<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 5, 2000
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LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
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(Exact Name Of Registrant As Specified In Its Charter)
The Kingdom of Belgium
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(State or Other Jurisdiction of Incorporation)
0-27296 N/A
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(Commission File Number) (I.R.S. Employer Identification No.)
52 Third Avenue, Burlington, Massachusetts 01803
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(Address of Principal Executive Offices in the U.S.) (Zip Code)
(781) 203-5000
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
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Item 2. Acquisition or Disposition of Assets.
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On May 5, 2000, we acquired all of the outstanding capital stock of
Dictaphone Corporation ("Dictaphone") through a merger of Dictaphone into one of
our wholly-owned subsidiaries. In connection with the merger we issued a total
of approximately 9.4 million shares of our common stock (adjusted for our
recent stock split) in exchange for all of the outstanding shares of Dictaphone
common stock. We were also required to assume or refinance approximately $430
million of Dictaphone's debt and other obligations. We determined this
consideration through arm's length negotiation with Dictaphone and the
stockholders of Dictaphone. We will use the purchase method to account for this
acquisition.
Dictaphone is a leader in selected vertical markets in the development,
manufacture, marketing, service and support of integrated voice and data
management systems and software, including dictation, voice processing, voice
response, unified messaging, records management, call center monitoring systems
and communications recording. Dictaphone has two operating segments, System
Products and Services and Contract Manufacturing. The System Products and
Services segment consists of the sale and service of system-related products to
dictation and voice management and communications recording system customers in
selected vertical markets. The Contract Manufacturing segment consists of the
manufacturing operations which provides outside electronics manufacturing
services to original equipment manufacturers in the telecommunication, data
management, computer and electronics industries. We intend to continue the
business of Dictaphone.
The shares to be issued in the merger initially have not been registered
under the Securities Act of 1933, as amended, and will be subject to
restrictions on transfer as set forth in that Act and the rules and regulations
of the Securities and Exchange Commission. We have granted the stockholders of
Dictaphone registration rights for the shares of our common stock which they
received in the merger. Stonington Capital Appreciation Fund 1994, L.P., which
owned approximately 96% of the issued and outstanding Dictaphone common stock,
has agreed to hold approximately 1.8 million shares of our common stock which it
received in the Merger for a period of two years.
During the two year period following the Merger, Stonington has assigned
certain voting rights to all the shares it acquired in the Merger, for so long
as it holds the shares, to an entity controlled by Messrs. Jo Lernout and Pol
Hauspie. In addition, subject to conditions, we have agreed to nominate a
designee of Stonington for election as one of our directors, and entities
controlled by Messrs. Lernout and Hauspie have agreed to vote their shares to
elect that nominee.
Dresdner Bank Luxembourg S.A., Deutche Bank N.V., Artesia Banking
Corporation N.V., KBC Bank N.V. and Fortis Bank N.V., collectively, provided
financing arrangements for the acquisition consisting of a $200 million short-
term debt facility and a $230 million five year declining balance facility. In
addition, we have obtained an ongoing $20 million revolving credit facility
for Dictaphone. We have accessed all of the short-term facility and
approximately $30 million under the declining balance facility in order to
satisfy approximately $230 million in Dictaphone's debt and other obligations in
connection with the closing of the merger, as well as to cover costs of the
transaction. The remaining committed amount will be available to repay $200
million of Dictaphone's senior
2
<PAGE>
subordinated notes, should they be put to the company within 90 days of the
closing by the noteholders at 101% of par, as permitted by the terms of the
notes. These notes are also redeemable by Dictaphone at a declining rate
beginning at 105.875% of par, commencing in August 2000.
Prior to the transaction described above, neither Dictaphone nor the
stockholders of Dictaphone had any material relationship with us or any of our
affiliates, directors or officers or any associate of any such director or
officer.
Item 7. Financial Statements and Exhibits.
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(a) Financial Statements of business acquired:
Not filed herewith. To be filed by amendment not later than 60 days after
this report is filed.
(b) Pro Forma financial information:
To be filed by amendment.
(c) Exhibits:
2. Agreement and Plan of Merger, dated as of March 7, 2000, by and
among the Registrant, Dark Acquisition Corp., a Delaware corporation
and a direct, wholly owned subsidiary of the Registrant and
Dictaphone Corporation, a Delaware corporation.
4.1 Registration Rights Agreement, dated as of May 5, 2000, by and
among the Registrant, Stonington Holdings, LLC, Mellon Bank, N. A.,
as Trustee for the Bell Atlantic Master Trust, Merrill Lynch KECALP,
L.P. 1994, John Duerden, Robert G. Schwager, Joseph Skrzypczak,
Ronald Elwell, Thomas Hodge, Daniel Hart and Egon Jungheim.
4.2 Stockholders' Agreement, dated as or May 5, 2000, by and among
the Registrant, Stonington Holdings, LLC, LEHA, Light Holding N.V.,
L&H Holding III, OLDCO N.V. and L&H Investment Company.
3
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LERNOUT & HAUSPIE SPEECH
PRODUCTS N.V.
Dated: May 22, 2000
By:/s/ Carl Dammekens
----------------------------------------
Carl Dammekens
Chief Financial Officer and Senior Vice
President of Finance
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5/19/00
EXHIBIT 2
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AGREEMENT AND PLAN OF MERGER
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(Exhibits and Schedules are omitted pursuant to Item 601(b)(2)
of Regulation S-K. The Company agrees, however, to furnish
supplementary a copy of such omitted items
to the Commission upon request.)
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AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER
AMONG
LERNOUT & HAUSPIE SPEECH PRODUCTS, N.V.
DARK ACQUISITION CORP.
AND
DICTAPHONE CORPORATION
March 7, 2000
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AGREEMENT AND PLAN OF MERGER
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I. THE MERGER.................................................. 1
Section 1.1 Effective Time of the Merger................................ 1
Section 1.2 Closing..................................................... 2
Section 1.3 Effects of the Merger....................................... 2
Section 1.4 Directors and Officers...................................... 2
Section 1.5 Actions Prior to Closing.................................... 2
Section 1.6 Alternative Merger Structure................................ 3
ARTICLE II. CONVERSION OF SECURITIES.................................... 4
Section 2.1 Conversion of Capital Stock................................. 4
Section 2.2 Exchange of Certificates.................................... 5
Section 2.3 Stonington's Merger Shares.................................. 8
Section 2.4 Escrow Shares............................................... 10
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF COMPANY................... 10
Section 3.1 Organization of Company..................................... 10
Section 3.2 Company Capital Structure................................... 10
Section 3.3 Authority; No Conflict; Required Filings and Consents....... 10
Section 3.4 SEC Filings; Financial Statements........................... 10
Section 3.5 No Undisclosed Liabilities.................................. 10
Section 3.6 Absence of Certain Changes or Events........................ 10
Section 3.7 Taxes....................................................... 10
Section 3.8 Title to Properties......................................... 10
Section 3.9 Intellectual Property....................................... 10
Section 3.10 Agreements, Contracts and Commitments....................... 10
Section 3.11 Litigation.................................................. 10
Section 3.12 Environmental Matters....................................... 10
Section 3.13 ERISA and Employee Benefit Plans............................ 10
Section 3.14 Compliance With Laws........................................ 10
Section 3.15 Permits..................................................... 10
Section 3.16 Labor Matters............................................... 10
Section 3.17 Insurance................................................... 10
Section 3.18 Government Contracts........................................ 10
Section 3.19 Year 2000................................................... 10
Section 3.20 Inventory................................................... 10
Section 3.21 Warranty.................................................... 10
Section 3.22 Customers and Suppliers..................................... 10
Section 3.23 Accounts Receivable......................................... 10
Section 3.24 Section 203 of the DGCL Not Applicable...................... 10
Section 3.25 Transactions with Interested Persons........................ 10
Section 3.26 Absence of Sensitive Payments............................... 10
Section 3.27 Indebtedness................................................ 10
Section 3.28 Consent..................................................... 10
</TABLE>
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AGREEMENT AND PLAN OF MERGER
S-2
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<TABLE>
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB............. 10
Section 4.1 Organization of Buyer and Sub............................... 10
Section 4.2 Capitalization.............................................. 10
Section 4.3 Authority; No Conflict; Required Filings and Consents....... 10
Section 4.4 Public Filings; Financial Statements........................ 10
Section 4.5 No Undisclosed Liabilities.................................. 10
Section 4.6 Absence of Certain Changes or Events........................ 10
Section 4.7 Intellectual Property....................................... 10
ARTICLE V. CONDUCT OF BUSINESS......................................... 10
Section 5.1 Covenants of Company........................................ 10
Section 5.2 Options; Warrants........................................... 10
Section 5.3 Covenants of Buyer.......................................... 10
Section 5.4 Cooperation................................................. 10
Section 5.5 Confidentiality............................................. 10
Section 5.6 Investigation............................................... 10
ARTICLE VI. ADDITIONAL AGREEMENTS....................................... 10
Section 6.1 Exclusivity................................................. 10
Section 6.2 Access to Information....................................... 10
Section 6.3 Environmental Review........................................ 10
Section 6.4 Legal Conditions to Merger.................................. 10
Section 6.5 Employee Benefit Plans...................................... 10
Section 6.6 Public Disclosure........................................... 10
Section 6.7 Tax-Free Reorganization..................................... 10
Section 6.8 Nasdaq Listing.............................................. 10
Section 6.9 Brokers or Finders.......................................... 10
Section 6.10 Notification of Certain Matters............................. 10
Section 6.11 Special Stockholders Meeting of the Company................. 10
Section 6.12 Special Board Meeting of the Buyer.......................... 10
Section 6.13 Liability Insurance......................................... 10
ARTICLE VII. CONDITIONS TO MERGER........................................ 10
Section 7.1 Conditions to Each Party's Obligation To Effect the Merger.. 10
Section 7.2 Additional Conditions to Obligations of Buyer and Sub....... 10
Section 7.3 Additional Conditions to Obligations of Company............. 10
ARTICLE VIII. TERMINATION AND AMENDMENT................................... 10
Section 8.1 Termination................................................. 10
Section 8.2 Effect of Termination....................................... 10
Section 8.3 Fees and Expenses........................................... 10
Section 8.4 Amendment................................................... 10
Section 8.5 Extension; Waiver........................................... 10
</TABLE>
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AGREEMENT AND PLAN OF MERGER
S-3
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<TABLE>
<S> <C> <C>
ARTICLE IX. MISCELLANEOUS............................................... 10
Section 9.1 Survival of Representations, Warranties and Agreements...... 10
Section 9.2 Notices..................................................... 10
Section 9.3 Interpretation; Incorporation by Reference.................. 10
Section 9.4 Counterparts................................................ 10
Section 9.5 Entire Agreement; No Third Party Beneficiaries.............. 10
Section 9.6 Governing Law and Venue..................................... 10
Section 9.7 Waiver of Jury Trial........................................ 10
Section 9.8 Assignment.................................................. 10
Section 9.9 Severability................................................ 10
Section 9.10 Other Remedies; Specific Performance........................ 10
</TABLE>
Company Disclosure Schedule
Buyer Disclosure Schedule
Exhibit A Option Termination Agreements
Exhibit B Letter of Transmittal
Exhibit C Indemnity and Escrow Agreement
Exhibit D LLC Agreement
Exhibit E Registration Rights Agreement
Exhibit F Stockholders Agreement
Exhibit G Voting Agreement and Waiver
Exhibit H Legal Opinions
Exhibit I Note Termination Agreement
Schedule 1.4 Schedule of Officers
Schedule 1.5 Option Terminations and Retention Agreements
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AGREEMENT AND PLAN OF MERGER
S-4
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AGREEMENT AND PLAN OF MERGER
----------------------------
LIST OF SCHEDULES
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<TABLE>
<S> <C>
Schedule 1.4 Officers and Director
Schedule 1.5 Option Termination and Retention Agreements
Schedule 2.5 Escrow Shares
<CAPTION>
Company Disclosure Schedules
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<S> <C>
Schedule 3.1 - Organization
Schedule 3.2(a) - Company Capital Structure
Schedule 3.2(b) - Company Capital Structure
Schedule 3.3(b) - Authority; No Conflict; Required Filings and Consents
Schedule 3.7(b) - Tax Audits
Schedule 3.7(c) - Tax Matters - Statute of Limitations Waiver
Schedule 3.8(a) - Title to Properties
Schedule 3.8(a)(1) - Company Operating Leases
Schedule 3.8(a)(1)(A) - Leases Expiring
Schedule 3.8(a)(2) - Leased Properties
Schedule 3.8(a)(3) - Operating Leases
Schedule 3.8(c) - Title to Properties
Schedule 3.9(b) - Intellectual Property
Schedule 3.9(c) - Intellectual Property
Schedule 3.9(e) - Intellectual Property
Schedule 3.10(a) - Agreements, Contracts and Commitments
Schedule 3.10(b) - Agreements, Contracts and Commitments
Schedule 3.11 - Litigation - List of Pending Litigation
Schedule 3.12 - Environmental Matters
Schedule 3.12(b) - Environmental Matters
Schedule 3.12(b)(1) - Environmental Matters
Schedule 3.12(g) - Environmental Matters
Schedule 3.13(c) - ERISA and Employment Benefit Plans
Schedule 3.13(d) - ERISA and Employment Benefit Plans
Schedule 3.13(e) - ERISA and Employment Benefit Plans
Schedule 3.13(f) - ERISA and Employment Benefit Plans
Schedule 3.16 - Labor Matters
Schedule 3.17 - Insurance
Schedule 3.17(1) - Schedule of Insurance
Schedule 3.21 - Warranty
Schedule 3.21(1) - Standard Limited Warranty Policy
Schedule 3.21(2) - Standard Limited Warranty Policy
Schedule 3.21(3) - Maintenance and Customer Support Programs
Schedule 3.21(4) - Terms for Assured Performance Plan
Schedule 3.21(5) - Terms of Software Maintenance Agreement
Schedule 3.21(6) - Terms of Software Maintenance Agreement
Schedule 3.22 - Customers and Suppliers
Schedule 3.27 - Indebtedness
Schedule 5.1(r) - Accounts Payable Processing Practices
Schedule 7.2(e) - Consents
</TABLE>
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<TABLE>
<CAPTION>
Buyer Disclosure Schedules
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<S> <C>
Section 4.2 - Capitalization
Section 4.3(b) - Authority; No Conflicts; Required Filings and Consents
Section 4.5 - No Undisclosed Liabilities
Section 4.7(f) - Intellectual Property
</TABLE>
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AGREEMENT AND PLAN OF MERGER
S-ii
<PAGE>
TABLE OF DEFINED TERMS
----------------------
<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
- ----- ------------
<S> <C>
12% Preferred Stock, 2
1999 Financial Statements, 14
Affiliate, 23
Agreement, 1
Alternative Transaction, 3
Bankruptcy and Equity Exception, 13
Buyer, 1
Buyer Common Stock, 4
CERCLA, 21
Certificate of Merger, 1
Certificates, 5
Closing, 2
Closing Date, 2
Code, 1
Company, 1
Company Ancillary Agreements, 12
Company Balance Sheet, 14
Company Common Stock, 2
Company Disclosure Schedule, 10
Company Material Adverse Effect, 10
Company Material Contracts, 20
Company Preferred Stock, 11
Company SEC Reports, 14
Company Stock Plans, 11
Credit Agreement, 8
DGCL, 1
Differential, 8
Dissenting Shares, 5
Effective Time, 2
Environmental Laws, 21
ERISA, 23
ERISA Benefit Plan, 23
Excess Differential, 9
Exchange Act, 14
Exchange Fund, 5
Governmental Entity, 13
Hazardous Materials, 21
HSR Act, 13
Indebtedness Statement, 8
Indebtedness Threshold, 8
</TABLE>
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AGREEMENT AND PLAN OF MERGER
S-iii
<PAGE>
<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
- ----- ------------
<S> <C>
Independent Accounting Firm, 9
Leases, 17
Letters of Transmittal, 5
Merger, 1
Merger Shares, 4
Notes, 8
Option Termination Agreements, 3
Options, 3
PBGC, 24
Preferred Stock Put Price, 3
RCRA, 21
Retention Agreements, 3
SEC, 14
Site, 21
Stockholders, 5
Sub, 1
Subsidiary, 11
Surviving Corporation, 2
Tax Returns, 16
Taxes, 16
Term Loans, 8
Transfer Agent, 5
U.S. GAAP, 14
Warrants, 3
</TABLE>
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AGREEMENT AND PLAN OF MERGER
S-iv
<PAGE>
5/19/00
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of March 7, 2000,
by and among Lernout & Hauspie Speech Products, N.V., a Belgium corporation
("Buyer"), Dark Acquisition Corp., a Delaware corporation and a direct, wholly
owned subsidiary of Buyer ("Sub"), and Dictaphone Corporation, a Delaware
corporation ("Company").
WHEREAS, the Boards of Directors of Buyer and Company deem it advisable and
in the best interests of each corporation and its respective stockholders that
Buyer and Company combine in order to advance the long-term business interests
of Buyer and Company;
WHEREAS, the combination of Buyer and Company shall be effected by the
terms of this Agreement through a merger of Company into Sub, as a result of
which the stockholders of Company will become (directly or indirectly)
stockholders of Buyer (the "Merger");
WHEREAS, Stonington Capital Appreciation 1994 Fund, L.P. ("Stonington"),
the holder of 12,653,000 shares or ____% of the common stock of Company, has
agreed with Buyer to vote such shares in favor of the Merger and not to exercise
its appraisal rights pursuant to Section 262 of the Delaware General Corporation
Law with respect to the Merger and to transfer the shares of Buyer common stock
that Stonington will receive pursuant to the Merger to a newly formed limited
liability company (the "LLC");
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
Whereas, simultaneous with the execution of this Agreement Stonington
Financing IV LLC, a Delaware limited liability company and a wholly owned
subsidiary of Stonington, Buyer and Company have entered in a Note Termination
Agreement in the form of Exhibit I hereto.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I. THE MERGER
Section 1.1 Effective Time of the Merger.
----------------------------
Subject to the provisions of this Agreement, a certificate of merger in
such form as is required by the relevant provisions of the Delaware General
Corporation Law ("DGCL") (the "Certificate of Merger") shall be duly executed
and acknowledged by the
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AGREEMENT AND PLAN OF MERGER
<PAGE>
Surviving Corporation (as defined in Section 1.3) and thereafter delivered to
the Secretary of State of the State of Delaware for filing, as soon as
practicable on the Closing Date (as defined in Section 1.2). The Merger shall
become effective upon the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware (the "Effective Time") or at such later time
as is established by Buyer and Company and set forth in the Certificate of
Merger.
Section 1.2 Closing.
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The closing of the Merger (the "Closing") will take place at 10:00 a.m.,
E.S.T., on a date to be specified by Buyer and Company (the "Closing Date"),
which shall be no later than the second business day after satisfaction or
waiver of the conditions set forth in Article VII (other than delivery of items
to be delivered at Closing), at the offices of Brown, Rudnick, Freed & Gesmer,
P.C., One Financial Center, Boston, Massachusetts, unless another date, place or
time is agreed to in writing by Buyer and Company.
Section 1.3 Effects of the Merger.
---------------------
At the Effective Time (i) the separate existence of Company shall cease and
Company shall be merged with and into Sub (Sub following the Merger is sometimes
referred to below as the "Surviving Corporation"), and (ii) the Certificate of
Incorporation of Sub in effect immediately prior to the Closing shall be the
Certificate of Incorporation of the Surviving Corporation, and (iii) the Bylaws
of Sub in effect immediately prior to the Closing shall be the Bylaws of the
Surviving Corporation. The Merger shall have the effects set forth in Section
251 of the DGCL.
Section 1.4 Directors and Officers.
