchaser within five (5) Business Days following the expiration of
such period, and such sale shall be on the same terms offered to Messrs. Lernout
and Hauspie. In the event that Messrs. Lernout and Hauspie do not complete the
transaction within three (3) Business Days following an election to purchase the
shares offered to them as described in this Section 4.5, Illiquidity Payments
(as defined in Section 5.6 below) shall be required to be paid to the Purchasers
for the number of days after the Required Purchase Date until such shares have
been otherwise sold to a third party as set forth in the foregoing sentence, or
expiration of the five (5) Business Day period in which the Sellers may sell the
offered shares to a third party.
4.6 Shareholder Covenants. Each Seller further covenants and agrees, in
---------------------
its or his capacity as direct or indirect shareholder of LHSP, including through
any person, corporation or other entity directly or indirectly controlled by
such Seller, that it will not approve, propose or vote with respect to (i) any
capital increase of LHSP by way of a rights offering to existing LHSP
shareholders on a pre-emptive basis or (ii) any resolution to pay a cash
dividend on the Common Shares; provided, however, that the foregoing actions
shall be permitted with the consent of Purchasers having paid 2/3rds of the
Purchase Price. Further, the Sellers shall instruct LHSP that any of the
foregoing rights in cash shall be promptly paid to the Purchasers directly from
LHSP and any of the foregoing rights granted to any Seller in any other form in
respect of the Common Shares which are not automatically included in the
securities pledged to the Purchasers under the Pledge Agreement will be
assigned, transferred or paid to Purchasers pro rata, based upon the percentage
of Common Shares purchased by each of them and assuming the issuance of the
"Permitted Maximum Number" of Common Shares.
4.7 No Integrated Offering. Neither the Sellers, nor any of their
-----------------------
respective affiliates, nor any person acting on their behalf, will, through the
Share Transfer Date, directly or indirectly make any offers or sales of any
security or solicit any offers to buy any security under circumstances that
would either require registration of any of the Common Shares under the
Securities Act or prevent the parties hereto from consummating, or delay or
interfere with the consummation of, the transactions contemplated hereby
pursuant to an exemption from registration under the Securities Act.
<PAGE>
ARTICLE V
SHARE TRANSFER DATE; DELIVERY OF SHARES; REGISTRATION OF SHARES
5.1 Determination Date. The number of Common Shares to be delivered by
-------------------
Sellers to the Purchasers shall be determined on a date (the "Determination
-------------
Date") that is the earliest to occur of: (i) August 31, 2001, (ii) any date
----
that Messrs. Jo Lernout and Pol Hauspie no longer Control LHSP, directly or
indirectly through control of L&H Holding N.V. or one or more entities
controlled by them, for any reason, (iii) the date of any statement by any
Seller that it does not intend to honor its obligations under this Agreement, or
the date of any repudiation by any Seller of its obligations hereunder if such
repudiation is not revoked within three (3) Business Days following written
notice from Purchasers' holding a majority of the purchased commitments
hereunder requesting such revocation, (iv) the effective date of a merger,
consolidation or sale of all or substantially all of the assets of LEHA, Oldco
or Holding in violation of Section 4.2 hereof or merger, consolidation or sale
of all or substantially all of the assets of LHSP in violation of such section
or in any such case where the survivor is not listed on a national securities
exchange or market in the United States or the Sellers are not in Control of
such entity, (v) any date that any of the Sellers makes an assignment for the
benefit of creditors, or applies for consent to the appointment of a receiver or
trustee for it or for all or substantially all of its property or business, or
such a receiver or trustee shall otherwise be appointed, (vi) any date that
bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings for relief under any bankruptcy law or any law for the relief of
debtors shall be instituted by or against any of the Sellers which, in the case
of any involuntary proceeding, is not dismissed within 90 days from the date of
filing, (vii) the date that the common stock of LHSP is not listed on a national
securities exchange or market in the United States (viii) the date of any
transfer of Common Shares to LEHA in violation of the provisions of Sections
2.12 and 3.1 hereof or (ix) the date that the Security Agent (on behalf of the
Purchasers) does not have a first priority, validly perfected security interest
in the "Pledged Shares" and the other "Pledged Collateral", in each case as
defined in the Stock Pledge Agreement (a "Non-Perfection Event"), provided that
a Determination Date shall not be deemed to have occurred if, within 10 days
from such date, the Sellers have cured such Non-Perfection Event and, at such
time, the Security Agent (on behalf of the Purchasers) has a first priority,
validly perfected security interest in the "Pledged Shares" and the other
"Pledged Collateral", in each case as defined in the Stock Pledge Agreement.
For purposes of this Article V, "Business Day" means any day other than a
------------
Saturday, Sunday or a day on which banks in New York, New York, the United
Kingdom and Brussels, Belgium are permitted or required by law to be closed.
For purposes of this Article V, "Control" means the right to nominate for
-------
appointment the majority of the directors of LHSP.
5.2 Transfer of Shares. At any time on or after the Determination Date
------------------
(the "Share Transfer Date"), Purchasers shall issue irrevocable instructions
-------------------
(the "Security
--------
<PAGE>
Agent Instructions") to the Security Agent (as defined in the Stock Pledge
------------------
Agreement) (the "Security Agent") with a copy to the Sellers and the Company's
--------------
transfer agent (the "Transfer Agent"), specifying the Required Transfer Amount
--------------
(as defined below) and directing the Security Agent to transfer the certificates
for the Common Shares to the Transfer Agent on behalf of the Purchasers. Within
two Business Days of Sellers' receipt of the Security Agent Instructions,
Sellers shall confirm or deny in writing to the Purchasers, the Security Agent
and the Transfer Agent that the Determination Date shall have occurred and the
accuracy of the specified Required Transfer Amount. In the event the Sellers do
not so confirm or deny the Security Agent Instructions in accordance with the
preceding sentence, the Security Agent Instructions shall be deemed to have been
confirmed by the Sellers. Not later than the third Business Day after the
Security Agent's receipt of the Security Agent Instructions, the Security Agent
shall deliver the certificates for the Common Shares in their possession and the
related stock powers to the Transfer Agent and, within the same time period, the
Sellers shall take any and all such other actions as may be reasonably necessary
to vest ownership of each Purchasers' Pro-Rata Portion of the Common Shares in
the Purchasers as required hereunder and in the Stock Pledge Agreement
(including, without limitation, the registration of such transfer in the share
register of LHSP). In connection with the foregoing transfer of the Common
Shares, Sellers shall, not later than April 24, 1998, issue irrevocable
instructions, which shall be countersigned by the Transfer Agent and delivered
to the Purchasers by such date, to the Transfer Agent that it must comply with
the Security Agent Instructions unless the Transfer Agent has been notified of a
dispute, in which case the dispute shall be resolved as set forth in Section
5.4. Notwithstanding the foregoing, in the case of the Determination Date
occurring as a result of the circumstances set forth in Section 5.1(v), (vi)
hereof, such transfer shall occur by delivery from the Security Agent of the
requisite number of Common Shares, automatically and without further notice or
action by any Seller and the Security Agent shall have the right to cause such
transfer to be registered in the share register of LHSP. Each Purchaser (or its
permitted assignees) shall be entitled to its pro rata portion ("Pro Rata
--------
Portion") of the Common Shares delivered pursuant to this Section 5.2 based upon
-------
the ratio of the Purchase Price paid by such Purchaser to the aggregate Purchase
Price paid by all Purchasers hereunder. All Common Shares delivered to
Purchasers in satisfaction of Sellers' obligations hereunder shall be free and
clear of all liens and encumbrances, and Sellers shall pay any fees, taxes or
assessments imposed by any governmental or quasi-governmental authority in
connection with such delivery (provided that Sellers shall not be obligated to
pay any taxes related to any income attributable to any Purchaser as a result of
the transactions contemplated hereby).