----------------------
The director of the Surviving Corporation as of the Effective Time (which
shall be subject to change at Buyer's discretion) shall be the individual
identified on Schedule 1.4 hereto, to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation. The
individuals identified on Schedule 1.4 hereto shall be the officers of the
Surviving Corporation as of the Effective Time, each to hold office until his
successor is duly elected or appointed.
Section 1.5 Actions Prior to Closing.
------------------------
The following actions shall be effective as of the Closing Date:
(a) The holders of shares of the 12% Convertible Pay-In-Kind Preferred
Stock, $.01 par value per share (the "12% Preferred Stock"), shall have
converted such shares into shares of common stock, $.01 par value per share, of
Company (the "Company Common Stock") and all rights of such holders with respect
thereto shall cease upon such conversion; and
(b) The holder of shares of the 14% Pay-In-Kind Perpetual Preferred
Stock $.01 par value per share (the "14% Preferred Stock"), shall have put such
shares to
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AGREEMENT AND PLAN OF MERGER
2
<PAGE>
Company in accordance with the terms of the 14% Preferred Stock and
Buyer shall pay to such holders of 14% Preferred Stock, at the Closing, the put
price therefor (the "Preferred Stock Put Price"), and upon payment thereof, all
rights of such holders with respect thereto shall cease; and
(c) The holders of shares of all warrants to purchase shares of
Company Common Stock (each of whom is identified on Schedule 1.5(c) attached
hereto) shall have exercised such warrants and shall have paid to Company any
warrant exercise price related thereto (the "Warrants"); and
(d) The holders of all options to purchase shares of Company Common
Stock (each of whom is identified on Section 3.2(a) of the Company Disclosure
Schedule) (the "Options") shall have entered into either (i) option termination
agreements in the form of Exhibit A-1; or (ii) for those persons identified on
Schedule 1.5(d) hereto, (x) an option termination agreement in the form of
Exhibit A-2 (together with the form of agreement at Exhibit A-1, the "Option
Termination Agreements") or (y) a retention agreement between such holder and
Buyer (the "Retention Agreements") and a Letter Agreement between such holder
and Company (the "Letter Agreements") each entered into as of the date hereof.
The holders of the Options as of the Closing shall receive from the Company,
with funds provided by Buyer, in the aggregate, $27,000,000 in connection with
the execution of the Option Termination Agreements, the Retention Agreements and
the Letter Agreements, to be allocated on a pro rata basis in accordance with
the number of shares of Company Common Stock to be issued upon exercise of each
such holder's Options. Payment shall be made (i) in full at Closing to those
holders of Options that execute an Option Termination Agreement in the form of
Exhibit A-1, or (ii) for those persons identified on Schedule 1.5(d), 75% at
closing and the remaining 25% in accordance with such holder's Option
Termination Agreement, Retention Agreement or Letter Agreement.
As a result of the foregoing actions, at the time of Closing the issued and
outstanding capital stock of Company shall consist solely of shares of Company
Common Stock.
Section 1.6 Alternative Merger Structure.
----------------------------
While it is currently contemplated that the Merger shall be effected
through the merger of Company with and into Sub, Buyer shall have the option, in
its sole discretion, to cause the Merger to be effected through an alternative
transaction structure with Buyer or another Subsidiary of Buyer whereby Buyer,
such alternative Subsidiary or the Company may be the acquiror or the Surviving
Corporation (the "Alternative Transaction"), in which case the appropriate
technical provisions of this Agreement, the Company Ancillary Agreements (as
defined below) and the Buyer Ancillary Agreements (as defined below) shall be
deemed to be amended as necessary in order to effect the Alternative
Transaction. If Buyer desires to effect the Alternative Transaction, it shall
deliver a notice to Company of its election to do so. Notwithstanding the
foregoing, in the event that such alternative structure would adversely affect
the Merger consideration,
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AGREEMENT AND PLAN OF MERGER
3
<PAGE>
or the tax free nature thereof, to be paid hereunder, the consent of the Company
will be required to effect the Merger other than as described in Section 1.3.
ARTICLE II. CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock.
---------------------------
As of the Effective Time, by virtue of the Merger and without any action on
the part of the holder of any shares of capital stock of Company or capital
stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock. All shares of Company Common Stock
that are owned by Company as treasury stock or by any wholly owned Subsidiary
(as defined in Section 3.1) of Company shall be canceled and retired and shall
cease to exist and no stock of Buyer or other consideration shall be delivered
in exchange therefor.
(c) Merger Shares. Subject to Section 2.2, each issued and outstanding
share of Company Common Stock (other than shares to be canceled in accordance
with Section 2.1(b)), shall be converted into the right to receive 0.310352941
shares of the Common Stock, BEF 21.54 fractional value per share, of Buyer for
an aggregate of 4,743,434 shares (subject to reduction to account for fractional
shares and further adjustment in accordance with Section 2.3) ("Buyer Common
Stock") (collectively, the "Merger Shares"). All such shares of Company Common
Stock, when so converted, shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Shares of Buyer Common
Stock and any cash in lieu of fractional shares of Buyer Common Stock to be
issued or paid in consideration therefor upon the surrender of such certificate
in accordance with Section 2.2, without interest.
(d) Adjustments to Merger Shares. The number of Merger Shares to be
issued in the Merger shall be equitably adjusted (i) as set out in Section 2.3
and (ii) to reflect fully the effect of any stock split, reverse split,
reclassification, stock dividend (including any dividend or distribution of
securities convertible into Buyer Common Stock), reorganization,
recapitalization or other like change with respect to Buyer Common Stock
occurring after the date hereof and prior to the Effective Time.
(e) Dissenting Shares. Notwithstanding any provision of this Agreement
to the contrary, shares of Company Common Stock that are outstanding immediately
prior to the Effective Time and which are held by Stockholders (as defined in
Section 2.2(a)) who shall not have voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal for
such shares in
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AGREEMENT AND PLAN OF MERGER
4
<PAGE>
accordance with Section 262 of the DGCL (collectively, the "Dissenting Shares")
shall not be converted into or represent the right to receive Merger Shares.
Such Stockholders shall be entitled to receive payment of the appraised value of
such shares held by them in accordance with the provisions of such Section 262,
except that all Dissenting Shares held by Stockholders who shall have failed to
perfect or who effectively shall have withdrawn or lost their rights to
appraisal of such shares under such section 262 shall thereupon be deemed to
have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive Merger Shares, without any interest
thereon, upon surrender, in the manner provided in Section 2.2(b), of the
certificate or certificates that formerly evidenced such shares. Company shall
give Buyer (i) prompt notice of any demands for appraisal received by Company,
withdrawals of such demands, and any other instruments served pursuant to the
DGCL and received by Company and (ii) the opportunity to direct all negotiations
and proceedings with respect to demands for appraisal under the DGCL. Company
shall not, except with the prior written consent of Buyer, make any payment with
respect to any demands for appraisal or offer to settle or settle any such
demands.
Section 2.2 Exchange of Certificates.
------------------------
The procedures for exchanging outstanding shares of Company Common Stock
for Buyer Common Stock pursuant to the Merger are as follows:
(a) Exchange Fund. As of the Effective Time, Buyer shall cause to be
delivered to all holders of Company Common Stock ("Stockholders"), who have not
exercised their dissenter's right under Section 262 of the DGCL, for exchange in
accordance with this Section 2.2 (i) certificates representing the shares of
Buyer Common Stock issuable pursuant to Section 2.1. (subject to the terms of
Section 2.5) in exchange for outstanding shares of Company Common Stock, and
(ii) cash in an amount sufficient to make payments required pursuant to Section
2.2(d) (such cash and shares of Buyer Common Stock together with any dividends
or other distributions thereon as described in Section 2.2(h) being hereinafter
referred to as the "Exchange Fund").
(b) Exchange Procedures. Each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates") whose shares
were converted pursuant to Section 2.1 into the right to receive shares of Buyer
Common Stock shall deliver to Buyer or its designated agent at the Closing, a
letter of transmittal in the form of Exhibit B attached hereto (the "Letters of
Transmittal"), together with such Stockholder's Certificates and such other
documents as may be required pursuant to the Letter of Transmittal. Upon
surrender of a Certificate for cancellation to Buyer or to such agent as may be
appointed by Buyer, together with such Letter of Transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor,
and Buyer shall cause the transfer agent of its capital stock (the "Transfer
Agent") to issue in the name of such holder certificates representing that
number of whole shares of duly authorized, validly issued, fully paid and
nonassessable shares of Buyer Common Stock
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AGREEMENT AND PLAN OF MERGER
5
<PAGE>
which such holder has the right to receive pursuant to the provisions of this
Article II and, subject to the terms of Section 2.5, to promptly deliver such
Certificates to such holders, together with cash in lieu of fractional shares
pursuant to Section 2.2(d) and any dividends or other distributions to which
such holder is entitled pursuant to Section 2.2(h), and the Certificate so
surrendered shall immediately be canceled. In the event a certificate for shares
of Buyer Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered in the transfer
records of Company, a certificate representing the proper number of shares of
Buyer Common Stock plus cash in lieu of fractional shares pursuant to Section
2.2(d) shall be issued to a transferee if the Letter of Transmittal so provides,
and the Certificate representing such Company Common Stock is presented to Buyer
or its designated agent, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock transfer taxes
have been paid. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the certificate representing
shares of Buyer Common Stock plus cash in lieu of fractional shares pursuant to
Section 2.2(d) and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.2(h).
(c) No Further Ownership Rights in Company Common Stock. All shares of
Buyer Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash distributions paid pursuant
to subsections (d) or (h) of this Section 2.2) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Company
Common Stock, and from and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Section 2.2.
(d) No Fractional Shares. No certificate or scrip representing
fractional shares of Buyer Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any other rights of a stockholder of Buyer.
Notwithstanding any other provision of this Agreement, each holder of shares of
Company Common Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of Buyer Common Stock (after
taking into account all Certificates delivered by such holder) shall receive, in
lieu thereof, cash (without interest) in an amount equal to such fractional part
of a share of Buyer Common Stock multiplied by $99.
(e) No Liability. Promptly following the date which is twelve (12)
months after the Closing Date, Buyer shall instruct the Transfer Agent to return
all shares of Buyer Common Stock included in the Exchange Fund then in its
possession and not theretofore claimed by a holder of Company Common Stock to
the Belgium Caisse des depots et Consignations or any similar institution.
Thereafter, each holder of a Certificate
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AGREEMENT AND PLAN OF MERGER
6
<PAGE>
may surrender such Certificate to Buyer and, subject to applicable abandoned
property, escheat and similar laws, receive in exchange therefore the Buyer
Common Stock, to be provided by the Belgium Caisse des depots et Consignations
or such other institution that holds such shares of Buyer Common Stock, without
interest with any cash in lieu of fractional shares of Buyer Common Stock to
which they are entitled pursuant to Section 2.2(d), and any dividends or other
distributions with respect to the Buyer Common Stock to which they are entitled
pursuant to Section 2.2(h), to be provided by Buyer.
(f) Withholding Rights. Each of Buyer and the Surviving Corporation
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as it is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by the Surviving
Corporation or Buyer, as the case may be, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Company Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or Buyer, as the case may be.
(g) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, Buyer
will cause the Transfer Agent to issue in exchange for such lost, stolen or
destroyed Certificate the shares of Buyer Common Stock and any cash in lieu of
fractional shares of Buyer Common Stock deliverable in respect thereof pursuant
to this Agreement.
(h) Distributions with Respect to Unexchanged Buyer Common Stock. No
dividends or other distributions declared or made after the Effective Time with
respect to the Buyer Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to the
Buyer Common Stock represented thereby, and no cash payment in lieu of any
fractional shares of Buyer Common Stock shall be paid to any such holder
pursuant to Section 2.2(d), until the holder of such Certificate shall surrender
such Certificate as provided in Section 2.2(b). Subject to the effect of
escheat, tax or other applicable laws and Section 2.2(e), following surrender of
any such Certificate, there shall be paid to the holder of the certificates
representing whole shares of Buyer Common Stock issued in exchange therefor,
without interest, (i) within five (5) business days after such surrender, the
amount of any cash payable with respect to a fractional share of Buyer Common
Stock to which such holder is entitled pursuant to Section 2.2(d) and the amount
of dividends or other distributions with a record date after the Effective Time
and theretofore payable with respect to such whole shares of Buyer Common Stock,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole shares of Buyer Common Stock.
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AGREEMENT AND PLAN OF MERGER
7
<PAGE>
Section 2.3 Optional Adjustment to Merger Shares for Indebtedness.
-----------------------------------------------------
(a) At least five (5) business days prior to the scheduled Closing
Date, Company will deliver to Buyer a statement (the "Indebtedness Statement")
of the amount of the indebtedness of Company and its Subsidiaries, as of the
Closing Date. For the purpose of this Agreement, "Indebtedness" shall mean all
interest bearing indebtedness of Company and its Subsidiaries (excluding capital
leases, and net of all cash in the bank accounts of the Company) including,
without limitation (i) the aggregate Preferred Stock Put Price in respect of all
outstanding 14% Preferred Stock, (ii) amounts outstanding pursuant to
obligations under the Tranche B Term Loan and Tranche C Term Loan (together, the
"Term Loans") under Company's credit facility with Bankers Trust Company and
NationsBanks N.A. (the "Credit Agreement"), (iii) amounts outstanding, exclusive
of the letter of credit obligations set forth on Section 2.3 of the Company
Disclosure Schedule and any subsequently issued letters of credit in replacement
or substitution thereof or issued for similar purposes, pursuant to obligations
under the Credit Agreement with respect to Company's revolving credit facility,
(iv) amounts outstanding under the Company's $10,000,000 Convertible Promissory
Note due June 26, 2000 to Bankers Trust Company (the "BT Note"), (v) obligations
of Company evidenced by the $200,000,000 senior subordinated notes due August 1,
2005 (the "Notes"), and (vi) the breakage costs, if any, associated with those
certain interest rate hedge/cap transactions, each in the amount of $33,000,000
between the Company, on the one hand, and The Bank of Tokyo-Mitsubishi, Ltd.
dated Feb. 17, 1999 and Nationsbank, N.A. dated Feb. 16, 1999, respectively, on
the other hand, inclusive of accrued interest, if any, on any of the foregoing.
Company will cooperate fully with Buyer and will afford full access to the
books, records and work papers of Company from the date of this Agreement to the
Closing Date to enable Buyer to review the preparation of the Indebtedness
Statement. The Indebtedness Statement shall be based on pay-off letters
received from the holders of the Indebtedness to the extent available.
(b) At the Closing, in the event that the amount of Indebtedness
reflected on the Indebtedness Statement (defined in Section 2.3(c)) exceeds
$395,000,000 (the "Indebtedness Threshold"), then, at Buyer's option, in its
sole discretion, the number of Merger Shares to be issued in the Merger shall be
reduced by the number of shares of Buyer Common Stock determined by dividing (A)
the amount by which the Indebtedness exceeds the Indebtedness Threshold (the
"Differential"), by (B) $99 (subject to adjustment for fractional shares);
(c) Disputes
(i) Within ninety (90) business days of the Closing Date, Buyer may
notify Stonington on behalf of the Stockholders (the "Stockholder
Representative") of any dispute of any amounts reflected or required to be
reflected on the Indebtedness Statement but only on the basis that such amounts
were not arrived at in conformity with
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AGREEMENT AND PLAN OF MERGER
8
<PAGE>
the definition of Indebtedness; provided, however, such notification (the
"Revised Indebtedness Statement") shall be in writing, specifying the amount of
each disputed item and setting forth, in reasonable detail, the basis for such
dispute. Within ten business days of receipt of the Revised Indebtedness
Statement, the Stockholder Representative shall notify Buyer in writing of any
dispute of the items in the Revised Indebtedness Statement, setting out the
amounts thereof in reasonable detail and the basis for such dispute. In
connection therewith, following receipt of the Revised Indebtedness Statement,
the Stockholder Representative shall be afforded full access to the books,
records and work papers of Company and Surviving Corporation to enable the
Stockholders Representative to review the preparation of the Revised
Indebtedness Statement. In the event of such a dispute, Buyer and Stockholder
Representative shall attempt to reconcile their differences. If Buyer and
Stockholder Representative are unable to resolve any dispute of the Revised
Indebtedness Statement within five (5) business days of Stockholder
Representative's written notification to Buyer of any such disputed amounts,
Stockholder Representative and Buyer shall submit the items remaining in dispute
for resolution to an independent accounting firm of international reputation
mutually acceptable to Buyer and Stockholder Representative (such accounting
firm being referred to herein as the "Independent Accounting Firm"). Such
Independent Accounting Firm shall, within ten (10) business days after such
submission, determine and report to Buyer and Stockholder Representative upon
such remaining disputed items, which report shall be final, binding and
conclusive on Buyer and Stockholder Representative as to the Indebtedness of
Company at the Closing. The fees and disbursements of the Independent Accounting
Firm shall be allocated equally between Buyer and Company.
(ii) In acting under this Section 2.3, the Independent Accounting Firm
shall be entitled to the privileges and immunities of arbitrators.
(d) In the event that upon final determination of the Indebtedness
pursuant to Section 2.3 (c) the amount of the actual Differential is determined
to exceed the amount of the Differential calculated to exist at the time of the
Closing (such excess being the "Excess Differential"), Buyer shall have the
right to recover the Excess Differential and interest thereon as and from the
Closing Date, from the Escrow Fund in accordance with the procedure provided in
the Indemnity Escrow and Agreement (as defined in Section 2.5), except that the
full amount of the Excess Differential shall be recoverable without reduction on
account of the Stockholders' Deductible (as defined in the Indemnity and Escrow
Agreement).
Section 2.4 Stonington's Merger Shares.
--------------------------
Immediately following the Effective Time, in accordance with a stock power
to be executed by Stonington in connection with the execution of its Letter of
Transmittal, Stonington shall transfer to the LCC the Merger Shares received by
it pursuant to the Merger, such Merger Shares, subject to the terms of Section
2.5, to be held by the LLC pursuant to the Limited Liability Company Agreement
in the form of Exhibit D ("LLC Agreement").
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AGREEMENT AND PLAN OF MERGER
9
<PAGE>
Section 2.5 Escrow Shares.
-------------
Each Stockholder shall in its Letter of Transmittal direct Buyer or
Transfer Agent to deliver to the Escrow Agent (as defined in the Indemnity and
Escrow Agreement) certificates representing that number of shares of Buyer
Common Stock set forth on Schedule 2.5 (collectively, the "Escrow Shares"), and
each Stockholder (or in the case of Stonington, the LLC) shall deliver to Buyer,
for delivery to the Escrow Agent, completed stock powers in favor of the Escrow
Agent in respect of such Stockholder's Escrow Shares. Pursuant to the terms of
the Indemnity and Escrow Agreement in the form of Exhibit C attached hereto (the
"Indemnity and Escrow Agreement"), such certificates and stock powers shall be
held by the Escrow Agent as security for the indemnification obligations of
Stockholders, or in the case of Stonington, the LLC, contained in Article I of
the Indemnity and Escrow Agreement (the "Escrow Fund").
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Buyer and Sub that the statements
contained in this Article III are true and correct, except as set forth herein
or in the disclosure schedule delivered by Company to Buyer on or before the
date of this Agreement (the "Company Disclosure Schedule"). The Company
Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article III and the
disclosure in any paragraph shall qualify other paragraphs in this Article III
only to the extent that it is readily apparent from a reading of such disclosure
that it also qualifies or applies to such other paragraphs.
Section 3.1 Organization of Company.
-----------------------
Each of Company and its Subsidiaries (as defined below) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power to own,
lease and operate its property and to carry on its business as now being
conducted, and is duly qualified to do business and, to the extent such concept
applies, is in good standing as a foreign corporation in each jurisdiction
(which jurisdictions are listed in Section 3.1 of the Company Disclosure
Schedule) in which the failure to be so qualified would be reasonably likely to
have a material adverse effect on the business, properties, financial condition,
or results of operations of Company and its Subsidiaries, taken as a whole, or
to have a material adverse effect on the ability of Company to consummate the
transactions contemplated by this Agreement (a "Company Material Adverse
Effect"), provided that "Company Material Adverse Effect" shall not include any
change in or effect on the business, properties, financial condition or results
of operations of Company, to the extent that any of the foregoing are reasonably
demonstrated to be attributable to the announcement or pendency of the Merger.
Except as set forth in the Company SEC Reports (as defined in Section 3.4) filed
prior to the date hereof, neither Company nor any of its Subsidiaries directly
or indirectly owns any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any corporation,
partnership, joint venture or
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AGREEMENT AND PLAN OF MERGER
10
<PAGE>
other business association or entity, excluding securities in any publicly
traded company held for investment by Company or any of its Subsidiaries and
comprising less than five percent (5%) of the outstanding stock of such company.
As used in this Agreement, the word "Subsidiary" means, with respect to a party,
any corporation or other organization, whether incorporated or unincorporated,
of which (i) such party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of which held
by such party or any Subsidiary of such party do not have a majority of the
voting interest in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.
Section 3.2 Company Capital Structure.
-------------------------
(a) The authorized capital stock of Company consists of 30,000,000
shares of Company Common Stock and 25,000,000 shares of preferred stock, $.01
par value per share ("Company Preferred Stock"), of which 7,500,000 shares are
designated 14% Preferred Stock and 10,000,000 shares are designated 12%
Preferred Stock. As of the date of this Agreement, (i) 12,934,000 shares of
Company Common Stock are issued and outstanding, all of which are duly
authorized, validly issued, fully paid and nonassessable, (ii) 91,100 shares of
Company Common Stock are held in the treasury of Company or by Subsidiaries of
Company, (iii) 2,742,353.74 shares of 14% Preferred Stock are issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable, and (iv) 2,000,000 shares of 12% Preferred Stock are issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable, all of which are, on the date hereof, and will be on the Closing
Date after consummation of the transactions contemplated by Section 1.5, owned
beneficially and of record by the persons and in the amounts as set forth in
Section 3.2 of the Company Disclosure Schedule. The Options constitute all
options to purchase stock of Company which are outstanding as of the date of
this Agreement and which will be outstanding immediately before or on the
Closing Date under the plans under which such options were granted
(collectively, the "Company Stock Plans") and set forth on Section 3.2 of the
Company Disclosure Schedule is a complete and accurate list of all holders of
Options, indicating the number of shares of Company Common Stock subject to each
Option and the exercise price therefor. Section 3.2 of the Company Disclosure
Schedule also shows the number of shares of Company Common Stock reserved for
future issuance pursuant to the Warrants (which Warrants constitute all of the
warrants to purchase shares of Company's capital stock) and which will be
outstanding on the Closing Date and other outstanding rights to purchase shares
of Company Common Stock outstanding as of the date of this Agreement and which
will be outstanding immediately before or on the Closing Date and a description
of the agreement or other document under which such Warrants or other rights
were granted and sets forth a complete and accurate list of all holders of
Warrants or other rights indicating the number and type of shares of Company
Common Stock or Company Preferred Stock subject to Warrants or
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AGREEMENT AND PLAN OF MERGER
11
<PAGE>
other rights and the exercise price. All shares of Company Common Stock or
Company Preferred Stock subject to issuance as specified above are duly
authorized and reserved and the shares of Company Common Stock, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, shall be validly issued, fully paid and nonassessable. Except as set
forth in the Certificate of Incorporation of Company, there are no obligations,
contingent or otherwise, of Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of Company Common Stock or any other
capital stock of Company or any of its Subsidiaries or to provide funds to or
make any material investment (in the form of a loan, capital contribution or
otherwise) in any Subsidiary of Company or any other entity other than
guarantees of bank obligations of Subsidiaries of Company entered into in the
ordinary course of business. All of the outstanding shares of capital stock of
each of Company's Subsidiaries are duly authorized, validly issued, fully paid
and nonassessable and all such shares are owned by Company or another Subsidiary
of Company free and clear of all security interests, liens, claims, pledges,
agreements, limitations in Company's voting rights, charges or other
encumbrances of any nature.
(b) Except for the Company Stock Plans, the Warrants and shares of
capital stock of Company issuable pursuant to any of the foregoing, the BT Note
or the 12% Preferred Stock, (i) there are no equity securities of Company or any
of its Subsidiaries, or any security exchangeable into or exercisable for such
equity securities, issued, reserved for issuance or outstanding and (ii) there
are no other options, warrants, equity securities, calls, rights, commitments or
agreements of any character to which Company or any of its Subsidiaries is a
party or by which it or any of its Subsidiaries is bound obligating Company or
any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of Company or any of its
Subsidiaries or obligating Company or any of its Subsidiaries to grant, extend,
accelerate the vesting of, otherwise modify or amend or enter into any such
option, warrant, equity security, call, right, commitment or agreement. There
are no voting trusts, proxies or other voting agreements or understandings with
respect to the shares of capital stock of Company or any of its Subsidiaries.
Section 3.3 Authority; No Conflict; Required Filings and Consents.
-----------------------------------------------------
(a) Company has all requisite corporate power and authority to enter
into this Agreement and each of the agreements and documents contemplated hereby
to which Company is a party (the "Company Ancillary Agreements") and to
consummate the transactions contemplated by this Agreement and the Company
Ancillary Agreements. The execution and delivery of this Agreement and the
Company Ancillary Agreements and the consummation of the transactions
contemplated by this Agreement and the Company Ancillary Agreements by Company
have been duly authorized by all necessary corporate action on the part of
Company other than with respect to the Merger: the approval and adoption of this
Agreement and the Merger by the affirmative vote of a majority of the voting
power of the then outstanding shares of Company Common Stock, and the filing of
the Certificate of Merger with the Secretary of State of Delaware as required by
the DGCL. This Agreement has been and each of the Company
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AGREEMENT AND PLAN OF MERGER
12
<PAGE>
Ancillary Agreements has been or will be duly executed and delivered by Company
and (assuming the due execution and delivery of such agreements by the other
parties thereto) constitutes or, with respect to the Company Ancillary
Agreements, constitutes or will constitute, the valid and binding obligations of
Company, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles (the "Bankruptcy and Equity Exception"). The Board of
Directors of Company has not taken any action to accelerate any options granted
under the Company Stock Plans or Warrants and has approved the treatment of the
Options and Warrants set forth in Section 1.5 of this Agreement. Company has
delivered or concurrently with the execution of this Agreement is delivering any
required notice under the Warrants to the holders thereof.
(b) The execution and delivery of this Agreement and each of the
Company Ancillary Agreements by Company does not, and the consummation of the
transactions contemplated by this Agreement and the Company Ancillary Agreements
will not, (i) conflict with, or result in any violation or breach of, any
provision of the Certificate of Incorporation or Bylaws of Company or the
charter, by-laws, or other organizational document of any Subsidiary of Company,
(ii) result in any violation or breach of, or constitute (with or without notice
or lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material benefit)
under, or require a consent or waiver under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which Company or any of its Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound, or (iii) except as provided in clauses (i), (ii), (iii) and (iv) in
paragraph (c) below, conflict with or violate any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Company or any of its Subsidiaries or any of its or their
properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, defaults, terminations, cancellations or accelerations
which are not, individually or in the aggregate, reasonably likely to have a
Company Material Adverse Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any domestic or foreign, federal, state, county or
municipal government, or any department, agency, bureau, commission or other
similar type body obtaining authority therefrom, or created pursuant to any law,
(including without limitation, Environmental Laws, as defined in Section 3.12)
or any court or arbitration body ("Governmental Entity"), is required by or with
respect to Company or any of its Subsidiaries in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby and thereby, except for (i) the filing of the pre-merger
notification report under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, ("HSR Act"), (ii) the filing of the Certificate of Merger with
the Delaware Secretary of State, (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities laws and the laws of any foreign country and
(iv) such other consents, authorizations, filings, approvals and registrations
which, if not obtained or made, would not be reasonably likely to have a Company
Material Adverse Effect.
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AGREEMENT AND PLAN OF MERGER
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<PAGE>
Section 3.4 SEC Filings; Financial Statements.
---------------------------------
(a) Company has filed and made available to Buyer all forms, reports
and documents, and any amendments thereto, required to be filed by Company with
the Securities and Exchange Commission ("SEC") since January 1, 1997. All such
required forms, reports and documents (including those that Company may file
after the date hereof until the Closing) are referred to herein as the "Company
SEC Reports" The Company SEC Reports (i) were prepared in compliance in all
material respects with the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Company SEC Reports, and
(ii) except to the extent that information contained in the Company SEC Reports
has been amended or superseded by a later filed Company SEC Report, did not at
the time they were filed contain any untrue statement of a material fact or omit
to state a material fact required to be stated in such Company SEC Reports or
necessary in order to make the statements in such Company SEC Reports, in the
light of the circumstances under which they were made, not misleading. None of
Company's Subsidiaries is required to file any forms, reports or other documents
with the SEC.
(b) Company has also provided Buyer with unaudited consolidated
financial statements as of, and for the year ended December 31, 1999 (the "1999
Financial Statements"). The unaudited balance sheet of Company as of December
31, 1999 is referred to herein as the "Company Balance Sheet." Each of the
consolidated financial statements (including, in each case, any related notes or
schedules) contained in the Company SEC Reports complied as to form in all
material respects with the applicable published rules and regulations of the SEC
with respect thereto. The Company SEC Reports and the 1999 Financial Statements
were prepared in accordance with United States generally accepted accounting
principles ("U.S. GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited statements, as permitted by the SEC on Form 10-Q
under the Exchange Act) and fairly presented in all material respects the
consolidated financial position of Company and its Subsidiaries as of the dates
and the consolidated results of its operations and cash flows for the periods
indicated, consistent in all material respects with the books and records of
Company and its Subsidiaries, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments and
for the absence of complete footnotes which were not or are not expected to be
material in amount.
Section 3.5 No Undisclosed Liabilities.
--------------------------
Except as disclosed in the 1999 Financial Statements and the Company SEC
Reports filed prior to the date hereof, and except for normal or recurring
liabilities incurred since December 31, 1999 in the ordinary course of business
consistent with past
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AGREEMENT AND PLAN OF MERGER
14
<PAGE>
practices, Company and its Subsidiaries do not have any liabilities, either
accrued, contingent or otherwise (required to be reflected in financial
statements in accordance with U.S. GAAP or in the notes thereto), which
individually or in the aggregate are reasonably likely to have a Company
Material Adverse Effect.
Section 3.6 Absence of Certain Changes or Events.
------------------------------------
Except as disclosed in the 1999 Financial Statements or Company SEC Reports
filed prior to the date hereof, since September 30, 1999, Company and its
Subsidiaries, have conducted their businesses only in the ordinary course and in
a manner consistent with past practice and, since such date, there has not been
(i) any change in the financial condition, results of operations, business, or
properties of Company and its Subsidiaries, taken as a whole, that has had, or
is reasonably likely to have, a Company Material Adverse Effect; (ii) any
damage, destruction or loss (whether or not covered by insurance) with respect
to Company or any of its Subsidiaries having a Company Material Adverse Effect;
(iii) any revaluation by Company of any of its assets having a Company Material
Adverse Effect; or (iv) any other action or event that would have required the
consent of Buyer pursuant to Section 5.1 of this Agreement had such action or
event occurred after the date of this Agreement.
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<PAGE>
Section 3.7 Taxes.
-----
(a) Company and each of its Subsidiaries have filed all Tax Returns
(as defined below) that they were required to file, and all such Tax Returns
were correct and complete except for any failure to file, error or omission
that, individually or in the aggregate, is not reasonably likely to have a
Company Material Adverse Effect. Company and each of its Subsidiaries have paid
or made adequate provisions in accordance with US GAAP for the payment of all
Taxes (as defined below) that are shown to be due on any such Tax Returns. All
Taxes that Company or any of its Subsidiaries is or was required by law to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Entity, except for any such
Taxes with respect to which the failure to withhold, collect or pay,
individually or in the aggregate, is not reasonably likely to have a Company
Material Adverse Effect. For purposes of this Agreement, "Taxes" means all
taxes, charges, fees, levies or other similar assessments or liabilities,
including without limitation income, gross receipts, ad valorem, premium, value
added, excise, real property, personal property, sales, use, services, transfer,
withholding, employment, payroll and franchise taxes imposed by the United
States of America or any state, local or foreign government, or any agency
thereof, or other political subdivision of the United States or any such
government, and any interest, fines, penalties, assessments or additions to tax
resulting from, attributable to or incurred in connection with any tax or any
contest or dispute thereof. For purposes of this Agreement, "Tax Returns" means
all reports, returns, declarations, statements or other information required to
be supplied to a taxing authority in connection with Taxes.
(b) Company has delivered to Buyer correct and complete copies of all
federal income Tax Returns, examination reports and statements of deficiencies
assessed against or agreed to by any of Company or any of its Subsidiaries since
December 31, 1996. Except as set forth in Section 3.7(b) of the Company
Disclosure Schedule, the federal income Tax Returns of Company and each of its
Subsidiaries have never been audited by the Internal Revenue Service. Company
has delivered or made available to Buyer correct and complete copies of all
other material Tax Returns of Company and its Subsidiaries together with all
related examination reports and statements of deficiency for all periods from
and after December 31, 1996. No examination or audit of any Tax Return of
Company or any of its Subsidiaries by any Governmental Entity is currently in
progress or, to the knowledge of Company and Stockholders, threatened or
contemplated. Neither Company nor any of its Subsidiaries has been informed by
any jurisdiction that the jurisdiction believes that Company or any of its
Subsidiaries was required to file any Tax Return that was not filed, except for
any Tax Return with respect to which the failure to file, individually or in the
aggregate, is not reasonably likely to have a Company Material Adverse Effect.
(c) Neither Company nor and of its Subsidiaries has waived any statute
of limitations with respect to Taxes or agreed to an extension of time with
respect to a Tax assessment or deficiency, which waiver or extension of time
remains currently in effect.
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AGREEMENT AND PLAN OF MERGER
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<PAGE>
(d) Neither Company nor any of its Subsidiaries is a "consenting
corporation" within the meaning of Section 341(f) of the Code, and none of the
assets of Company or its Subsidiaries are subject to an election under
Section 341(f) of the Code.
(e) Neither Company nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
(f) Neither Company nor any of its Subsidiaries has made any payment,
is obligated to make any payment, or is a party to any agreement that obligates
it to make any payment that will be an "excess parachute payment" under Section
280G of the Code.
(g) Neither Company nor any of its Subsidiaries has any actual or
potential liability for any Taxes of any person (other than Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of federal, state, local, or foreign law), or as a transferee or
successor, by contract, or otherwise.
(h) Neither Company nor any of its Subsidiaries has undergone a change
in its method of accounting resulting in an adjustment to its taxable income
pursuant to Section 481(a) of the Code.
(i) Neither Company nor any of its Subsidiaries is or has ever been a
member of a group of corporations with which it has filed (or been required to
file) consolidated, combined or unitary Tax Returns, other than a group of which
only Company and its Subsidiaries are or were members.
Section 3.8 Title to Properties.
-------------------
(a) Section 3.8 of the Company Disclosure Schedule sets forth a list
of all real property leased by Company or its Subsidiaries as of the date set
forth therein and the location of such premises. Company has made available to
Buyer true and complete copies of all real property leases ("Leases"). Neither
Company nor Subsidiary is in default, nor, to the knowledge of Company, is any
other party in default under any of the Leases, except where the existence of
such defaults, individually or in the aggregate, is not reasonably likely to
have a Company Material Adverse Effect.
(b) Except as specifically disclosed in Section 3.8 of the Company
Disclosure Schedule, Company or its Subsidiaries (as indicated in Section 3.8 of
the Company Disclosure Schedule) has good and marketable title in fee simple to
all of its real property.
(c) None of the real or personal property owned or used by Company or
any Subsidiary is subject to any mortgage, pledge, deed of trust, lien (other
than for taxes not yet due and payable), conditional sale agreement, security
title, encumbrance, or other adverse claim or interest of any kind.
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<PAGE>
Section 3.9 Intellectual Property.
---------------------
(a) Company and the Subsidiaries own, or are licensed or otherwise
possess legally enforceable rights to use, all patents, trademarks, trade names,
domain names, service marks, copyrights and any applications therefor, trade
secrets, maskworks, know how, computer software programs or applications (in
both source code and object code form), and proprietary information that are
used by Company or any Subsidiary in and material to the business of Company or
any Subsidiary as currently conducted (the "Company Intellectual Property
Rights"). Except as would not have a Company Material Adverse Effect, where
appropriate, Company and the Subsidiaries have received executed assignments for
Company Intellectual Property Rights and have recorded such assignments with the
appropriate domestic or foreign filing offices. Except as would not have a
Company Material Adverse Effect, with respect to any licenses, sublicenses and
other agreements to which Company or any Subsidiary is a party, and pursuant to
which Company or any Subsidiary is authorized to use (i) any third party
patents, trademarks, trade secrets, mask works, or copyrights, including
software which are incorporated in, are, or are used to form a part of, any
Company product (the "Company Third Party Intellectual Property Rights"), or
(ii) any trade secret of a third party, such license, sublicense or other
agreement is valid and enforceable, is binding on all parties to such agreement,
and is in full force and effect.
(b) Except as would not have a Company Material Adverse Effect,
neither Company nor any Subsidiary is, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
hereunder, in breach or violation of any license or sublicense of intellectual
property to which Company or a Subsidiary is a party. Except as set forth in
Schedule 3.9 of the Company Disclosure Schedule (which claims, if determined
adversely, are not reasonably likely to have a Company Material Adverse Effect),
no claims are being asserted or, to the knowledge of Company and the
Subsidiaries, no claims are threatened by any person, or, to the knowledge of
the Company, there are no grounds for any bona fide claims: (i) alleging that
the use of Company Intellectual Property Rights or Company Third Party
Intellectual Property Rights by Company or any Subsidiary infringes the
intellectual property of any third party (ii) alleging that the manufacture,
sale, licensing or use of any product as now used, sold offered for sale, or
licensed by Company or any Subsidiary infringes on any copyright, patent,
trademark, service mark or trade secret; (iii) challenging the ownership,
validity or enforceability of any of the Company Intellectual Property Rights;
or (iv) challenging Company's or any Subsidiary's license or legally enforceable
right to use, or the validity or enforceability of any Company Third Party
Intellectual Property Rights.
(c) All registrations owned by Company and included in the Company
Intellectual Property Rights are, to the knowledge of Company and the
Subsidiaries, valid and subsisting. Except as set forth in Schedule 3.9 of the
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AGREEMENT AND PLAN OF MERGER
18
<PAGE>
Company Disclosure Schedule, to the knowledge of Company and the Subsidiaries,
there has been and is no unauthorized use, disclosure, infringement or
misappropriation of any of the Company Intellectual Property Rights material to
Company or any Subsidiary. Except as set forth in Schedule 3.9 of the Company
Disclosure Schedule (which claims, if determined adversely, are not reasonably
likely to have a Company Material Adverse Effect) neither Company nor any
Subsidiary (i) is being sued as a defendant in any claim, suit, action or
proceeding for infringement of any patents, trademarks, service marks,
copyrights, misappropriation of any trade secret, or infringement of any
proprietary right of any third party; or (ii) is being threatened or charged in
writing with infringement of any patents, trademarks, service marks, copyrights
or misappropriation of trade secrets of any third party.