5.3 Determination of Required Transfer Amount. The "Required Transfer
----------------------------------------- -----------------
Amount" shall be determined in accordance with the schedule attached hereto as
------
Exhibit C. For purposes of such Exhibit C and this Section 5.3, the term
"Quoted Price" means a price per Common Share of LHSP calculated by reference to
-------------
the average of the closing bid and closing asked prices of the Common Shares, as
quoted on the Principal Exchange as reported by Bloomberg ("Bloomberg") or a
---------
comparable reporting service of national
<PAGE>
reputation selected by the Sellers with the Purchaser's consent, which consent
shall not be unreasonably withheld, at the close of regularly scheduled trading
on each of the 30 days on which such Principal Exchange is open for trading
prior to the Determination Date, or if the prices cannot be calculated for such
security on such date on any of the foregoing bases, the trading price of such
security on such date shall be deemed to be the fair market value as reasonably
determined by an investment banking firm selected by the Purchasers holding a
majority of the Pro Rata Portion, with the reasonable costs of such appraisal to
be borne by the Sellers. "Principal Exchange" means the principal securities
------------------
exchange or trading market where the Common Shares of LHSP are listed or traded
in the United States. Notwithstanding anything in this Section 5.3 or Exhibit C
to the contrary, if the Quoted Price is equal to or less than $40.00, the
Required Transfer Amount shall be equal to 2,000,000 Common Shares (the
"Permitted Maximum Number").
------------------------
5.4 Adjustments to Required Transfer Amount and Permitted Maximum Number.
---------------------------------------------------------------------
If, prior to the delivery of Common Shares on the Share Transfer Date in
accordance with the terms of this Agreement, LHSP makes any issue of Common
Shares by way of capitalization of profits or reserves, the number of
outstanding shares of Common Stock is increased by a stock split, stock
dividend, merger or other event in accordance with Section 4.2 hereof,
combination, recapitalization, reorganization, reclassification or other similar
event, or if the number of outstanding shares of Common Stock is decreased by a
reverse stock split, combination, recapitalization, reorganization, or
reclassification of shares, or other similar event, or LHSP makes any other
variation to its capital structure having an effect similar to the events
described above (any of the foregoing, a "Stock Event"), the Required Transfer
-----------
Amount and Permitted Maximum Number will be equitably adjusted to ensure that
the economic value of the Common Shares to be acquired by Purchasers hereunder
will be equal to the value that the Purchasers would have obtained absent such
Stock Event. Sellers and Purchasers acknowledge and agree that the Required
Transfer Amount and Permitted Maximum Number do not currently take into account
the stock split of LHSP which will become effective on April 15, 1998, and will
be adjusted to reflect such stock split. If, prior to the delivery of Common
Shares on the Share Transfer Date in accordance with the terms of this
Agreement, LHSP declares or makes any distribution of its assets (or rights to
acquire its assets) to holders of Common Stock as a dividend, stock repurchase,
by way of return of capital or otherwise (including any dividend or distribution
to the Corporation's shareholders in cash or shares (or rights to acquire
shares) of capital stock of a subsidiary (i.e., a spin-off) (a "Distribution"),
------------
then the Sellers shall cause, after the date of record for determining
shareholders entitled to such Distribution, the Purchasers to receive (and the
Purchasers shall be entitled to receive) the amount of such assets which would
have been payable to the Purchasers with respect to the Permitted Maximum Number
had such Purchasers been the holder of such shares of Common Stock on the record
date for the determination of shareholders entitled to such Distribution. If,
prior to the delivery of Common Shares on the Share Transfer Date in accordance
with the terms of this Agreement, LHSP issues any convertible securities or
rights to purchase stock, warrants,
<PAGE>
securities or other property (the "Purchase Rights") pro rata to the record
---------------
holders of any class of Common Stock, then the Purchasers will be entitled to
acquire, upon the terms applicable to such Purchaser Rights, the aggregate
Purchase Rights which such Purchasers could have acquired if such Purchasers had
held the Permitted Maximum Number immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchaser Rights, or, if no
such record is taken, the date as of which the record holders of Common Stock
are to be determined for the grant, issue or sale of such Purchase Rights. Any
such Purchase Rights in cash shall be delivered directly to the Purchasers
promptly and any such Purchase Rights in securities or other property shall be
delivered to the Security Agent and held as additional collateral until
distribution of the Common Shares on the Share Transfer Date. If the Sellers and
Purchasers are unable to reach agreement on any such adjustment upon the
occurrence of any Stock Event, Distribution or Purchase Rights, Sellers will
promptly deliver the amount which is not in dispute and the Purchasers having
paid a majority of the Purchase Price and the Sellers will select an
internationally recognized auditing firm to resolve the dispute. If they are
unable to agree on such a firm, each shall select one firm which together shall
select the auditing firm to serve hereunder. Each of the Sellers and the
Purchasers will submit their calculations and support data to such auditors
within five Business Days following appointment. The auditors shall make a
determination of the appropriate adjustment within ten Business Days of the
notice, which determination shall be final and binding on each Seller and each
Purchaser. The costs of any such audit shall be borne by the party or parties
whose calculation was in error.
5.5 Unrestricted Securities. Sellers shall cause LHSP to file a
-----------------------
Registration Statement with the SEC registering the resale of the Common Shares
by the Purchasers pursuant to the terms of the Registration Rights Agreement,
and shall fully enforce LHSP's obligations under such Registration Rights
Agreement. Sellers shall cause the Common Shares to be delivered to Purchasers
hereunder to be freely tradable pursuant to an effective registration statement
at all times (subject to Permitted Blackout Periods) until the earlier to occur
of (i) two years following the Share Transfer Date, (ii) the date that all
Common Shares received by each Purchaser hereunder have been sold or (iii) the
date the Common Shares may be sold, by the original Purchasers or otherwise,
without restriction under Rule 144 (the "Registration Period"). None of the
--------------------
Common Shares delivered to the Purchasers in satisfaction of Sellers'
obligations under this Article V (whether as a result of acceleration of the
Determination Date, or otherwise) shall contain a restrictive legend or
otherwise be subject to restrictions on sale or transfer under the Securities
Act of 1933, other than to the extent such restrictions arise as a result of the
status of any Purchaser as an affiliate (as defined under the Securities Act) of
LHSP, or to the extent imposed during Permitted Blackout Periods.
5.6 Illiquidity Payments. If a Determination Date shall have occurred,
--------------------
(i) the irrevocable Security Agent Instructions or other mechanics of delivery
set forth in Section 5.2 are not completed within three (3) Business Days of the
date that any such actions are
<PAGE>
required, (ii) any portion of the Required Transfer Amount are subject to a
restrictive legend (including not having a Registration Statement effective if
and as required pursuant to the Registration Rights Agreement, but other than as
permitted pursuant to Section 5.5) or are not otherwise freely transferable,
(iii) at any time during the Registration Period, other than during Permitted
Blackout Periods, such registration statement lapses in effect (or sales
otherwise cannot be made thereunder, whether by reason of LHSP's failure to
amend or supplement the prospectus included therein in accordance with the
Registration Rights Agreement or otherwise), unless such lapse is the result of
Purchasers' failure to timely deliver such information as may be required
pursuant to Section 4(a) of the Registration Rights Agreement or (iv) a payment
shall be due to the Purchasers pursuant to Section 4.5 hereof (the number of
Common Shares not freely tradable from time to time as a result of any of the
foregoing being referred to herein as the "Illiquid Securities"), the Sellers
-------------------
shall be obligated to make cash payments to each Purchaser to compensate for the
lack of liquidity resulting therefrom for the period of such illiquidity. Except
with respect to clause (iv) of the preceding sentence, for purposes of the
foregoing provisions, such payment obligation shall not become effective until
after the date that the Registration Statement is required to be declared
effective pursuant to Section 5.5 hereof and the Registration Rights Agreement.