(d) No Company Intellectual Property Right is subject to any
outstanding order, judgment, decree, or stipulation restricting in any manner
the licensing thereof by Company. To the knowledge of Company and Subsidiaries,
no Company Third Party Intellectual Property Right is subject to any outstanding
order, judgment, decree, or stipulation restricting in any manner the use
thereof by Company or any Subsidiary. Except for contracts licensing Company's
or any Subsidiary's products executed in the ordinary course of business and in
accordance with Company's past practices, and except as would not have a Company
Material Adverse Effect, neither Company nor any Subsidiary has entered into any
agreement to indemnify any other person against any charge of infringement of
any Company Third Party Intellectual Property Right.
(e) Company and the Subsidiaries have taken reasonable measures in
accordance with normal industry practice to protect and preserve (i) the
validity and enforceability of trademarks included in the Company Intellectual
Property Rights, and (ii) the confidentiality and enforceability of its trade
secrets and other confidential information. Except as would not have a Company
Material Adverse Effect, Company and the Subsidiaries have taken reasonable
measures in accordance with normal industry practice (i) to protect its trade
secrets and other confidential information from disclosure to an unauthorized
third party by any employee, consultant or contractor; and (ii) to vest in
Company or the Subsidiaries exclusive ownership of intellectual property
invented or developed by any employee, consultant or contractor. To the
knowledge of Company and the Subsidiaries, no trade secret or confidential
information material to the business of Company or any Subsidiary as currently
conducted has been misappropriated. To the knowledge of Company and the
Subsidiaries, no employee, contractor, agent or consultant of Company or any
Subsidiary has misappropriated any trade secrets or other confidential
information of any other person in the course of their work for Company and any
Subsidiaries. Except as would not have a Company Material Adverse Effect,
neither Company nor any Subsidiary has any written agreements with employees,
contractors or consultants granting any such employee, contractor or consultant
nonexclusive ownership rights to the portions of Company's Intellectual Property
Rights so created by such individual.
(f) To the knowledge of Company and the Subsidiaries, no employee,
contractor, agent or consultant of Company or any Subsidiary is in default or
breach of any term of any employment agreement, non-disclosure agreement,
assignment of invention agreement or similar agreement or contract relating in
any way to the protection, ownership, development, use or transfer of Company
Intellectual Property Rights. No director, officer or employee of Company or any
Subsidiary owns, in whole or in part, any Company Intellectual Property Right.
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19
<PAGE>
Section 3.10 Agreements, Contracts and Commitments.
-------------------------------------
(a) As of the date hereof, there are no contracts or agreements that
are material contracts (as defined in Item 601(b)(10) of Regulation S-K) with
respect to Company and its Subsidiaries ("Company Material Contracts"), other
than those Company Material Contracts identified on the exhibit indices of
Company's most recent annual report on Form 10-K, the Company SEC Reports filed
thereafter and prior to the date of this Agreement or set forth on Section 3.10
of the Disclosure Schedule. Each Company Material Contract has not expired by
its terms and is in full force and effect against Company and, to the knowledge
of Company, against the other party or parties thereto. Neither Company nor any
of its Subsidiaries, nor to the knowledge of Company, any other party thereto,
is in violation of or in default under (nor does there exist any condition
which, upon the passage of time the giving of notice or both, would cause such a
violation of or default under) any lease, permit, concession, franchise, license
or other contract or agreement to which it is a party or by which it or any of
its properties or assets is bound, except for violations or defaults that,
individually or in the aggregate, have not resulted in and are not reasonably
likely to result in a Company Material Adverse Effect.
(b) Section 3.10 of the Company Disclosure Schedule sets forth a
complete list of each lease, permit, concession, franchise, license or other
contract or agreement to which Company or any of its Subsidiaries is a party or
bound (i) with any Affiliate of Company (other than any Subsidiary which is a
direct or indirect wholly owned subsidiary of Company), other than any
agreements which are or have been fully performed and under which neither
Company nor any Subsidiary of Company has any continuing rights, liability or
obligation, or (ii) that includes any non-competition or similar provision
imposing any restrictions or undertakings on Company or any Subsidiary of
Company, other than any agreements under which neither Company nor any
Subsidiary of Company has any continuing rights, liability or obligation or is
subject to any restriction or undertaking. Copies of all the agreements,
contracts and arrangements set forth in Section 3.10 of the Company Disclosure
Schedule have heretofore been made available to Buyer and such copies are
accurate and complete.
Section 3.11 Litigation.
----------
Except as described in the Company SEC Reports filed prior to the date
hereof, there is no action, suit or proceeding, claim, arbitration or
investigation thereto, against Company or any of its Subsidiaries pending or as
to which Company or any of its Subsidiaries has received any written notice of
assertion, which, if determined adversely, individually or in the aggregate, is
reasonably likely to have a Company Material Adverse Effect (including as to
those matters set forth on Section 3.11 of the Company Disclosure Schedule).
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20
<PAGE>
Section 3.12 Environmental Matters.
---------------------
Except as is not reasonably expected to have a Company Material Adverse
Effect:
(a) Any and all oil, petroleum products, chemicals, waste oil,
hazardous waste, hazardous substances, toxic substances or materials, PCBs,
asbestos, pollutants or contaminants, or hazardous materials, in each case
regulated by any Environmental Law as hereafter defined (hereafter, "Hazardous
Materials") used or generated by Company or any Subsidiary since August 11, 1995
have been generated, used, stored, treated and disposed on and at any of the
properties or facilities owned or leased by Company or any Subsidiary (for the
purposes of this Section, a "Site") in material compliance with all applicable
laws, court orders, and legally binding government authorizations related to the
protection of public health or worker safety as related to Hazardous Material,
the environment or the management of pollution or Hazardous Materials
(collectively "Environmental Laws") and Company and each Subsidiary is in
material compliance with all Environmental Laws. For purposes of this Agreement,
"Environmental Laws" include all then applicable federal, state and local laws,
statutes, ordinances, rules, regulations, orders, or legally binding
requirements of any Governmental Entity pertaining to health or safety as
related to Hazardous Material and protection of the environment, natural
resources, conservation, wildlife, waste management, Hazardous Materials
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), the Resource Conservation and
Recovery Act ("RCRA"), the Clean Air Act, the Solid Waste Disposal Act, the
Water Pollution Control Act, the Clean Water Act, the Toxic Substances Control
Act, the Emergency Planning and Community Right-to-Know Act of 1986, the
Hazardous Materials Transportation Act, any corresponding state and local
statutes, ordinances and amendments or successor legislation to such acts, the
common law and any similar laws, rules, or regulations promulgated thereunder.
(b) Neither Company nor any Subsidiary has received or become subject
to any written correspondence, claim, notice, complaint, court order,
administrative order or request for information from any Governmental Entity or
private party (i) alleging violation or potential violation of, or asserting any
exceedence or noncompliance with any Environmental Law, (ii) asserting potential
liability under Environmental Law , or (iii) requesting investigation or clean-
up of any Site under any Environmental Law.
(c) No Hazardous Materials used or generated by Company or any
Subsidiary, are being, or are intended to be or, to the knowledge of Company,
are threatened with being spilled, released, discharged, disposed, placed,
leaked, or otherwise caused to become located in the air, soil or water in,
under or upon a Site or any land adjacent thereto except in material compliance
with Environmental Law. Company has made available to Buyer copies of all
material correspondence, notices or other documents filed or received since
August 11, 1995 pursuant to any Environmental Law.
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AGREEMENT AND PLAN OF MERGER
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<PAGE>
(d) Neither Company nor any Subsidiary has received any written notice
that any sites, locations or facilities to which any Hazardous Materials have
been shipped or sent to by any of them are subject to or threatened to become
subject to any governmental investigation, response action or clean up order.
Company has provided Buyer with copies of all manifests, bills of lading and
other receipts or evidence documenting disposal or recycling of Hazardous
Materials offsite since August 11, 1995.
(e) Neither Company nor any Subsidiary has treated, stored for more
than ninety (90) days, disposed of or recycled any hazardous wastes regulated
pursuant to RCRA on any Site nor, to the knowledge of Company, has anyone else,
treated, stored for more than ninety (90) days, disposed of or recycled any of
the foregoing on any Site.
(f) There are no underground tanks and other storage facilities for
Hazardous Materials located at any Site and, to the knowledge of Company, no
other underground tanks for Hazardous Materials are or have been located on any
Site and copies of all notifications made to or received from any Governmental
Entity since August 11, 1995 pursuant to Environmental Laws relating to
underground storage tanks have been provided to Buyer. Any underground tanks or
storage facilities that have been removed and had their contents disposed of
have been removed and the contents disposed of in material compliance with all
Environmental Laws.
(g) Company and each of its Subsidiaries has: (i) all governmental
permits, authorizations, or approvals required under all Environmental Laws to
conduct the business operations of Company at any Site; (ii) Company and its
Subsidiaries are in compliance with all such permits, authorizations or
approvals, and (iii) Company and its Subsidiaries have provided copies of all
such permits, authorizations or approvals to Buyer.
(h) There are no asbestos-containing materials or capacitors,
transformers or other equipment or fixtures containing PCBs located at any Site.
(i) There are no liens, under Environmental Laws on any Site or any
assets of Company or any Subsidiary and no, to the knowledge of Company,
government actions have been taken or are in process which could subject any
Site or any such assets to such liens, and Company is not required to place any
notice or restriction relating to Hazardous Materials at any Site in any deed to
such Site.
(j) Company has made available to Buyer all environmental reports,
audits, assessments or studies conducted since August 11, 1995, or provided to
Stonington in connection with its acquisition of the shares of capital stock of
the Company on or about that date, within the possession of Company, any
Subsidiary or Stonington with respect to Company's or any Subsidiary's
facilities or any Site or the environs of any Site and has provided to Buyer the
results of sampling and analysis conducted since August 11, 1995, or in
connection with Stonington's acquisition of the majority of shares of capital
stock of the Company on or about that date, of any asbestos, air, soil, or
water, including ground and surface water, undertaken with respect to its
facilities or any Site.
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<PAGE>
(k) Company and each Subsidiary is in compliance with all Federal and
state worker safety laws and requirements, including, but not limited to
requirements under the Occupational Safety and Health Act.
(l) Nothing has come to the attention of the Company since August 11,
1995 or in connection with Stonington's acquisition of the shares of capital
stock of the Company on or about that date to cause the Company to believe that
any representation or warranty set forth in this Section 3.12 which is limited
in time to such date or event, would not be true or correct in all material
respects prior to said date or event.
Section 3.13 ERISA and Employee Benefit Plans.
---------------------------------
(a) Section 3.13 of the Company Disclosure Schedule lists every
material plan, arrangement or policy, written or oral, relating to current or
former employees of Company or of any member of a controlled group or affiliated
service group (as defined in Internal Revenue Code Section 414(b), (c), (m) and
(o)) which includes Company (an "Affiliate"), which is:
(i) an employee benefit plan within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"); or
(ii) a multiemployer plan within the meaning of Section 3(37) or
4001(a)(3) of ERISA; or
(iii) a compensation, stock purchase, stock option, stock bonus, stock
appreciation, VEBA (as defined in Code Section 501(c)(9)), severance, health,
welfare, life, disability or other benefit plan, fund, program, arrangement or
practice which is not covered by clause (i) or (ii) above (including policies
related to vacation pay, holiday time, moving expense reimbursement programs,
sick leave and salary reduction agreements, charge-in-control agreements, and
severance agreements); or
(iv) any statutory or non-statutory benefits, benefit plans or
arrangements offered to Company's non-US based workforce.
(Hereinafter, "ERISA Benefit Plan" refers to plans or arrangements under clauses
(i) and (ii) above and "Benefit Plan" refers to plans or arrangements under
clauses (i)-(iv) above).
(b) There are no agreements or commitments of Company or any
Affiliate, whether or not legally binding, to create any additional Benefit Plan
not listed on Section 3.13 of the Company Disclosure Schedule.
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AGREEMENT AND PLAN OF MERGER
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<PAGE>
(c) With respect to each written Benefit Plan, Company has furnished
to Buyer complete and accurate copies of each Benefit Plan described in Section
3.13 of the Company Disclosure Schedule, including all amendments thereto. With
respect to each ERISA Benefit Plan, Company has also furnished the three most
recent Form 5500s and the most recent Internal Revenue Service determination
letter (if any), plan actuarial report, summary plan description, summary annual
report and employee manual, as well as summaries of material modifications,
material employee communications, and all reports of the Benefit Plan required
by ERISA and the regulations thereunder. For each health plan offered to current
or former employees, Company will furnish to Buyer a listing showing
participants, coverage type, COBRA participants, beneficiaries and claims
experience for the year ended December 31, 1999. Company has also furnished
Buyer copies of any insurance contracts or trust agreements through which any
ERISA Benefit Plan is funded, any custodial or investment contracts relating to
assets or benefits under the Benefit Plan, any contracts relating to record
keeping or administration for the Benefit Plan, and notice of any material
adverse change occurring with respect to any Benefit Plan since the date of the
most recently completed and filed annual report.
(d) Except as set forth on Section 3.13 of the Company Disclosure
Schedule, with respect to each ERISA Benefit Plan which is a pension plan within
the meaning of Section 3(2) of ERISA:
(i) as of the end of the most recent plan year, the value of the ERISA
Benefit Plan's assets equals or exceeds the total value of all vested and
unvested employee benefits under such Plan, whether determined on an ongoing
basis or termination basis;
(ii) there is no "accumulated funding deficiency" and, to the knowledge of
Company, no "prohibited transaction" has occurred (as such terms are defined in
ERISA), and the funding method and actuarial assumptions are reasonable and
acceptable under ERISA;
(iii) Company has incurred no liability to the Pension Benefit Guaranty
Corporation ("PBGC") with respect to the ERISA Benefit Plan (other than any
liability for premiums in the ordinary course);
(iv) to the knowledge of Company, any Plan meant to be a qualified plan
meets all applicable requirements of Section 401(a) of the Internal Revenue
Code;
(v) Company has properly and timely made all governmental filings with
respect to ERISA Benefit Plans except where any failure to make any such filing
would not reasonably be expected to have a Company Material Adverse Effect;
(vi) the Company Balance Sheet reflects all accrued but unpaid liabilities
with respect to such ERISA Benefit Plans in accordance with U.S. GAAP;
(vii) there has been no termination or partial termination of any ERISA
Plan; there has been no filing with the PBGC of an intent to terminate any ERISA
Benefit Plan,
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AGREEMENT AND PLAN OF MERGER
24
<PAGE>
nor has the PBGC instituted any proceedings to terminate any ERISA Benefit Plan;
and neither Company nor any Affiliate has received a notice of deficiency or
liability or a demand for payment from the PBGC; and
(viii) if such ERISA Benefit Plan is a multiemployer pension plan to which
Company or any Affiliate has made contributions, there would be no withdrawal
liability on or after the Closing Date under Title IV of ERISA if Company or any
Affiliate ceased to make contributions to the Plan on the day of Closing, other
than as set forth in Section 3.13 of the Disclosure Schedule;
(e) Except as set forth in Section 3.13 of the Disclosure Schedule,
with respect to each Benefit Plan:
(i) each Benefit Plan complies currently and has complied in the past, as
to form and operation, in all material respect with the provisions of all
applicable Federal and state laws, such as ERISA and the Internal Revenue Code;
and, to the knowledge of Company, no nonexempt "prohibited transaction" (as
defined in Section 4975 of the Code or enumerated in Section 406(a) or (b) of
ERISA) has occurred;
(ii) all required government filings, reports, and notices have been
properly and timely made, except where any failure to make any such filing would
not reasonably be expected to have a Company Material Adverse Effect;
(iii) to the knowledge of Company, no such Benefit Plan is currently under
audit or investigation by any governmental agency or body and no correction
procedures have been initiated or completed with the Internal Revenue Service
for any ERISA Benefit Plan meant to be qualified under Section 401 of the Code
or with the Department of Labor for any ERISA Benefit Plan;
(iv) there are no actions, suits or claims (other than routine claims for
benefits) pending or, to the knowledge of Company, threatened against any of the
Benefit Plans or against the assets of any Benefit Plan;
(v) all material premiums due in connection with the Benefit Plan,
including without limitation premiums due the PBGC and material premiums for
life and health insurance and annuity contracts, have been paid in full when due
and, except as specifically disclosed on Section 3.13 of the Company Disclosure
Schedule, there are no such premiums that are attributable to any period of time
before the Closing that will not have been paid or accrued for on or before the
Closing;
(vi) all reports and filings made by Company pursuant to ERISA, including
without limitation all Form 5500 and attachments, summary annual reports, and
participant reports, and any other documents reasonably necessary to enable
Buyer to perform its material responsibilities with respect to any Benefit Plan
subsequent to the Closing, are and shall be available at the offices of Company
on and immediately after the Closing;
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<PAGE>
(f) Except as set forth in Section 3.13 of the Company Disclosure
Schedule and as required by COBRA or the Family Medical Leave Act, no Benefit
Plan provides, and neither Company nor any Affiliate has made any promises or
incurred any obligation to provide any health or other welfare benefits to any
retirees, former employees, or their dependents;
Section 3.14 Compliance With Laws.
--------------------
Company and each of its Subsidiaries has complied with, is not in violation
of, and has not received any written notice alleging any violation with respect
to, any foreign, federal, state or local statute, law or regulation with respect
to the conduct of its business, or the ownership or operation of its properties
or assets, except for failures to comply or violations which, individually or in
the aggregate, have not had and are not reasonably likely to have a Company
Material Adverse Effect.
Section 3.15 Permits.
-------
Company and each of its Subsidiaries have all permits, licenses and
franchises from Governmental Entities required to conduct their businesses as
now being conducted (the "Company Permits"), except for such permits, licenses
and franchises the absence of which, individually or in the aggregate, have not
resulted in, and are not reasonably likely to result in, a Company Material
Adverse Effect. Company and its Subsidiaries are in compliance with the terms
of the Company Permits, except where the failure to so comply, individually or
in the aggregate, is not reasonably likely to have a Company Material Adverse
Effect.
Section 3.16 Labor Matters.
-------------
Neither Company nor any of its Subsidiaries is a party to or otherwise
bound by any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization except as set out on
Schedule 3.16 of the Disclosure Schedule. Neither Company nor any of its
Subsidiaries is the subject of any proceeding asserting that Company or any of
its Subsidiaries has committed an unfair labor practice or is seeking to compel
it to bargain with any labor union or labor organization that, individually or
in the aggregate, is reasonably likely to have a Company Material Adverse
Effect, nor is there pending or, to the knowledge of Company, threatened, any
labor strike, dispute, walkout, work stoppage or lockout involving Company or
any of its Subsidiaries that, individually or in the aggregate, is reasonably
likely to have a Company Material Adverse Effect.
Section 3.17 Insurance.
---------
Section 3.17 of the Disclosure Schedule sets forth a list (including the
name of the insurer, the name of the policyholder, the name of each insured, the
periods of coverage and the scope of coverage) of all policies of fire, theft,
casualty, liability, burglary,
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AGREEMENT AND PLAN OF MERGER
26
<PAGE>
fidelity, workers compensation, business interruption, environmental, product
liability, fidelity, workers compensation, product warranty, automobile and
other forms of insurance of Company and any of its Subsidiaries. All such
insurance policies are with reputable insurance carriers, provide customary
coverage for all normal risks incident to the business, of Company and its
Subsidiaries and their respective properties and assets, and are in character
and amount at least equivalent to that carried by persons engaged in similar
businesses and subject to the same or similar perils or hazards. None of such
policies are subject to any retrospective adjustment.
Section 3.18 Government Contracts.
--------------------
Neither Company nor any of its Subsidiaries is or has been suspended or
debarred (within the meaning of 48 C.F.R. Ch. 1, Section 52 or any similar
foreign law, statute or regulation) from bidding on contracts or subcontracts
with any Governmental Entity; no such suspension or debarment has been initiated
or threatened; and the consummation of the transactions contemplated by this
Agreement will not result in any such suspension or debarment that, individually
or in the aggregate, is reasonably likely to have a Company Material Adverse
Effect. Neither Company nor any of its Subsidiaries has since August 11, 1995
been audited or investigated or is now being audited or, to Company's knowledge,
investigated by the U.S. Government Accounting Office, the U.S. Department of
Defense or any of its agencies, the Defense Contract Audit Agency, the U.S.