Such "Illiquidity Payments" shall equal an amount per annum, calculated on a
monthly basis for each day during such month during which the Illiquid
Securities were illiquid, equal to the Prime Rate (as reported by the Wall
Street Journal or, if the Wall Street Journal is no longer published, a
replacement publication selected by Purchasers providing a majority of the
Purchase Price) plus 3% multiplied by the aggregate Current Price of all
Illiquid Securities, as determined on a weekly basis as of the first trading day
of each calendar week. "Current Price" means the five-day average closing bid
-------------
price for the Common Shares on the Principal Exchange reported by Bloomberg on
the date of determination or, if the foregoing does not apply, the last reported
sale price of such security in the over-the-counter market on the electronic
bulletin board of such security as reported by Bloomberg, or, if no sale price
is reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security that are listed in the "pink sheets" by the
National Quotation Bureau, Inc. If the Current Price cannot be calculated for
such security on such date on any of the foregoing bases, the Closing Bid Price
of such security on such date shall be the fair market value as reasonably
determined by an investment banking firm selected by the Purchasers holding a
majority of the Pro Rata Portion, with the reasonable costs of such appraisal to
be borne by the Sellers. "Permitted Blackout Periods" means not more than 30
--------------------------
consecutive days or 60 days in any twelve month period in which LHSP may delay
the disclosure of material non-public information concerning LHSP (including
updating a Registration Statement or prospectus), the disclosure of which at the
time is not, in the good faith opinion of LHSP and counsel to LHSP, in the best
interests of LHSP. All payments pursuant to this Section 5.6 relating to
Illiquid Securities shall be payable at the end of each calendar month during
which such payments were applicable. Any compensation paid hereunder shall be in
addition to, and not in lieu
<PAGE>
of, any other rights and remedies that the Purchasers may have hereunder,
whether in law or in equity, as a result of Sellers' failure to satisfy their
obligations hereunder.
<PAGE>
ARTICLE VI
CONDITIONS TO THE SELLERS' OBLIGATION TO CLOSE
6.1 The obligation of the Sellers to enter into this Agreement and to
commit to sell Common Shares to the Purchasers on the Share Transfer Date, is
subject to the satisfaction, as of the date of the Closing, of each of the
following conditions, provided that these conditions are for the Sellers' sole
benefit and may be waived by the Sellers at any time in their sole discretion:
(a) The Purchasers shall have executed this Agreement, the Stock Pledge
Agreement, the Registration Rights Agreement and the Escrow Agreement and
delivered the same to the Sellers and Shoreline. The Purchasers shall have
completed and executed the Purchaser Questionnaire and Representation Agreement
and delivered the same to the Sellers and Shoreline.
(b) Each Purchasers shall have wired to the account of the Escrow Agent
pursuant to the Escrow Agreement its Pro-Rata Portion of the Purchase Price with
an aggregate Purchase Price of $50,000,000.
(c) The representations and warranties of the Purchaser shall be true and
correct in all material respects as of the Closing (except for representations
and warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date).
(d) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of any of the transactions contemplated
by this Agreement.
<PAGE>
ARTICLE VII
CONDITIONS TO EACH PURCHASER'S OBLIGATION TO CLOSE
7.1 The obligation of each Purchaser to enter into the transactions
contemplated hereby is subject to the satisfaction as of the date of the
Closing, of each of the following conditions, provided that these conditions are
for the Purchaser's sole benefit and may be waived by the Purchaser at any time
in the Purchaser's sole discretion:
(a) The Sellers shall have executed this Agreement, the Registration
Rights Agreement, the Stock Pledge Agreement, the Escrow Agreement and delivered
the same to Purchaser and Shoreline, and the Sellers (except for Messrs. Lernout
and Hauspie) shall have executed Incumbency Certificates and delivered the same
to Purchaser and Shoreline.
(b) The Sellers shall have delivered to the Security Agent a number of
duly issued Common Shares being so pledged by Sellers equal to the Permitted
Maximum Number.
(c) Sellers and LHSP shall have entered into the Registration Rights
Agreement.
(d) The Common Shares shall be listed on Nasdaq and trading in the Common
Shares shall not have been suspended or limited by Nasdaq or the SEC or other
regulatory authority, and no such proceeding seeking suspension shall be
pending.
(e) The representations and warranties of the Sellers shall be true and
correct in all material respects as of the Closing (except for representations
and warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date) and the Sellers shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Sellers at or prior to the Closing.
(f) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(g) Purchaser shall have received opinions of Sellers' counsel, dated as
of the Closing, in the form attached hereto as Exhibit D.
---------
<PAGE>
(h) The Sellers shall have taken all steps necessary, including those set
forth in the Stock Pledge Agreement, to perfect a first priority security
interest in the Common Shares in favor of the Purchasers.
<PAGE>
ARTICLE VIII
MISCELLANEOUS
8.1 Indemnity.
----------
(a) To the extent permitted by law, the Sellers will, jointly and
severally, indemnify, hold harmless and defend (i) each Purchaser, (ii) the
directors, officers, partners, employees, agents and each person who controls
any Purchaser within the meaning of the 1933 Act or the Securities Exchange Act
of 1934, as amended (the "1934 Act"), if any, (iii) any underwriter (as defined
--------
in the 1933 Act) for the Purchasers, and (iv) the directors, officers, partners,
employees and each person who controls any such underwriter within the meaning
of the 1933 Act or the 1934 Act, if any (each, an "Indemnified Person"), against
------------------
any joint or several losses, claims, damages, liabilities, stamp, transfer,
documentary or other taxes or expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, in respect thereof, "Claims") to which any of
------
them may become subject as a result of entering into this Agreement, the Stock
Pledge Agreement, the Registration Rights Agreement, the Escrow Agreement or any
other document or instrument required to be delivered hereunder or thereunder,
including breaches of representations, warranties and covenants hereunder and
thereunder, or the transactions contemplated hereby or thereby; provided that no
Seller nor any affiliate or related party will have any obligation or liability
in respect of a decrease in the price or market value of the Common Shares to be
delivered on the Share Transfer Date (except solely with respect to a failure of
the Sellers to deliver Common Shares on the Share Transfer Date, and then only
with respect to declines in the market value of the Common Shares during the
duration of such failure of Sellers to deliver Common Shares). Subject to the
restrictions set forth in Section 8.1(b) with respect to the number of legal
counsel, the Sellers shall reimburse each Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 8.1(a) shall not
apply to (i) amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Sellers, which consent shall
not be unreasonably withheld, and (ii) claims related to actions or omissions of
any Indemnified Party determined by a court of competent jurisdiction to
constitute gross negligence or willful misconduct. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Common Shares by
the Purchasers.
(b) Promptly after receipt by an Indemnified Person under this Section 8.1
of notice of the commencement of any action (including any governmental action
or third-party notice of claim, action or lawsuit), such Indemnified Person
shall, if a Claim in
<PAGE>
respect thereof is to be made against any indemnifying party under this Section
8.1, deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person; provided, however, that such indemnifying party shall not be entitled to
-------- -------
assume such defense and an Indemnified Person shall have the right to retain its
own counsel with the fees and expenses to be paid by the indemnifying party, if,
and only in the event that, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person and any other party
represented by such counsel in such proceeding. In such event, the indemnifying
party shall pay for only one separate legal counsel for the Indemnified Persons
and such legal counsel shall be selected by Purchasers holding a majority-in-
interest of the Common Shares sold hereunder to which the Claim relates. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person under this Section 8.1, except
to the extent that the indemnifying party is actually prejudiced in its ability
to defend such action. The indemnification required by this Section 8.1 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
(c) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under this Section 8.1 to the fullest extent permitted by law; provided,
--------
however, that no contribution shall be made under circumstances where the maker
-------
would not have been liable for indemnification under the fault standards set
forth in Section 8.1(a).
8.2 Governing Law; Jurisdiction. This Agreement shall be governed by and
----------------------------
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in the State of New York. The parties hereto
irrevocably consent to the jurisdiction of the United States federal courts and
state courts located in the County of New York in the State of New York in any
suit or proceeding based on or arising under this Agreement or the transactions
contemplated hereby and irrevocably agree that all claims in respect of such
suit or proceeding may be determined in such courts; provided, however, that the
-----------------
Purchasers shall have the option to bring any action in a court in Belgium.
Each Seller and each Purchaser irrevocably waives the defense of an inconvenient
forum to the maintenance of such suit or proceeding in such forum. Each Seller
and each Purchaser further agrees that service of process upon the Seller or
such Purchaser, as applicable, mailed by the first class mail in accordance with
Section 8.6 shall be deemed in every respect effective service of process upon
such Seller or such Purchaser
<PAGE>
in any suit or proceeding arising hereunder. Nothing herein shall affect any
Purchaser's right to serve process in any other manner permitted by law. Each
Seller hereby appoints Brown, Rudnick, Freed and Gesmer as its agent for service
of process. The address for such office is set forth in Section 8.7 hereof. The
parties hereto agree that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner. The parties hereto
irrevocably waive any right to trial by jury under applicable law.