Department of Justice, the Inspector General of any U.S. Governmental Entity,
any similar agencies or instrumentalities of any foreign Governmental Entity, or
any prime contractor with a Governmental Entity nor, to Company's knowledge, has
any such audit or investigation been threatened that is reasonably likely,
individually or in the aggregate, to have a Company Material Adverse Effect. To
Company's knowledge, there is no valid basis for (a) the suspension or debarment
of Company or any of its Subsidiaries from bidding on contracts or subcontracts
with any Governmental Entity or (b) any claim pursuant to an audit or
investigation by any of the entities named in the foregoing sentence that is
reasonably likely, individually or in the aggregate, to have a Company Material
Adverse Effect. Neither Company nor any of its Subsidiaries has any agreements,
contracts or commitments which require it to obtain or maintain a security
clearance with any Governmental Entity.
Section 3.19 Year 2000.
---------
Company is not aware of any failure of Company's or any Subsidiary's
computer hardware or software systems or products to be Year 2000 Compliant,
which failure, individually or in the aggregate, is reasonably likely to have a
Company Material Adverse Effect. For purposes of this Agreement, "Year 2000
Compliant" means, with respect to each system referred to in the prior sentence
that is intended to perform date-related functions, that such system, when used
properly in accordance with its documentation, is capable of receiving,
processing and providing date data on and between December 31, 1999 and January
1, 2000 with the same functionality as it received, processed and provided date
data on or before December 31, 1999; provided that all applications, hardware
and other systems used in conjunction with such system correctly exchange date
data with or provide data to such system.
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AGREEMENT AND PLAN OF MERGER
27
<PAGE>
Section 3.20 Inventory.
---------
All inventories of Company and its Subsidiaries, whether or not reflected
on the Company Balance Sheet, consists of a quality and quantity useable and
saleable in the ordinary course of business of Company and its Subsidiaries,
except for obsolete items and items of below standard quality, all of which have
been written off and/or reserved for or written down to net realizable value on
the Company Balance Sheet. All inventories not written off have been priced at
the lower of cost or market on a first in, first out basis. Except for
inventories written off and/or reserved for or written down to net realizable
value on the Company Balance Sheet, the quantities of each type of inventory,
whether raw materials, work in process or finished goods, are not materially in
excess of the present needs of Company and its Subsidiaries.
Section 3.21 Warranty.
--------
Section 3.21 of the Company Disclosure Schedule sets forth the general
warranty policies of Company and material deviations therefrom. The Company and
its Subsidiaries' experience with returns of products sold by Company and
Subsidiary for fiscal year 1999 or during the current year have not materially
and adversely deviated from the Company's prior experience.
Section 3.22 Customers and Suppliers.
-----------------------
Except as set forth in Section 3.22 of the Company Disclosure Schedule, no
customer of Company or any of its Subsidiaries that represented five percent
(5%) or more of Company's consolidated revenues in the fiscal year ended
December 31, 1999 (a "Material Customer"), has indicated to Company or any of
its Subsidiaries that it will stop, or decrease the rate of buying materials,
products or services from Company or such Subsidiary, which cessation or
decrease is reasonably likely, individually or in the aggregate, to have a
Company Material Adverse Effect. No material supplier of Company or any of its
Subsidiaries has indicated to Company or any of its Subsidiaries in writing or,
to Company's knowledge, orally, that it will stop, or decrease the rate of,
supplying materials, products or services to them, which cessation or decrease
is reasonably likely, individually or in the aggregate, to have a Company
Material Adverse Effect.
Section 3.23 Accounts Receivable.
-------------------
All accounts receivable of Company reflected on the Company Balance Sheet
are valid receivables, arose from bona fide sales of goods and services in the
ordinary course of business, and are subject to no setoffs or counterclaims
other than the allowance for doubtful accounts set forth on the Company Balance
Sheet.
Section 3.24 Section 203 of the DGCL Not Applicable.
--------------------------------------
The Board of Directors of Company has taken all actions so that the
restrictions contained in Section 203 of the DGCL applicable to a "business
combination" (as defined
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AGREEMENT AND PLAN OF MERGER
28
<PAGE>
in Section 203) will not apply to the execution, delivery or performance of this
Agreement, or the consummation of the Merger or the other transactions
contemplated by this Agreement.
Section 3.25 Transactions with Interested Persons.
------------------------------------
No officer, director or 5% stockholder of Company or any Subsidiary, or
their respective spouses or children, (i) owns, directly or indirectly, on an
individual or joint basis, any material interest in, or serves as an officer or
director of, any customer, competitor or supplier of Company or any Subsidiary
or any organization which has a material contract or arrangement with Company or
any Subsidiary, or (ii) has any material contract or agreement with Company or
any Subsidiary other than as disclosed on a schedule hereto, and all such
agreements are, except as noted on such schedule, on arms-length terms.
Section 3.26 Absence of Sensitive Payments.
-----------------------------
Neither Company, any Subsidiary, nor, to the knowledge of Company, any of
Company's or any Subsidiary's directors, officers, agents, stockholders or
employees, on behalf of Company or any Subsidiary:
(a) has made or has agreed to make any contributions, payments or
gifts of funds or property to any governmental official, employee or agent where
either the payment or the purpose of such contribution, payment or gift was or
is illegal under the laws of the United States, any state thereof, or any other
jurisdiction (foreign or domestic);
(b) has established or maintained any unrecorded fund or asset for any
purpose, or has made any false or artificial entries on any of its books or
records for any reason; or
(c) has made or has agreed to make any contribution or expenditure, or
has reimbursed any political gift or contribution or expenditure made by any
other person to candidates for public office, whether Federal, state or local
(foreign or domestic) where such contributions were a violation of applicable
law.
Section 3.27 Indebtedness.
------------
Set forth in Section 3.27 of the Company Disclosure Schedule is a list of
all the Indebtedness specified in paragraphs (i) to (vi) of Section 2.3(a),
together with the outstanding principal balance and the accrued but unpaid
interest as of the date specified at such Schedule. Company has made available
to Buyer copies of all documentation related to such Indebtedness (the "Loan
Documents").
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AGREEMENT AND PLAN OF MERGER
29
<PAGE>
Section 3.28 Consent.
-------
The Consent set forth at Section 3.28 of the Company Disclosure Schedule
has been duly adopted by Stonington as the holder of more than 75% of the
outstanding shares of Company Common Stock.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB
Buyer and Sub represent and warrant to Company that the statements
contained in this Article IV are true and correct, except as set forth herein or
in the disclosure schedule delivered by Buyer to Company on or before the date
of this Agreement (the "Buyer Disclosure Schedule"). The Buyer Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article IV and the disclosure in any
paragraph shall qualify other paragraphs in this Article IV only to the extent
that it is readily apparent from a reading of such document that it also
qualifies or applies to such other paragraphs.
Section 4.1 Organization of Buyer and Sub.
-----------------------------
Each of Buyer and Sub is a corporation duly organized, validly existing and
to the extent such concept applies, in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power to own,
lease and operate its property and to carry on its business as now being
conducted, and is duly qualified to do business and, to the extent such concept
applies, is in good standing as a foreign corporation in each jurisdiction in
which the failure to be so qualified would be reasonably likely to have a
material adverse effect on the business, properties, financial condition, or
results of operations of Buyer and its Subsidiaries, taken as a whole, or to
have a material adverse effect on the ability of Buyer to consummate the
transactions contemplated by this Agreement (a "Buyer Material Adverse Effect");
provided that "Buyer Material Adverse Effect" shall not include any change in or
effect on the business, properties, financial conditions or results of
operations of Company or any of its Subsidiaries to the extent that any of the
foregoing are demonstrated to be attributable to the announcement or pendency of
the Merger.
Section 4.2 Capitalization.
--------------
(a) As of March 2, 2000, the issued capital of Buyer consists of
1,282,380,872 Belgian Francs, represented by (i) [58,626,737] shares of Buyer
Common Stock and (ii) 895,932 shares of automatically convertible stock (the
"Buyer Automatically Convertible Stock"), which are automatically convertible
into a maximum of 1,194,576 shares of Buyer Common Stock, all of which are
validly issued, fully paid and nonassessable. The board of directors of Buyer
was authorized on May 27, 1995 to increase the issued capital of Buyer with an
amount of 1,065,165,893 Belgian Francs. Except for options granted pursuant to
employee or director equity plans of Buyer or as set forth on Section 4.2 of the
Buyer Disclosure Schedule, there are no shares of Buyer Common Stock
suspensively issued for future issuance pursuant to options, warrants, equity
securities, calls, rights, commitments or agreements to which Buyer is a party
or bound as of the date of this Agreement. All shares of Buyer Common Stock
subject to
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AGREEMENT AND PLAN OF MERGER
30
<PAGE>
issuance as specified above, upon issuance on the terms and conditions specified
in the instruments pursuant to which they are issuable, shall be validly issued,
fully paid and nonassessable. All of the outstanding shares of capital stock of
Sub are duly authorized, validly issued, fully paid and nonassessable and all
such shares are owned by Buyer free and clear of all security interests, liens,
claims, pledges, agreements, limitations in Buyer's voting rights, charges or
other encumbrances of any nature, except for security interests granted in favor
of Buyer's lenders as disclosed in Buyer's audited financial statements for the
year ended December 31, 1998.
(b) All of the Merger Shares will be, when issued in accordance with
this Agreement, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive or similar rights created by statute, the
Memorandum and Articles of Association of Buyer or any agreement to which Buyer
is a party or is bound.
(c) Buyer owns beneficially and of record all of the shares of Sub,
all of which shares were duly authorized, validly issued and are fully paid and
nonassessable.
Section 4.3 Authority; No Conflict; Required Filings and Consents.
-----------------------------------------------------
(a) Each of Buyer and Sub has all requisite corporate power and
authority to enter into this Agreement and each of the agreements and documents
contemplated hereby to which Buyer or Sub is a party (the "Buyer Ancillary
Agreements") and to consummate the transactions contemplated by this Agreement
and the Buyer Ancillary Agreements. The execution and delivery of this Agreement
and the Buyer Ancillary Agreements and the consummation of the transactions
contemplated by this Agreement and the Buyer Ancillary Agreements have been duly
authorized by all necessary corporate action on the part of each of Buyer and
Sub (including the approval of the Merger by Buyer as the sole stockholder of
Sub) other than with respect to the Merger, the filing of the Certificate of
Merger with the Secretary of State of Delaware as required by the DGCL. This
Agreement has been and the Buyer Ancillary Agreements have been or will be duly
executed and delivered by each of Buyer and Sub and (assuming the due
authorization and execution of such agreements by the other parties thereto)
constitutes or will constitute the valid and binding obligations of each of
Buyer and Sub, enforceable in accordance with their terms, subject to the
Bankruptcy and Equity Exception.
(b) Subject to approval by a notary public in Belgium as described in
paragraph (iii) of the memorandum set forth at Section 4.3(b) of the Buyer
Disclosure Schedule), the execution and delivery of this Agreement and each of
the Buyer Ancillary Agreements by each of Buyer and Sub does not, and the
consummation of the transactions contemplated by this Agreement and each of the
Buyer Ancillary Agreements will not, (i) conflict with, or result in any
violation or breach of, any provision of the Memorandum or Articles of
Association of Buyer or the Certificate of Incorporation or Bylaws of Sub,
(ii) result in any violation or breach of, or constitute (with or without notice
or lapse of time, or both) a default (or give rise to a right of
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AGREEMENT AND PLAN OF MERGER
31
<PAGE>
termination, cancellation or acceleration of any obligation or loss of any
material benefit) under, or require a consent or waiver under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, contract
or other agreement, instrument or obligation to which Buyer or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound, or (iii) except as provided in clauses (i), (ii), (iii),
(iv) and (v) in paragraph (c) below, conflict with or violate any permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Buyer or any of its Subsidiaries or
any of its or their respective properties or assets, except in the case of (ii)
and (iii) for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which are not, individually or in the aggregate,
reasonably likely to have a Buyer Material Adverse Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Buyer or any of its Subsidiaries in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the pre-merger notification report under
the HSR Act, and such notifications as may be required, if any, under similar
applicable laws of the European countries (ii) the filing of the Certificate of
Merger with the Delaware Secretary of State, (iii) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable state securities laws and the laws of any foreign
country, (iv) the approval by NASDAQ of the listing of the shares of Buyer
Common Stock to be issued in the Merger, and (v) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not be reasonably likely to have a Buyer Material Adverse Effect.
Section 4.4 Public Filings; Financial Statements.
------------------------------------
(a) Buyer has filed and made available to Company all forms, reports
and documents required to be filed with the SEC since January 1, 1997. Buyer's
Registration Statement on Form F-3 (File No. 333-11324), filed with the SEC on
January 7, 2000, together with all documents incorporated therein by reference,
as amended (the "Buyer Registration Statement"; said Buyer Registration
Statement and all reports now or hereafter incorporated therein by reference to
be referred to as the "Buyer SEC Reports") (i) was prepared in compliance in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Buyer Registration Statement, and (ii) does not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements, as amended
(including, in each case, any related notes or schedules), contained in the
Buyer Registration Statement were prepared in accordance with U.S. GAAP applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements or, in the case of unaudited
statements as permitted by the
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AGREEMENT AND PLAN OF MERGER
32
<PAGE>
SEC on Form 6-K under the Exchange Act) and fairly presented in all material
respects the consolidated financial position of Buyer and its Subsidiaries as of
the dates and the consolidated results of its operations for the periods
indicated, consistent in all material respects with the books and records of
Company and its Subsidiaries; provided, however, that interim financial
statements may be in summary format, may be limited to operating statement and
balance sheet information, do not comply with the footnote requirements of U.S.
GAAP and may be subject to normal year end adjustments.
(c) Since December 31, 1997, Buyer has timely filed all reports
required to be filed by it pursuant to the Exchange Act.
Section 4.5 No Undisclosed Liabilities.
--------------------------
Except as disclosed in the Buyer SEC Reports filed prior to the date hereof
or in Company press releases issued prior to the date hereof, and except for (i)
normal or recurring liabilities incurred since September 30, 1999 in the
ordinary course of business consistent with past practices, and (ii) liabilities
incurred or which may be incurred in connection with the matters disclosed at
Section 4.5 of the Buyer Disclosure Schedule, Buyer and its Subsidiaries do not
have any liabilities, either accrued, contingent or otherwise (whether or not
required to be reflected in financial statements in accordance with U.S. GAAP),
and whether due or to become due, which individually or in the aggregate are
reasonably likely to have a Buyer Material Adverse Effect.
Section 4.6 Absence of Certain Changes or Events.
------------------------------------
Except as expressly contemplated by this Agreement, as disclosed in the
Buyer SEC Reports or Company press releases filed or issued prior to the date
hereof, or in connection with the matters disclosed at Section 4.5 of the Buyer
Disclosure Schedule that Buyer has discussed with Company prior to the date
hereof, since September 30, 1999, there has not been (i) any change in the
financial condition, results of operations, business, or properties of Buyer and
its Subsidiaries, taken as a whole, that has had, or is reasonably likely to
have, a Buyer Material Adverse Effect; (ii) any damage, destruction or loss to
property (whether or not covered by insurance) with respect to Buyer or any of
its Subsidiaries having a Buyer Material Adverse Effect; (iii) any revaluation
by Buyer of its assets having a Buyer Material Adverse Effect, exclusive of any
revaluations (including write-downs or write-offs) of good will; or (iv) any
other action or event that would have required the consent of Company pursuant
to Section 5.3 of this Agreement had such action or event occurred after the
date of this Agreement.
Section 4.7 Intellectual Property.
---------------------
For purposes of this Section 4.7, "Intellectual Property" means
(i) patents, patent applications and statutory invention registrations,
(ii) trademarks, service marks, trade dress, logos, trade names, corporate
names, and other source identifiers, and registrations and applications for
registration thereof (iii) copyrightable works, copyrights, and registrations
and applications for registration thereof, and (iv) confidential and proprietary
information, including trade secrets and know-how. Except as disclosed in the
Buyer SEC Reports filed prior to the date hereof:
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AGREEMENT AND PLAN OF MERGER
33
<PAGE>
(a) to the knowledge of the Buyer and except as would not have a Buyer
Material Adverse Effect, the conduct of the business of Buyer and the Buyer
Subsidiaries as currently conducted does not infringe or misappropriate the
Intellectual Property of any third party;
(b) except as would not have a Buyer Material Adverse Effect, no claim
has been asserted to Buyer that the conduct of the business of Buyer or any
Buyer Subsidiary as currently conducted infringes or may infringe or
misappropriate the Intellectual Property of any third party;
(c) with respect to each item of Intellectual Property owned by Buyer
and the Buyer Subsidiaries and material to the businesses of Buyer and the Buyer
Subsidiaries as currently conducted taken as a whole ("Buyer Owned Intellectual
Property"), Buyer or a Buyer Subsidiary is the owner of the entire right, title
and interest in and to the Buyer Owned Intellectual Property and is entitled to
use the Buyer Owned Intellectual Property in the continued operation of its
respective business;
(d) except as would not have a Buyer Material Adverse Effect, with
respect to each item of Intellectual Property licensed to Buyer or a Buyer
Subsidiary ("Buyer Licensed Intellectual Property"), Buyer or a Buyer Subsidiary
has the right to use such Buyer Licensed Intellectual Property in the continued
operation of its respective business in accordance with the terms of the license
agreement governing such Buyer Licensed Intellectual Property;
(e) to the knowledge of the Buyer and except as would not have a Buyer
Material Adverse Effect, the Buyer Owned Intellectual Property is valid and
enforceable, and has not been adjudged invalid or unenforceable in whole or
part;
(f) to the knowledge of Buyer and except as would not have a Buyer
Material Adverse Effect, no person is engaging in any activity that infringes
the Buyer Owned Intellectual Property;
(g) except as would not have a Buyer Material Adverse Effect, each
license of Buyer Licensed Intellectual Property is valid and enforceable, is
binding on all parties to such license, is in full force and effect, and no
party thereto is in breach thereof or default thereunder.
ARTICLE V. CONDUCT OF BUSINESS
Section 5.1 Covenants of Company.
--------------------
Except as expressly contemplated hereby, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing Date, Company agrees as to itself and its Subsidiaries
(except to the extent that
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AGREEMENT AND PLAN OF MERGER
34
<PAGE>
Buyer shall otherwise consent in writing), to carry on its business in the
ordinary course in substantially the same manner as previously conducted, to pay
its debts and Taxes and perform other obligations when due, subject to good
faith disputes over such debts, Taxes or obligations, and use commercially
reasonable efforts consistent with past practices and policies to preserve
intact its present business organization, keep available the services of its
present officers and key employees and to preserve its relationships with
customers, suppliers, distributors, and others having business dealings with it.
Except as expressly contemplated by this Agreement or set forth in the Company
Disclosure Schedule, Company shall not (and shall not permit any of its
Subsidiaries to), without the written consent of Buyer:
(a) Accelerate, amend or change the period of exercisability of any
Warrant or any outstanding Option or restricted stock granted under any Company
Stock Plan or any other employee stock plan of Company or authorize cash
payments in exchange for any Warrant or any Option granted under any of such
plans except as contemplated by Section 1.5 of this Agreement;
(b) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock, or
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock;
(c) Issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities convertible
into shares of its capital stock, or subscriptions, rights, warrants or options
to acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities, other than the issuance
of shares of Company Common Stock pursuant to the conversion of 12% Preferred
Stock and the exercise of the Warrants outstanding on the date of this
Agreement;
(d) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership
or other business organization or division, or otherwise acquire or agree to
acquire any assets (other than inventory, supplies and other items, in each
case, in the ordinary course of business consistent with past practice);
(e) Sell, lease, license or otherwise dispose of any of its properties
or assets having a value in excess of $250,000, except for sales of inventory or
products, in each case, in the ordinary course of business consistent with past
practice;
(f) (i) Increase or agree to increase the compensation (including
salary, bonus, benefits or other remuneration) payable or to become payable to
its officers or employees except for increases in accordance with existing
contractual commitments, all of which contracts are disclosed on the Company
Disclosure Schedule (ii) grant any
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AGREEMENT AND PLAN OF MERGER
35
<PAGE>
severance or termination pay to, or enter into or amend any employment or
severance agreements with, any employees or officers, other than (x) the payment
of severance or termination pay in accordance with any existing contractual
commitments or the terms of any Benefit Plan and (y) subject to subparagraph
(t) below, entering into employment agreements with new employees in the
ordinary course of business consistent with past practice, (iii) enter into any
collective bargaining agreement, (iv) establish, adopt, enter into or amend
(except as may be required by law) any bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination or severance or other plan, trust, fund,
policy or arrangement for the benefit of any directors, officers or employees,
or (v) forgive any indebtedness of any employee to Company or any of its
Subsidiaries;
(g) Amend or propose to amend its certificate of incorporation or
bylaws;
(h) Make any loans to any person or entity or guarantee any debt
securities of others (other than as a result of the endorsement of checks for
collection and for advances for employee reimbursable expenses, in each case in
the ordinary course of business consistent with past practice);
(i) Initiate, compromise, or settle any material litigation or
arbitration proceeding ;
(j) Modify, amend or terminate any Company Material Contract (other
than any immaterial modification or amendment to a purchase order in the
ordinary course of business consistent with past practice), or waive, release or
assign any material rights or claims, including any write-off or other
compromise of any accounts receivable of Company or any of its Subsidiaries;
(k) Make or rescind any Tax election, settle or compromise any
Material Tax liability or amend any Tax Return;
(l) Change its methods of accounting as in effect at December 31, 1999
except as required by US GAAP;
(m) Make or commit to make any capital expenditures that exceed the
capital budget furnished by Company to Buyer by more than $250,000;
(n) Enter into any new license for any intellectual property rights to
or from any third party other than in the ordinary course of business consistent
with past practice;
(o) Revalue any of the significant assets of Company or any of its
Subsidiaries, including the writing down of inventory other than in the ordinary
course of business consistent with past practice;
(p) Close any facility or office;
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AGREEMENT AND PLAN OF MERGER
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<PAGE>
(q) Invest funds in debt securities or other instruments maturing more
than 90 days after the date of investment;
(r) Fail to pay accounts payable and other obligations in the ordinary
course of business in a manner consistent with Company's past practice or
accelerate the payment of any accounts receivable other than in the ordinary
course of business in a manner consistent with past practice, as such practices
are set forth on Schedule 5.1 (r) of the Company Disclosure Schedules;
(s) Mortgage or pledge any of its property or assets or subject any
such assets to any security interest, lien or other encumbrance, except liens
imposed by law in respect of obligations not yet due which are owed in respect
of taxes or which otherwise are owed to materialman, workmen, carriers,
warehousepersons or laborers not in excess of $100,000 in the aggregate;
(t) Hire any employees or retain any consultants other than non-
management or non-supervisory personnel in the ordinary course of business;
(u) Make any payment or other distribution to any Affiliate of Company
except for normal employment compensation consistent with past practices; or
(v) Take, or agree in writing or otherwise to take, any of the actions
described in paragraphs (a) through (u) above.
Section 5.2 Options; Warrants.
-----------------
Company shall not take any action to permit any Options or Warrants to
purchase its capital stock (issued by Company pursuant to its Stock Option Plan
or otherwise) to become vested or exercisable (or to otherwise accelerate) as a
result of this Agreement or the consummation of the Merger, except as
contemplated by Section 1.5.
Section 5.3 Covenants of Buyer.
------------------
Except as expressly contemplated hereby, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Buyer agrees as to itself and its Subsidiaries
(except to the extent that Company shall otherwise consent in writing) not to
do, or propose to do, any of the following:
(a) Declare or pay any dividends (other than stock dividends) on or
make any other distributions (other than in stock) in respect of its capital
stock;
(b) Amend or propose to amend its Memorandum or Articles of
Association in a manner reasonably likely to prevent the consummation of the
transactions contemplated hereby;
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AGREEMENT AND PLAN OF MERGER
37
<PAGE>
(c) Adopt a plan of complete or partial liquidation or dissolution of
Buyer; or
(d) Take, or agree in writing or otherwise to take, any of the actions
described in paragraphs (a) through (c) above.
Section 5.4 Cooperation.
-----------
Subject to compliance with applicable law, from the date hereof until the
Closing, each of Company and Buyer shall (and shall cause each of their
respective Subsidiaries to) make their respective officers available to confer
on a regular and frequent basis with one or more representatives of the other
party at reasonable times and upon reasonable advance notice to report on the
general status of ongoing operations and shall promptly provide each other or
its counsel with copies of all filings made by such party with any Governmental
Entity in connection with this Agreement, the Merger and the transactions
contemplated hereby and thereby. Company acknowledges that its obligation under
this Section shall include making its officers available to meet with those
financial institutions from which Buyer seeks the financing referred to in
Section 7.2 (j).
Section 5.5 Confidentiality.
---------------
The parties acknowledge that Buyer and Company have previously executed a
Confidential Non-Disclosure Agreement, dated as of April 28, 1999 (the
"Confidentiality Agreement"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms, except as expressly modified
herein.
Section 5.6 Investigation.
-------------
(a) By Buyer. Buyer acknowledges and agrees that it (i) has made its
own inquiry and investigation into, and, based thereon, has formed an
independent judgment concerning, the Company, (ii) has been furnished with or
given adequate access to such information about the Company as it has requested
and (iii) will not
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AGREEMENT AND PLAN OF MERGER
38
<PAGE>
assert any claim against any of its directors, officers, employees, agents,
Stockholders, affiliates, consultants, counsel, accountants, or representatives,
or hold any Person liable for any inaccuracies, misstatements or omissions with
respect to information (other than, with respect to Company and Stockholders,
the representations and warranties contained in this Agreement, the Company
Ancillary Agreements or in any Letter of Transmittal) furnished by such Persons
concerning the Company other than a claim relating to Company's or any
Stockholder's fraud.
(b) By Company. Company acknowledges and agrees that it (i) has made
its own inquiry and investigation into, and, based thereon, has formed an
independent judgment concerning, the Buyer, (ii) has been furnished with or
given adequate access to such information about the Buyer as it has requested
and (iii) will not assert any claim against any of its directors, officers,
employees, agents, stockholders, affiliates, consultants, counsel, accountants,
or representatives, or hold any Person liable for any inaccuracies,
misstatements or omissions with respect to information (other than, with respect
to Buyer, the representations and warranties contained in this Agreement and the
Buyer Ancillary Agreements furnished by such Persons concerning the Buyer, other
than a claim relating to Buyer's fraud.
(c) In connection with Buyer's investigation of the Company, Buyer has
received certain estimates, projections and other forecasts for the Company, and
certain plan and budget information. Buyer acknowledges that there are
uncertainties inherent in attempting to make such projections, forecasts, plans
and budgets, that Buyer is familiar with such uncertainties, that Buyer is
taking full responsibility for making its own evaluation of the adequacy and
accuracy of all estimates, projections, forecasts, plans and budgets so
furnished to it, and that Buyer will not assert any claim against any
Stockholder or any of its directors, officers, employees, agents, affiliates,
consultants, counsel, accountants, or representatives, or hold any such Persons
liable, with respect thereto, except relating to such Person's fraud.
Accordingly, neither the Company nor any Stockholder makes any representation or
warranty with respect to any estimates, projections, forecasts, plans or budgets
referred to in this Section 5.6(c).
(d) In connection with Company's investigation of the Buyer, Company
has received certain estimates, projections and other forecasts for the Buyer,
and certain plan and budget information. Company acknowledges that there are
uncertainties inherent in attempting to make such projections, forecasts, plans
and budgets, that Company is familiar with such uncertainties, that Company is
taking full responsibility for making its own evaluation of the adequacy and
accuracy of all estimates, projections, forecasts, plans and budgets so
furnished to it, and that Company will not assert any claim against Buyer or any
of its directors, officers, employees, agents, affiliates, consultants, counsel,
accountants, or representatives, or hold any such Persons liable, with respect
thereto, except relating to such Person's fraud. Accordingly, Buyer makes no
representation or warranty with respect to any estimates, projections,
forecasts, plans or budgets referred to in this Section 5.6(d).
ARTICLE VI. ADDITIONAL AGREEMENTS
Section 6.1 Exclusivity.
-----------
Between the date of this Agreement and the Closing Date, neither Company,
any Subsidiary, nor any stockholders, agent, officer, director, trustee or
representative of any of the foregoing will, during the period commencing on the
date of this Agreement and ending with the earlier to occur of the Closing Date
or the termination of this Agreement in accordance with its terms, directly or
indirectly:
(i) solicit, encourage or initiate the submission of proposals or offers
from any person pertaining to, or
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AGREEMENT AND PLAN OF MERGER
39
<PAGE>
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than Buyer or its
authorized agents relating to
any acquisition or purchase of all or a material amount of the assets, business
or operations of, or any equity interest in, Company or any Subsidiary of
Company or any merger, consolidation or other business combination involving
Company or any Subsidiary.
Section 6.2 Access to Information.
---------------------
Upon reasonable notice, Company shall (and shall cause each of its
Subsidiaries to) afford to Buyer's officers, employees, accountants, counsel and
other representatives, reasonable access, during normal business hours during
the period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, and Company shall furnish
promptly to Buyer (and shall cause each its Subsidiaries to) furnish promptly to
the other party a copy of each report, schedule, registration statement and
other document filed or received by it during such period pursuant to the
requirements of federal securities laws and Company shall furnish promptly to
Buyer all information concerning its business, properties and personnel as the
other party may reasonably request. Unless otherwise required by law, each of
Buyer and Company will and shall cause its stockholders, officers, employees,
accountants, counsel and other representatives or persons who have access to
such information to hold any such information which is non-public in confidence
in accordance with the Confidentiality Agreement. No information or knowledge
obtained in any investigation pursuant to this Section 6.2 or otherwise shall
affect or be deemed to modify any representation or warranty contained in this
Agreement or the conditions to the obligations of the parties to consummate the
Merger.
Section 6.3 Environmental Review.
--------------------
Buyer may conduct a "Phase II" study on certain property of the Company in
Melbourne, Florida ("Florida Property") in accordance with the Access Agreement
dated on or about February 24, 2000 between Company and Buyer. Buyer's sole
rights and remedies with respect to any remediation in respect of the Florida
Property identified in the "Phase II" study are set out in the Indemnity and
Escrow Agreement.
Section 6.4 Legal Conditions to Merger.
--------------------------
(a) Subject to the terms hereof, Company and Buyer shall use all their
respective reasonable efforts to (i) take, or cause to be taken, all appropriate
action, and do, or cause to be done, all things necessary and proper under
applicable law to consummate and make effective the transactions contemplated
hereby as promptly as practicable, (ii) obtain from any Governmental Entity or
any other third party any consents, licenses, permits, waivers, approvals,
authorizations, or orders required to be
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AGREEMENT AND PLAN OF MERGER
40
<PAGE>
obtained or made by Company or Buyer or any of their Subsidiaries in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby including, without
limitation, the Merger, (iii) as promptly as practicable, make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement and the Merger required under (A) the Securities Act and the
Exchange Act, and any other applicable federal or state securities laws, (B) the
HSR Act and any related governmental request thereunder, and (C) any other
applicable law, (iv) refinance the Indebtedness described in paragraphs (i) to
(vi) of Section 2.3(a) and (v) execute or deliver any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement. Company and Buyer shall cooperate with each
other in connection with the making of all such filings, including providing or
making available copies of all such documents to the non-filing party and its
advisors (or, in connection with information relating to filings under the HSR
Act, to the advisors of the non-filing party) prior to filing and, if requested,
consider in good faith all reasonable additions, deletions or changes suggested
in connection therewith. Company and Buyer shall use all their respective
reasonable efforts to furnish to each other all information required for any
application or other filing to be made by the other party pursuant to the rules
and regulations of any applicable law in connection with the transactions
contemplated by this Agreement. Buyer has received the letter set out in
Schedule 6.4 of Buyer's Disclosure Schedule with respect to the refinancing
described in (iv) above (the "Refinancing Letter"). Buyer agrees to use all
reasonable efforts to obtain the refinancing described in (iv) above on terms
not materially less favorable than those set out in the Refinancing Letter.
(b) Subject to the terms hereof, Buyer and Company agree, and shall
cause each of their respective Subsidiaries, to cooperate and to use all their
respective reasonable efforts to obtain any government clearances or approvals
required for Closing under the HSR Act, the Shearman Act, as amended, the
Clayton Act, as amended, the Federal Trade Commission Act, as amended, and any
other federal, state or foreign law or, regulation or decree designed to
prohibit, restrict or regulate actions for the purpose or effect of
monopolization or restraint of trade (collectively "Antitrust Laws").
(c) Each of Company and Buyer shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and use, and
cause their respective Subsidiaries to use, all their reasonable efforts to
obtain any third party consents related to or required in connection with the
Merger that are (A) necessary to consummate the transactions contemplated
hereby, (B) disclosed or required to be disclosed in the Company Disclosure
Schedule or the Buyer Disclosure Schedule, as the case may be, or (C) required
to prevent a Company Material Adverse Effect or a Buyer Material Adverse Effect
from occurring prior to or after the Effective Time.
Section 6.5 Employee Benefit Plans.
----------------------
(a) Buyer shall cause the Surviving Corporation to adopt and/or
continue all Employee Benefit Plans of the Company identified in Section 3.13 of
the
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AGREEMENT AND PLAN OF MERGER
41
<PAGE>
Company Disclosure Schedule as of the Closing Date; provided, however,
Surviving Corporation shall retain the sole discretion to amend, restate, merge
or terminate any such Employee Benefit Plan at any time after the Closing;
further provided that if Buyer elects to amend, restate, merge or terminate any
or all of such Employee Benefit Plans it shall, at a minimum, continue to
provide employees of Company who become employees of any of Buyer's United
States subsidiaries or the Surviving Corporation after the Closing Date benefits
which in the aggregate are equivalent to those provided to similarly situated
employees of Buyer's United States subsidiaries or Surviving Corporation or a
combination of such benefits and those available under Company's United States
Subsidiaries' Employee Benefit Plans.
(b) For purposes of eligibility, vesting and, except with respect to
any pension benefit plan or retiree medical plan, calculation of benefits
(except to the extent crediting such service would result in the duplication of
benefits) under each of Buyer's or Surviving Corporation's employee benefit
plans, programs and arrangements in which an employee of Company who is employed
as of the Closing Date and who becomes an employee of Buyer or the Surviving
Corporation immediately following the Closing (each a "Continuing Employee")
participates, Buyer shall grant, or shall cause the Surviving Corporation to
grant, each Continuing Employee with credit for all service with Company to the
extent permitted by law.
(c) It is expressly agreed that the provisions of this Section 6.5 are
not intended to be for the benefit of or otherwise enforceable by any third
person including, without limitation, any employee of Company, or any collective
bargaining unit or employee organization.
Section 6.6 Public Disclosure.
-----------------
Prior to the Effective Date, Buyer and Company shall consult with each
other before issuing any press release or otherwise making any public statement
with respect to the Merger or this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law. The initial press release relating to this Agreement
shall be in a form that was heretofore agreed by the parties.
Section 6.7 Tax-Free Reorganization.
-----------------------
Buyer and Company shall each use all reasonable efforts to cause the Merger
to be treated as a reorganization within the meaning of Section 368(a) of the
Code. The parties hereto hereby adopt this Agreement as a plan of
reorganization.
Section 6.8 Nasdaq Listing.
--------------
Buyer shall cause the shares of Buyer Common Stock to be issued in the
Merger to be listed on the Nasdaq National Market, subject to official notice of
issuance, on or prior to the Closing Date.
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AGREEMENT AND PLAN OF MERGER
42
<PAGE>
Section 6.9 Brokers or Finders.
------------------
Each of Buyer on the one hand, and Company represents, as to itself, its
Subsidiaries and its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any broker's
or finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement, except, in the case of Buyer,
S.G. Cowen Securities, whose fees and expenses will be paid by Buyer in
accordance with Buyer's agreement with such firm and, in the case of Company,
Hambrecht & Quist, whose fees and expenses will be paid by Company in accordance
with Company's agreement with such firm (subject to the limitations on such
expenses to be paid by Company as provided in Section 7.2).
Section 6.10 Notification of Certain Matters.
-------------------------------
Buyer will give prompt notice to Company, and Company will give prompt
notice to Buyer, of the occurrence, or failure to occur, of any event, which
occurrence or failure to occur would be reasonably likely to cause (a) any
representation or warranty of such party contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the date of this
Agreement to the Effective Time, or (b) any material failure of Buyer and Sub or
Company, as the case may be, or of any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement. Notwithstanding the
above, the delivery of any notice pursuant to this section will not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice or the conditions to such party's obligation to consummate the Merger.
Section 6.11 Special Stockholders Meeting of the Company.
-------------------------------------------
The Company, acting through its Board of Directors, shall, in accordance
with applicable law and Company's certificate of incorporation and bylaws, duly
call, give notice of, convene and hold a special meeting of its Stockholders
(the "Special Stockholders Meeting") as soon as practicable following the date
of this Agreement for the purpose of approving the Merger and this Agreement
(the "Company Voting Proposal"). The Board of Directors of Company shall (i)
recommend approval and adoption of the Company Voting Proposal by the
Stockholders to Company; provided that so long as the Company complies with
Section 251(c) of the Delaware General Corporation Law and Section 6.1 hereof,
nothing in this Section 6.11 shall prevent the Board of Directors of Company
from changing its recommendations to the extent the Company, after consultation
with its outside legal counsel, determines that it is required to do so by its
fiduciary duties under applicable law and (ii) take all reasonable and lawful
action to solicit and obtain such approval. Company shall provide to the
Stockholders, together with the applicable notice of the Special Stockholders
Meeting, Buyer's Registration Statement and any filings made by Buyer with the
SEC which are incorporated therein by reference, which materials will be made
available to Company by Buyer in sufficient quantities for such distribution by
Company.
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AGREEMENT AND PLAN OF MERGER
43
<PAGE>
Section 6.12 Special Board Meeting of the Buyer.
----------------------------------
For the purpose of Belgian law, at the Effective Date, the Stockholders
shall be deemed to have transferred and delivered the shares of Company Common
Stock to the Buyer through (a) a contribution in kind in return for the Merger
Shares (which shall be issued as provided in Section 2.2 and (b) a sale of the
remaining number of shares of Company Common Stock corresponding to fractions of
shares of Buyer Common Stock which the Stockholders are entitled to receive
under this Agreement. The Buyer shall convene a board meeting to be held in
front of a notary public in Belgium which shall decide inter alia to (i)
increase the capital of the Buyer upon the contribution in kind by the
Stockholders of 15,284,000 shares of Company Common Stock subject to increase
pursuant to Section 2.1(d), (ii) issue the Merger Shares to the Stockholders and
(iii) pay an amount in cash to the Stockholders in respect of fractional shares
in accordance with this Agreement, followed by a replacement of the Shares of
Company Common Stock by shares of Sub, pursuant to the Merger.
Section 6.13 Liability Insurance.