8.3 Counterparts. This Agreement may be executed in two or more
-------------
counterparts, including, without limitation, by facsimile transmission, all of
which counterparts shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered
to the other party. In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall promptly cause
additional original executed signature pages to be delivered to the other
parties.
8.4 Headings. The headings of this Agreement are for convenience of
---------
reference and shall not form part of, or affect the interpretation of, this
Agreement.
8.5 Severability. If any provision of this Agreement shall be invalid or
------------
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
8.6 Entire Agreement: Amendments. This Agreement and the instruments
-----------------------------
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Seller nor the Purchaser makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived other than by an instrument in
writing signed by the party to be charged with enforcement and no provision of
this Agreement may be amended other than by an instrument in writing signed by
the Seller and the Purchaser.
8.7 Notice. Any notice herein required or permitted to be given shall be
-------
in writing and may be personally served or delivered by nationally-recognized
overnight courier or by facsimile machine confirmed telecopy, and shall be
deemed delivered at the time and date of receipt (which shall include telephone
line facsimile transmission) or, if the date of such receipt is not a Business
Day, then on the next succeeding Business Day. The addresses for such
communications shall be:
If to any Seller:
----------------
c/o Lernout & Hauspie Speech Products
<PAGE>
7 Sint - Krispijnstraat,
B8900 Ieper, Belgium
Telephone: 011-32-5-722-8888
Telecopy: 011-32-5-720-8489
Attention: Messrs. Pol Hauspie and Carl Dammekens
with a copy to:
Loeff Claeys Verbeke
Avenue De Tervurenlaan 268 A
Brussels B-1150
Telephone: 011-32-2-778-2415
Telecopy: 011-32-2-778-2457
Attention: Thomas Denys, Esq.
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, MA 02111
Telephone: (617) 856-8555
Telecopy: (617) 856-8201
Attention: Philip J. Flink, Esq.
If to Stark International
or Shepherd Investments International, Ltd.:
c/o Staro Asset Management, LLC
1500 West Market Street, Suite 200
Mequon, WI 53092
Attn: Mr. Brian Davidson
Telephone: (414) 241-7728 x15
Telecopy: (414) 241-7704
and with a copy to:
Eleazer Klein, Esq.
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Telephone: (212) 756-2376
Telecopy: (212) 593-5955
<PAGE>
If to RGC International Investors, LDC:
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Attn: Mr. Gary S. Kaminsky
Telephone: (610) 617-5900
Telecopy: (610) 617-0570
and with a copy to:
Keith Marlowe, Esq.
Morgan Lewis & Bockius
2001 Logan Square
Philadelphia, PA 19103
Telephone: (215) 963-5083
Telecopy: (215) 963-5299
in each case with a copy to:
Shoreline Pacific Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, CA 94965
Telephone: (415) 332-7800
Telecopy: (415) 332-7808
Attention: General Counsel
Each party shall provide notice to the other party of any change in address.
8.8 Successors and Assigns. This Agreement shall be binding upon and
-----------------------
inure to the benefit of the parties and their successors and assigns. None of
the Sellers or the Purchasers shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, the Purchaser may subject to and in compliance
with Section 5.2 hereof, assign all or part of its rights and obligations
-----------
hereunder to any of its "affiliates," as that term is defined under the
Securities Act, without the consent of the Sellers so long as such affiliate is
an accredited investor (within the meaning of Regulation D under the Securities
Act) and agrees in writing to be bound by this Agreement. This provision shall
not limit the Purchaser's right to transfer the Common Shares pursuant to the
terms of this Agreement or to assign the Purchaser's rights hereunder to any
such transferee pursuant to the terms of this Agreement.