-------------------
(a) For a period of six years after the Effective Time, Buyer shall
cause the Surviving Corporation to maintain (to the extent available in the
market) in effect a directors' and officers' liability insurance policy covering
those persons who are currently covered by Company's directors' and officers'
liability insurance policy (a copy of which has been heretofore made available
to Buyer) with coverage in amount and scope at least as favorable to such
persons as Company's existing coverage; provided, that in no event shall Buyer
or the Surviving Corporation be required to make annual premium payments to the
extent such premiums exceed an amount equal to 175% of the annual premium paid
by Company for such coverage as of the date of this Agreement (the "Maximum
Premium"); provided further, that if such premiums exceed the Maximum Premium
the Surviving Corporation shall purchase insurance policies in such amounts and
with such coverage as reasonably can be purchased for the Maximum Premium.
(b) Buyer agrees to be jointly and severally liable with the Company
and the Surviving Corporation for their indemnification obligations to the
Company's directors, and officers in all capacities in which such directors or
officers served the Company or its Subsidiaries while directors and officers
prior to the Effective Time, as set forth in the Company's Certificate of
Incorporation and to the extent such indemnification by the Company is permitted
under DGCL.
(c) In the event the Company or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or entity
in such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any person, then, and in each case, proper
provision shall be made so that the successors and assigns of the Company or the
Surviving Corporation, as the case may be, honor the indemnification obligations
set forth in this Section 6.13.
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AGREEMENT AND PLAN OF MERGER
44
<PAGE>
ARTICLE VII. CONDITIONS TO MERGER
Section 7.1 Conditions to Each Party's Obligation To Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction prior to the Closing Date of the
following conditions:
(a) HSR Act. The applicable waiting period under the HSR Act Covered
by (b) shall have terminated or expired.
(b) Governmental Approvals. Each of the parties shall have obtained or
made, as applicable, or there shall have occurred authorizations, consents,
orders or approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any Governmental Entity, the failure of which to
file, obtain or occur is reasonably likely to have a Buyer Material Adverse
Effect or a Company Material Adverse Effect, as the case may be.
(c) No Injunctions. No Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any order,
executive order, stay, decree, judgment or injunction (each an "Order") or
statute, rule or regulation which is in effect and which has the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger.
(d) Nasdaq Listing. The shares of Buyer Common Stock to be issued in
the Merger shall have been approved for listing on the Nasdaq National Market,
subject only to official notice of issuance.
(e) Company Stockholders Approval. Stonington, or Buyer as
Stonington's proxy, shall have voted all of Stonington's shares of Company
Common Stock in favor of the Company Voting Proposal as provided in the Voting
Agreement and Waiver.
Section 7.2 Additional Conditions to Obligations of Buyer and Sub.
-----------------------------------------------------
The obligations of Buyer and Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may be waived in
writing exclusively by Buyer and Sub:
(a) Representations and Warranties.
------------------------------
(i) The representations and warranties of Company set forth in this
Agreement that are not qualified as to Company Material Adverse Effect shall be
true and correct, except where failure be true and correct would not have a
Company Material Adverse Effect, as of the Closing Date, as though made at and
as of the Closing Date, except that those representations and warranties that
address matters only as of a particular date shall remain so true and correct as
of such date;
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AGREEMENT AND PLAN OF MERGER
45
<PAGE>
(ii) The representations and warranties of Company set forth in this
Agreement that are qualified as to Company Material Adverse Effect shall be true
and correct in all respects as of the Closing Date as though made at and as of
the Closing Date, except that those representations and warranties that address
matters only as of a particular date shall remain so true and correct in all
respects as of such date;
(iii) Buyer shall have received a certificate signed on behalf of Company
by chief executive officer or the chief financial officer of Company to the that
each of the conditions specified in (x) paragraphs (i) and (ii) of this
paragraph (a) is satisfied in all respects and (y) paragraphs (b), (c), (d),
(e), (h), and (n) of this Section 7.2 is satisfied in all respects.
(b) Performance of Obligations of Company. Company and Stockholders
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date.
(c) Consents of Preferred Stockholders.
(i) The actions described in Section 1.5(a) shall have occurred and Company
shall have obtained and delivered to Buyer and Sub copies of all consents,
conversion notices or agreements from each holder of 12% Preferred Stock
necessary to convert 12% Preferred Stock into shares of Buyer Common Stock
pursuant to Section 1.5.
(ii) The actions described in Section 1.5(b) shall have occurred and
Company shall have obtained and delivered to Buyer and Subsidiary copies of all
consents, exercise notices or other agreements from each holder of 14% Preferred
Stock necessary to put the 14% Preferred Stock to Company pursuant to
Section 1.5.
(d) Options; Warrants. The actions described in Section 1.5(c) and (d)
shall have occurred and Company shall have obtained and delivered to Buyer and
Sub copies of all Option Termination Agreements and Warrant exercise notices,
together with all other documentation necessary to accomplish the provisions of
Section 1.5(c) and (d).
(e) Consents. Company shall have obtained and delivered to Buyer and
Sub all material waivers, permits, consents, approvals or other authorizations
necessary to be obtained by it to consummate the Merger, and effected all
registrations, filings and notices necessary to be effected by it to consummate
the Merger except as would not have a Company Material Adverse Effect, but which
shall include, without limitation those agreements set forth at Section 7.2(e)
of the Company Disclosure Schedule, unless alternative arrangements to those
agreements which are reasonably satisfactory to Buyer are put in place by
Company.
(f) Stockholders Agreement. Stonington shall have executed and
delivered to Buyer the Stockholders Agreement in the form of Exhibit F hereto.
(g) Indemnity and Escrow Agreement. Each Stockholder shall have
executed and delivered to Buyer the Indemnity and Escrow Agreement.
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AGREEMENT AND PLAN OF MERGER
46
<PAGE>
(h) Indebtedness. The Indebtedness shall not be in excess of
------------
$425,000,000.
(i) LLC Agreement. Stonington shall have executed and delivered to
-------------
Buyer the LLC Agreement.
(j) Financing. Buyer shall have obtained financing in an amount
sufficient to refinance and/or fund the following: (i) the Indebtedness
described in paragraph (i) through (vi) of Section 2.3(a); and (ii) the payments
due at Closing under the Option Termination Agreements and Retention Agreements.
(k) Letters of Transmittal. Each Stockholder shall have completed
----------------------
and delivered to Buyer its Letter of Transmittal.
(l) Tax Opinion. Buyer shall have received the opinion of Brown,
-----------
Rudnick, Freed & Gesmer, to the effect that the Merger will be treated for
federal income tax purposes as a tax-free reorganization within the meaning of
Section 368(a) of the Code; (it being agreed that Buyer and Company shall each
provide reasonable cooperation, including making reasonable representations, to
Brown, Rudnick, Freed & Gesmer to enable it to render such opinion).
(m) Legal Opinion. Buyer shall have received the opinion of Shearman
& Sterling with respect to the matters set forth on Exhibit H attached
hereto.
(n) Appraisal Rights. No stockholder of Company shall have exercised
its appraisal rights in connection with the Merger.
(o) Stonington Obligations. Stonington shall not be in breach of any
of its obligations under the Voting Agreement and Waiver executed as of the
date hereof, which is in the form of Exhibit G hereto including without
limitation the transfer of shares in violation of that agreement.
Section 7.3 Additional Conditions to Obligations of Company.
-----------------------------------------------
The obligation of Company to effect the Merger is subject to the
satisfaction of each of the following conditions, any of which may be waived, in
writing, exclusively by Company:
(a) Representations and Warranties.
------------------------------
(i) The representations and warranties of Buyer and Sub set forth in this
Agreement that are not qualified as to Material Adverse Effect shall be true and
correct, except where failure to be true and correct would not have a Buyer
Material Adverse Effect, as of the Closing Date, as though made at and as of the
Closing Date, except that those representations and warranties that address
matters only as of a particular date shall so remain true and correct as of such
date;
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AGREEMENT AND PLAN OF MERGER
47
<PAGE>
(ii) The representations and warranties of Buyer and Sub set forth in this
Agreement that are qualified as to Buyer Material Adverse Effect shall be true
and correct in all respects as of the Closing Date, as though made at and as of
the Closing Date, except that those representations and warranties that address
matters only as of a particular date shall remain so true and correct in all
respects as of such date;
(iii) Company shall have received a certificate signed on behalf of Buyer
by the chief executive officer or the chief financial officer of Buyer to the
effect that each of the conditions specified in (x) paragraphs (i) and (ii) of
this paragraph (a) is satisfied in all respects and (y) paragraphs (b) and
(e) of this Section 7.3 is satisfied in all respects.
(b) Performance of Obligations of Buyer and Sub. Buyer and Sub shall
have performed in all material respects all obligations required to be performed
by them under this Agreement at or prior to the Closing Date.
(c) Tax Opinion. Stockholders shall have received the opinion of
Shearman & Sterling, to the effect that the Merger will be treated for federal
income tax purposes as a tax-free reorganization within the meaning of Section
368(a) of the Code; (it being agreed that Buyer and Company shall each provide
reasonable cooperation, including making reasonable representations, to Shearman
& Sterling to enable it to render such opinion).
(d) Legal Opinion. Company shall have received the opinion of Loeff
Claeys Verbeke and Brown, Rudnick, Freed & Gesmer, P.C. with respect to the
matters set forth on Exhibit H attached hereto, as applicable.
(e) Consents. Buyer and Sub shall have obtained and delivered to
Company all material waivers, permits, consents, approvals or other
authorizations necessary to be obtained by it to consummate the Merger, and
effected all material registrations, filings and notices necessary to be
affected by it to consummate the Merger.
(f) Registration Rights Agreement. Buyer shall have executed and
delivered to Stockholders the Registration Rights Agreement in the form to
Exhibit E attached hereto.
(g) Stockholders Agreement. Buyer shall have executed and delivered to
Stonington the Stockholders Agreement contemplated by Section 7.2(g).
(h) Indemnity and Escrow Agreement. Buyer shall have executed and
delivered to Stockholders the Indemnity and Escrow Agreement contemplated by
Section 7.2(h) and shall have funded the Escrow Fund created thereby as provided
herein.
(i) BT Note Agreement. Buyer, [Stonington] and Company shall have
executed the BT Note Agreement in the form of Exhibit I hereof, which shall be
executed as of the date hereof.
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AGREEMENT AND PLAN OF MERGER
48
<PAGE>
ARTICLE VIII. TERMINATION AND AMENDMENT
Section 8.1 Termination.
-----------
This Agreement may be terminated at any time prior to the Closing Date
(with respect to Sections 8.1(b) through 8.1(d), by written notice by the
terminating party to the other party), whether before or after approval of the
Merger by the stockholders of Company:
(a) by mutual written consent of Buyer and Company; or
(b) by either Buyer or Company if the Merger shall not have been
consummated by April 30, 2000 (the "Outside Date"); provided, however, that
either Buyer or Company may extend such date to June 30, 2000, by giving written
notice to the other at any time prior to April 30, 2000 if, on the date of such
notice, either of the conditions set forth in Sections 7.1(a) and 7.1(c) has not
been satisfied; provided that Buyer also may exercise such extension privileges
if Buyer has not obtained financing in an amount sufficient to refinance the
Indebtedness and other obligations described at Section 7.2(l); and provided
further that the right to terminate this Agreement under this Section 8.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been a principal cause of or resulted in the failure of
the Merger to occur on or before such date; or
(c) by either Buyer or Company if a Governmental Entity of competent
jurisdiction shall have issued a nonappealable final order, decree or ruling or
taken any other nonappealable final action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger; or
(d) by either Buyer or Company, if there has been a breach of any
representation, warranty, covenant or agreement on the part of the other party
set forth in this Agreement, which breach (i) causes the conditions set forth in
Section 7.2(a) or (b) (in the case of termination by Buyer) or 7.3(a) or
(b) (in the case of termination by Company) to be incapable of being satisfied.
Section 8.2 Effect of Termination.
---------------------
In the event of termination of this Agreement as provided in Section 8.1,
this Agreement shall immediately become void and there shall be no liability or
obligation on the part of Buyer, Company, Sub or their respective officers,
directors, stockholders or Affiliates, except as set forth in Sections 5.5, 6.9,
8.3 and Article IX; provided that any such termination shall not relieve any
party from liability for any willful breach of this Agreement (which includes
without limitation the making of any representation or warranty by a party in
this Agreement that the party knew was not true and accurate when made) and the
provisions of Sections 5.5, 6.9, 8.3, and Article IX of this Agreement and the
Confidentiality Agreement shall remain in full force and effect and survive any
termination of this Agreement.
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
49
<PAGE>
Section 8.3 Fees and Expenses.
-----------------
(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Merger is consummated provided that fees and expenses incurred by Company
(including any fees and expenses the Company has incurred on behalf of its
employees in connection with their negotiation and execution of the Retention
Agreements and Option Termination Agreements) in excess of $3,000,000 shall be
paid by Stockholders.
Section 8.4 Amendment.
---------
This Agreement may not be amended except by an instrument in writing signed
on behalf of each of the parties hereto.
Section 8.5 Extension; Waiver.
-----------------
At any time prior to the Effective Time, the parties hereto may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
ARTICLE IX. MISCELLANEOUS
Section 9.1 Survival of Representations, Warranties and Agreements.
------------------------------------------------------
All representations, warranties, agreements, covenants and obligations
herein or in any schedule, certificate or financial statement delivered by any
party to another party incident to the transactions contemplated hereby shall be
deemed to have been relied upon by the other party and shall survive the Closing
until one year following the Closing Date except that (a) Section 3.2 with
respect to title to capital stock of the Subsidiaries of Company, and (b)
Section 3.3 with respect to the authorization of the Merger, this Agreement and
the transactions contemplated hereby, shall be without limitation as to time.
Such representations, warranties, agreements, covenants and obligations shall be
further actionable subject to the limitations set forth in Article I of the
Escrow Agreement and shall not merge in the performance of any obligation by
either party hereto.
Section 9.2 Notices.
-------
All notices, requests, demands, claims and other communications hereunder
shah be in writing. Any notice, request, demand, claim or other communication
hereunder shall be deemed duly delivered five business days after it is sent by
registered or certified mail, return receipt requested, postage prepaid, or two
business days after it is sent via a
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
50
<PAGE>
reputable nationwide overnight courier service for next business day delivery,
in each case to the intended recipient as set forth below:
(a) if to Buyer or Sub, to
Lernout & Hauspie Speech Products, N.V.
Flanders Language Valley 50
B-8900 Ieper, Belgium
Attention: Legal Department and Chief Financial Officer
Telephone: 011 32 57 228 888
Facsimile: 011 32 57 208 489
with a copy to:
Lernout & Hauspie Speech Products, N.V.
c/o Lernout & Hauspie Speech Products USA, Inc.
52 Third Avenue
Burlington, MA 01803-4414
Attention: Legal Department and Chief Financial Officer
Telephone: (781) 203-5000
Facsimile: (781) 238-0986
with a copy to:
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, MA 02111
Attn: Philip J. Flink, Esq.
Tel: (617) 826-8200
Facsimile: (617) 856-8201
(b) if to Company, to
Dictaphone Corporation
3191 Broadbridge Avenue
Stratford, CT 06614
Telephone: (203) 381-7000
Facsimile: (203) 336-8566
Attn:
with a copy to:
Stonington Partners, Inc.
767 Fifth Avenue, 48th Floor
New York, New York 10153
Attn: Albert J. Fitzgibbons, III
Tel: (212) 339-8500
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
51
<PAGE>
and:
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telephone: (212) 848-4000
Facsimile: (212) 848-7179
Attn: Clare O'Brien, Esquire
Any party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
Section 9.3 Interpretation; Incorporation by Reference.
------------------------------------------
(a) When a reference is made in this Agreement to Articles or
Sections, such reference shall be to an Article or Section of this Agreement
unless otherwise indicated. The table of contents, table of defined terms and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. The
phrases "the date of this Agreement", "the date hereof," and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to March
7, 2000. The words "include," "includes" and "including" when used herein shall
be deemed in each case to be following by the words "without limitation."
(b) In the event of an ambiguity or a question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
(c) The Indemnification provision set forth in Article I of the Escrow
Agreement are incorporated herein by reference and the Company consents to the
provisions therein as of the date hereof.
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
52
<PAGE>
Section 9.4 Counterparts.
This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
two or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
Section 9.5 Entire Agreement; No Third Party Beneficiaries.
----------------------------------------------
This Agreement (including the documents and the instruments referred to
herein) (a) constitute the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) are not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder; provided that the
Confidentiality Agreement shall remain in full force and effect until the
Effective Time.
Section 9.6 Governing Law and Venue.
-----------------------
EXCEPT AS OTHERWISE REQUIRED UNDER BELGIUM LAW, THIS AGREEMENT SHALL BE
DEEMED TO BE MADE IN, AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND
GOVERNED BY AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (OTHER THAN
CHOICE OF LAW PRINCIPLES THEREOF) APPLICABLE TO CONTRACTS TO BE PERFORMED WHOLLY
IN SUCH STATE. The parties hereby (a) irrevocably submit to the jurisdiction of
the Chancery Court of the State of Delaware and the federal courts of the United
States of America located in the State of Delaware solely in respect of the
interpretation and enforcement of the provisions of this Agreement and in
respect of the transactions contemplated hereby and thereby and (b) waive, and
agree not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof, that it is not subject to such
jurisdiction or that such action, suit or proceeding may not be brought or is
not maintainable in said courts or that the venue thereof may not be appropriate
or that this Agreement may not be enforced in or by such courts, and the parties
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such courts. The parties hereby consent to and
grant any such court's jurisdiction over the person of such parties and over the
subject matter of such dispute and agree that mailing of process or other papers
in connection with any such action or proceeding in the manner provided in
Section 9.02, or in such other manner as may be permitted by law, shall be valid
and sufficient service thereof.
Section 9.7 Waiver of Jury Trial.
--------------------
EACH OF BUYER, SUB, COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF
BUYER, SUB, COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF OR THEREOF.
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
53
<PAGE>
Section 9.8 Assignment.
----------
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
Section 9.9 Severability.
------------
In the event that any provision of this Agreement or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
Section 9.10 Other Remedies; Specific Performance.
------------------------------------
Except as otherwise provided herein or in Article I of the Escrow
Agreement, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
54
<PAGE>
IN WITNESS WHEREOF, Buyer, Sub and Company have caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the date
first written above.
LERNOUT & HAUSPIE SPEECH
PRODUCTS N.V.
By: /s/ Pol Hauspie
--------------------------------
Name:
Managing Director
By: /s/ Nico Willaert
--------------------------------
Name:
Managing Director
DARK ACQUISITION CORP.
By: /s/Gaston Bastiaens
--------------------------------
Name:
Title:
DICTAPHONE CORPORATION
By: /s/ John Duerden
--------------------------------
Name:
Title:
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
55
<PAGE>
EXHIBIT 4.1
------------
REGISTRATION RIGHTS AGREEMENT
------------------------------
(Exhibits and Schedules are omitted pursuant to Item 601(b)(2) of
Regulation S-K. The Company agrees, however, to furnish supplementary a copy
of such omitted items to the Commission upon request.)