<PAGE>
8.9 Third Party Beneficiaries. This Agreement is intended for the
--------------------------
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
8.10 Survival. The representations and warranties of the Seller and the
---------
Purchaser and the agreements and covenants set forth herein shall survive the
closing hereunder notwithstanding any due diligence investigation conducted by
or on behalf of the Seller or any Purchaser as the case may be. Each Seller and
each Purchaser agrees to indemnify and hold harmless the Sellers or any
Purchaser as the case may be and each of such party's respective officers,
directors, employees, partners, agents and affiliates for loss or damage or
expenses (including reasonable attorneys fees) arising as a result of or related
to any breach or alleged breach by any Seller or any Purchaser as the case may
be of any of their respective representations or covenants set forth herein,
including advancement of expenses as they are incurred.
8.11 Further Assurances. Each party shall do and perform, or cause to be
-------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby including, but not limited to, perfecting the
first priority security interest in the Common Shares.
8.12 Remedies. No provision of this Agreement providing for any remedy
---------
to a Purchaser shall limit any remedy which would otherwise be available to such
Purchaser at law or in equity. Nothing in this Agreement shall limit any rights
a Purchaser may have under any applicable federal or state securities laws with
respect to the investment contemplated hereby. Each Seller and each Purchaser
acknowledges that a breach by it of its respective obligations hereunder will
cause irreparable harm to each Purchaser, in the case of a Seller, and each
Seller, in the case of a Purchaser. Accordingly, each Seller and each Purchaser
acknowledges that the remedy at law for a material breach of its respective
obligations under this Agreement will be inadequate and agrees, in the event of
a breach or threatened breach by a Seller or a Purchaser, as the case may be, of
the provisions of this Agreement, that a Purchaser or a Seller, as the case may
be, shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate compliance, without
the necessity of showing economic loss and without any bond or other security
being required.
IN WITNESS WHEREOF, the undersigned Purchasers and Sellers have caused this
Agreement to be duly executed as of the date first above written.
<PAGE>
SELLERS:
/s/ Jo Lernout
--------------------------
JO LERNOUT
/s/ Pol Hauspie
--------------------------
POL HAUSPIE
[SIGNATURES CONTINUED ONTO NEXT PAGE]
<PAGE>
LEHA FOUNDATION
By: /s/ Pol Hauspie
----------------------
Name: Pol Hauspie
Title: Director
L&H HOLDING III S.A.
By: /s/ Jo Lernout
----------------------
Name: Jo Lernout
Title: Director
OLDCO N.V.
By: /s/ Jo Lernout
----------------------
Name: Jo Lernout
Title: Director
By: /s/ Pol Hauspie
----------------------
Name: Pol Hauspie
Title: Director
[SIGNATURES CONTINUED ONTO NEXT PAGE]
<PAGE>
PURCHASERS:
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
Investment Manager
By: RGC General Partner Corp.
By: /s/
----------------------
Name:
Its: Managing Director
Aggregate Subscription Amount: $25,000,000
-----------
RESIDENCE: Cayman Islands
ADDRESS:
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Fax: (610) 617-0570
Telephone: (610) 617-5900
Attn: Gary S. Kaminsky
[SIGNATURES CONTINUED ONTO NEXT PAGE]
<PAGE>
BUYER SIGNATURES CONTINUED:
SHEPHERD INVESTMENTS INTERNATIONAL, LTD.
By: /s/ Michael A. Roth
----------------------------------------
Name: Michael A. Roth
Managing Member, Staro Asset Management, LLC
Investment Manager, Shepherd Investments International, Ltd.
DATE: 4-15-98
----------------------------
Aggregate Subscription Amount: $12,500,000
-----------
RESIDENCE: British Virgin Islands
ADDRESS: c/o Staro Asset Management, LLC
1500 West Market Street, Suite 200
Mequon, WI 53092
Fax: (414) 241-7704
Tel: (414) 241-7728 x15
Attn: Mr. Brian Davidson
STARK INTERNATIONAL
By: /s/ Michael A. Roth
----------------------------------------
Name: Michael A. Roth
Managing Member, Staro Asset Management, LLC
Investment Manager, Stark International
DATE: 4-15-98
----------------------------
Aggregate Subscription Amount: $12,500,000
-----------
RESIDENCE: Bermuda
ADDRESS: c/o Staro Asset Management, LLC
1500 West Market Street, Suite 200
Mequon, WI 53092
Fax: (414) 241-7704
Tel: (414) 241-7728 x15
Attn: Mr. Brian Davidson