<PAGE>
- ------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Among
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
and
THE STOCKHOLDERS OF DICTAPHONE CORPORATION
Dated as of , 2000
----------
- ------------------------------------------------------------------------------
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
ARTICLE I. THE MERGER
<S> <C> <C>
Section 1.1 Effective Time of the Merger.................................1
Section 1.2 Closing......................................................2
Section 1.3 Effects of the Merger........................................2
Section 1.4 Directors and Officers.......................................2
Section 1.5 Actions Prior to Closing.....................................2
Section 1.6 Alternative Merger Structure.................................3
ARTICLE II. CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock..................................4
Section 2.2 Exchange of Certificates.....................................5
Section 2.3 Optional Adjustment to Merger Shares for Indebtedness........8
Section 2.4 Stonington's Merger Shares..................................10
Section 2.5 Escrow Shares...............................................10
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF COMPANY
Section 3.1 Organization of Company.....................................10
Section 3.2 Company Capital Structure...................................11
Section 3.3 Authority; No Conflict; Required Filings and Consents.......12
Section 3.4 SEC Filings; Financial Statements...........................14
Section 3.5 No Undisclosed Liabilities..................................15
Section 3.6 Absence of Certain Changes or Events........................15
Section 3.7 Taxes.......................................................17
Section 3.8 Title to Properties.........................................17
Section 3.9 Intellectual Property.......................................19
Section 3.10 Agreements, Contracts and Commitments.......................20
Section 3.11 Litigation..................................................20
Section 3.12 Environmental Matters.......................................23
Section 3.13 ERISA and Employee Benefit Plans............................26
Section 3.14 Compliance With Laws........................................26
Section 3.15 Permits.....................................................26
Section 3.16 Labor Matters...............................................26
Section 3.17 Insurance...................................................27
Section 3.18 Government Contracts........................................27
Section 3.19 Year 2000...................................................27
Section 3.20 Inventory...................................................28
Section 3.21 Warranty....................................................28
Section 3.22 Customers and Suppliers.....................................28
Section 3.23 Accounts Receivable.........................................28
Section 3.24 Section 203 of the DGCL Not Applicable......................29
Section 3.25 Transactions with Interested Persons........................29
Section 3.26 Absence of Sensitive Payments...............................29
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 3.27 Indebtedness................................................29
Section 3.28 Consent.....................................................29
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB
Section 4.1 Organization of Buyer and Sub...............................30
Section 4.2 Capitalization..............................................30
Section 4.3 Authority; No Conflict; Required Filings and Consents.......31
Section 4.4 Public Filings; Financial Statements........................32
Section 4.5 No Undisclosed Liabilities..................................33
Section 4.6 Absence of Certain Changes or Events........................33
Section 4.7 Intellectual Property.......................................33
ARTICLE V. CONDUCT OF BUSINESS
Section 5.1 Covenants of Company........................................34
Section 5.2 Options; Warrants...........................................37
Section 5.3 Covenants of Buyer..........................................37
Section 5.4 Cooperation.................................................38
Section 5.5 Confidentiality.............................................38
Section 5.6 Investigation...............................................38
ARTICLE VI. ADDITIONAL AGREEMENTS
Section 6.1 Exclusivity.................................................39
Section 6.2 Access to Information.......................................40
Section 6.3 Environmental Review........................................40
Section 6.4 Legal Conditions to Merger..................................40
Section 6.5 Employee Benefit Plans......................................41
Section 6.6 Public Disclosure...........................................42
Section 6.7 Tax-Free Reorganization.....................................42
Section 6.8 Nasdaq Listing..............................................42
Section 6.9 Brokers or Finders..........................................42
Section 6.10 Notification of Certain Matters.............................43
Section 6.11 Special Stockholders Meeting of the Company.................43
Section 6.12 Special Board Meeting of the Buyer..........................43
Section 6.13 Liability Insurance.........................................44
ARTICLE VII. CONDITIONS TO MERGER
Section 7.1 Conditions to Each Party's Obligation To Effect the Merger..45
Section 7.2 Additional Conditions to Obligations of Buyer and Sub...... 45
Section 7.3 Additional Conditions to Obligations of Company.............47
ARTICLE VIII. TERMINATION AND AMENDMENT
Section 8.1 Termination.................................................49
Section 8.2 Effect of Termination.......................................49
Section 8.3 Fees and Expenses...........................................50
Section 8.4 Amendment...................................................50
Section 8.5 Extension; Waiver...........................................50
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE IX. MISCELLANEOUS
Section 9.1 Survival of Representations, Warranties and Agreements........50
Section 9.2 Notices.......................................................50
Section 9.3 Interpretation; Incorporation by Reference....................52
Section 9.4 Counterparts..................................................52
Section 9.5 Entire Agreement; No Third Party Beneficiaries................53
Section 9.6 Governing Law and Venue.......................................53
Section 9.7 Waiver of Jury Trial..........................................53
Section 9.8 Assignment....................................................54
Section 9.9 Severability..................................................54
Section 9.10 Other Remedies; Specific Performance..........................54
ARTICLE X. DEFINITIONS
Section 10.1 Definitions....................................................1
ARTICLE XI. REGISTRATION RIGHTS
Section 11.1 Restrictive Legend............................................3
Section 11.2 Notice of Proposed Transfer...................................4
Section 11.3 Request for Registration......................................4
Section 11.4 Incidental Registration.......................................6
Section 11.5 Obligations of the Company....................................7
Section 11.6 Additional Holder Obligations.................................9
Section 11.7 Expenses of Registration.....................................10
Section 11.8 Underwriting Requirements....................................10
Section 11.9 Rule 144 Information.........................................10
Section 11.10 Indemnification..............................................11
Section 11.11 Lockup.......................................................13
ARTICLE XII. MISCELLANEOUS
Section 12.1 Transfer of Registration Rights..............................14
Section 12.2 Interpretation...............................................14
Section 12.3 Amendments...................................................15
Section 12.4 Assignment...................................................15
Section 12.5 No Third-Party Beneficiaries.................................15
Section 12.6 Notices......................................................15
Section 12.7 Counterparts.................................................16
Section 12.8 Severability.................................................17
Section 12.9 Consent to Jurisdiction......................................17
Section 12.10 Waiver of Jury Trial.........................................17
Section 12.11 Specific Performance.........................................17
Section 12.12 Governing Law................................................18
</TABLE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of May 5,2000 (this "Agreement"),
among Lernout & Hauspie Speech Products N. V., a corporation organized under the
laws of Belgium (the "Company"), and the undersigned stockholders of the Company
(individually, a "Stockholder" and collectively, the "Stockholders").
WHEREAS, the execution and delivery of this Agreement is a condition to the
obligations of Dictaphone Corporation, a Delaware corporation ("Dictaphone"),
under the Agreement and Plan of Merger dated as of March 7,2000, among the
Company, Dark Acquisition Corp., a Delaware corporation and a direct wholly
owned subsidiary of the Company ("Merger Sub"), and Dictaphone (the "Merger
Agreement"), pursuant to which Dictaphone shall merge with and into Merger Sub,
all upon the terms and subject to the conditions set forth in the Merger
Agreement;
WHEREAS, upon consummation of the transactions contemplated by the Merger
Agreement, each Stockholder will beneficially own the number of shares of common
stock of the Company, BEF 10.77 fractional value, set forth opposite such
Stockholder's name in Schedule I hereto, which has been adjusted to reflect the
two for one stock split by the Company that will become effective on May
12,2000, (together with any common stock of the Company issued as a dividend or
other distribution with respect thereto, or in exchange therefor, or in
replacement thereof, the "Company Common Stock"); and
WHEREAS, the Company and the Stockholders now wish to enter into this
Agreement to set forth their understanding as to the registration rights of the
Stockholders with respect to the Company Common Stock;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, the Company and the Stockholders hereby
agree as follows:
ARTICLE X.
- ----------
Definitions
- -----------
Section 10.1 Definitions. (a) As used in this Agreement, the following
-------------
terms shall have the following meanings:
"Affiliate" has the meaning set forth in Rule 12b-2, as in effect on the
---------
date hereof, under the Exchange Act.
1
<PAGE>
2
"beneficially own" has the meaning set forth in Rule 13d-3, as in effect on
----------------
the date hereof, under the Exchange Act.
"Business Day" means any day that is not a Saturday, Sunday or other day on
------------
which banks are required or authorized by law to be closed in The City of New
York.
"Closing Date" has the meaning set forth in the Merger Agreement.
------------
"Commission" means the U.S. Securities and Exchange Commission and any successor
- -------------
agency.
"Eligible Registrable Stock" means Registrable Stock that is not then
--------------------------
subject to restrictions on transfer pursuant to the Stockholders Agreement.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
------------
amended. "Holder" means a Stockholder and any Permitted Transferee.
"Note Termination Agreement" means the Note Termination Agreement among
--------------------------
Company, Dictaphone and Stonington Financing IV, LLC, dated as of March 7, 2000.
"Permitted Transferee" means in the case of each Stockholder, (a) any
--------------------
Affiliate of the Stockholder or of any member of such Stockholder's immediate
family, (b) spouses, lineal descendants and members of the Stockholder's
immediate family or trusts for their benefits or (c) upon such Stockholder's
death, such Stockholder's executors, administrators, testamentary trustees,
legatees, heirs and beneficiaries.
"Person" means any individual, firm, corporation, partnership, limited
------
partnership, limited liability company, association, trust, unincorporated
organization or other entity, as well as any syndicate or group that would be
deemed to be a person under Section 13(d)(3) of the Exchange Act.
"Register," "registered" and "registration" shall refer to a registration
-------- ---------- ------------
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act and the declaration or ordering of
effectiveness of such registration statement or document.
"Registrable Stock" means the Stockholder Shares and any securities issued
-----------------
or issuable with respect to any Stockholder Shares by way of conversion,
exchange, replacement, stock dividend, stock split or other distribution or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise. For purposes of this Agreement, any
Registrable Stock shall cease to be Registrable Stock when (i) a registration
statement covering such Registrable Stock has been declared effective and such
Registrable Stock has been disposed of pursuant to such effective registration
statement, (ii) such Registrable Stock is sold by a Person in a transaction in
which the rights under the provisions of this Agreement are not assigned
pursuant to the terms hereof, (iii) such Registrable Stock is sold pursuant to
Rule 144(k) (or any similar provision then in force, but not Rule 144A) under
the Securities Act without registration under the Securities Act or (iv) the
market value of such
<PAGE>
3
Holder's Registrable Stock at the time of determination is less than
$100,000,000 and it is capable of being sold pursuant to Rule 144 (or any
similar provision then in force, but not Rule 144A) within a single three month
period.
"Registration Period" means the period beginning on the date hereof and
-------------------
ending on the fourth anniversary of such date, provided that if on such date the
Stockholders own Registrable Stock with an aggregate market value of
$150,000,000 or more, such period will be extended until the fifth anniversary
of the Closing.
"Securities Act" means the United States Securities Act of 1933, as
--------------
amended.
"Stockholders Agreement" means the Stockholders Agreement, dated as of
----------------------
the date hereof, among the Company, Stonington Holdings LLC and certain other
stockholders of the Company.
"Stockholder Shares" means the shares of Company Common Stock issued by
------------------
Light to (a) the Stockholders upon the completion of the merger contemplated by
the Merger Agreement and (b) Stonington or any of its subsidiaries pursuant to
the Note Termination Agreement.
(b) The following terms have the meanings set forth in the Sections set
forth below:
Term Location
---- --------
Agreement Preamble
Company Preamble
Company Common Stock Recitals
Dictaphone Recitals
Initiating Holders (S)2.03(a)
Merger Agreement Recitals
Merger Sub Recitals
Stockholder Preamble
Stockholders Preamble
ARTICLE XI.
- ------------
Registration Rights
- --------------------
Section 11.1 Restrictive Legend. (a) Each certificate representing shares
-------------------------------
of Registrable Stock shall, except as otherwise provided in this Section 2.01 or
in Section 2.02, be stamped or otherwise imprinted with a legend substantially
in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER THAT ACT OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE."
(b) The Company shall, at the request of the Holder, remove from each
certificate evidencing Stockholder Shares the legend described in Section
2.01(a) if in the opinion of
<PAGE>
4
counsel reasonably satisfactory to the Company the securities evidenced thereby
may be publicly sold without registration under the Securities Act.
Section 11.2 Notice of Proposed Transfer. Prior to any proposed transfer of
----------------------------------------
any shares of Registrable Stock (other than to a Permitted Transferee or under
the circumstances described in Sections 2.03 or 2.04), the holder thereof shall
give written notice to the Company of such Holder's intention to effect such
transfer. Each such notice shall describe the manner of the proposed transfer
and, if requested by the Company, shall be accompanied by an opinion of counsel
reasonably satisfactory to the Company to the effect that the proposed transfer
may be effected without registration under the Securities Act, whereupon the
holder of such Registrable Stock shall be entitled to transfer such Registrable
Stock in accordance with the terms of such notice. Each certificate for
Registrable Stock transferred as above provided shall bear the legend set forth
in Section 2.01(a), except that such certificate shall not bear such legend if
(i) such transfer is in accordance with the provisions of Rule 144 of the
Securities Act (or any other rule permitting public sale without registration
under the Securities Act) or (ii) the opinion of counsel referred to above is to
the further effect that the transferee and any subsequent transferee ( other
than an Affiliate of the Company) would be entitled to transfer such securities
in a public sale without registration under the Securities Act. The restrictions
provided for in this Section 2.02 shall not apply to securities that are not
required to bear the legend prescribed by Section 2.01(a) in accordance with the
provisions of Section 2.01.
Section 11.3 Request for Registration. (a) During the Registration Period,
any Holder or Holders of at least 20% of the Registrable Stock (the "Initiating
Holders") may request in a written notice that the Company file a registration
statement under the Securities Act (or a similar or successor document pursuant
to any other statute then in effect corresponding to the Securities Act)
covering the registration of any or all Eligible Registrable Stock then held by
such Initiating Holders in the manner specified in such notice, provided that
there must be included in such registration at least 20% of the Registrable
Stock issued. Following receipt of any notice under this Section 2.03, the
Company shall (i) within 10 days notify any other Holders of Registrable Stock
of such request in writing and (ii) use all reasonable efforts to cause to be
registered under the Securities Act all Eligible Registrable Stock that the
Initiating Holders and any such other Holders have, within 10 days after the
Company has given such notice, requested be registered in accordance with the
manner of disposition specified in such notice by the Initiating Holders.
(b) If the Initiating Holders intend to have the Registrable Stock
distributed by means of an underwritten offering, the Holders shall enter into
an underwriting agreement and other ancillary agreements (such as a custody
agreement) in customary form with the underwriter or underwriters. The Company
will select the lead underwriter for such offering from the list of institutions
set forth on Schedule II hereto or their successors and the Holders shall select
the co- manager for such offering from the institutions on such list or their
successors. All of the representations and warranties by, and the other
agreements on the part of, the Company in the underwriting agreement and other
ancillary agreements to and for the benefit of such underwriters, shall, except
as they relate to information provided to the Company in writing by the Holders
for purposes of the proposed underwriting and registration, also be made to and
for the benefit of such Holders of Registrable Stock for the limited purpose of
their participation in such offering. No Holder shall be required to make any
representations or warranties to or
<PAGE>
5
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such Holder, the Registrable Stock of such
Holder and such Holder's intended method of distribution and any other
representations required by law or reasonably required by the underwriter. If
any Holder of Registrable Stock disapproves of the terms of the underwriting,
such Holder may elect to withdraw all its Registrable Stock by written notice to
the Company, the managing underwriter and the Initiating Holders. The securities
so withdrawn shall also be withdrawn from registration.
(c) Notwithstanding any provision of this Agreement to the contrary,
(i) the Company shall not be required to effect a registration
pursuant to this Section 2.03 if the Company has effected a
registration pursuant to this Section 2.03 within the 120-day
period next preceding such request which permitted Holders to
register Registrable Stock; and
(ii) if the Company shall furnish to such Holders a certificate signed
by a majority of the managing directors of the Company stating
that in their good faith opinion such registration would have a
material adverse effect on the Company or would interfere with
any material transaction then being pursued by the Company, then
the Company's obligation to use all reasonable efforts to file or
confidentially submit a registration statement shall be deferred,
provided that (A) the period of any such deferral shall terminate
upon public disclosure of any such material transaction, (B) the
Company shall not obtain any deferral under this Section
2.03(c)(ii) more than three times in any twelve-month period and
(C) all deferrals under this Section 2.03(c)(ii) in any twelve-
month period shall not exceed 60 days in the aggregate.
(d) The Company shall be obligated to effect and pay for a maximum
of three registrations pursuant to this Section 2.03; provided, that such
obligation shall be in respect of no more than two registrations following the
second anniversary of this Agreement, and no more than one registration
following the third anniversary of this Agreement; and provided, further, that a
registration requested pursuant to this Section 2.03 shall not be deemed to have
been effected for purposes of this Section 2.03(d) unless (i) it has been
declared effective by the Commission, (ii) it has remained effective for the
period set forth in Section 2.05(a) and (iii) the offering of Registrable Stock
pursuant to such registration is not subject to any stop order, injunction or
other order or requirement of the Commission (other than any such stop order,
injunction, or other requirement of the Commission prompted by any act or
omission of Holders of Registrable Stock).
Section 11.4 Incidental Registration. (a) Subject to Section 2.08, if at
------------------------------------
any time the Company determines that it shall file a registration statement
under the Securities Act for the registration of Company Common Stock in a firm
commitment underwritten public offering (other than the registration of an offer
and sale of securities pursuant to an employee or similar benefit plan,
registered on Form S-8 or comparable form; or relating to a merger, acquisition
or other transaction of the type described in Rule 145 under the Securities Act
or comparable rule, registered on Form F-4 or Form S-4 or similar forms or filed
in connection with an exchange offer or an offering of securities solely to the
Company's existing stockholders) on any form that
<PAGE>
6
would also permit the registration of the Registrable Stock and such filing is
to be on its behalf or on behalf of selling holders of its securities for the
general registration of Company Common Stock to be sold for cash, the Company
shall each such time promptly give each of the Stockholders written notice of
such determination setting forth the date on which the Company proposes to file
such registration statement, which date shall be no earlier than 15 Business
Days from the date of such notice, and advising the Stockholders of their right
to have any or all of the Registrable Stock included in such registration. Upon
the written request of any Holder received by the Company no later than 10
Business Days after the date of the Company's notice, the Company shall cause to
be registered under the Securities Act all of the Eligible Registrable
Stock that each such Holder has so requested to be registered, subject to
reduction in accordance with paragraph (b) of this Section.
(b) If, in the written opinion of the managing underwriter, the total
amount of such securities to be so registered, including such Registrable Stock,
will exceed the maximum amount of the Company's securities which can be marketed
(i) at a price reasonably related to the then current market value of such
securities, or (ii) without otherwise materially and It adversely affecting the
entire offering, then the Company shall be entitled to reduce the number of
shares of Registrable Stock to be sold in such offering by the Holders and any
other stockholder of the Company offered the opportunity to participate in such
offering in accordance with the terms of the agreements listed on Schedule III
hereto, and subject thereto, in proportion (as nearly as practicable) to the
number of shares of Registrable Shares held, at the time of filing the
registration statement, by each Holder and each other stockholder of the Company
who is participating in such offering; provided however, that no provision
herein shall require the Company to reduce the number of shares of Company
Common Stock participating in such offering held by any stockholder of the
Company who is entitled to inclusion in such offering by reason of such
stockholder's demand registration rights.
(c) A request by Holders to include Registrable Stock in a proposed
registration pursuant to Section 2.04(a) shall not be deemed to be one of its
request registration rights granted pursuant to Section 2.03.
Section 11.5 Obligations of the Company. Whenever required under Section
---------------------------------------
2.03 to effect the registration of any Registrable Stock, the Company shall, as
expeditiously as possible:
(a) prepare and file with the Commission a registration statement with
respect to such Registrable Stock (which, subject to Section 2.03(c)(ii), shall
be confidentially submitted or filed in no event later than 60 days after
written notice requesting a registration statement under Section 2.03 has been
received by the Company) and use all reasonable efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby determined as provided hereafter; provided
that the Company shall not be required to keep any Registration Statement
effective more than 120 days;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary c to comply with the provisions of the Securities
Act with respect to the disposition of all Registrable Stock covered by such
registration statement and, as may be necessary to complete the contemplated
distribution of the Registrable Stock, to keep such Registration Statement
<PAGE>
7
effective for a reasonable period not to exceed 120 days and promptly notify the
Holders of any stop order issued or, to the Company's knowledge, threatened to
be issued by the Commission and take all reasonable actions required to prevent
the entry of such stop order or to remove it if entered;
(c) furnish to the Holders such numbers of copies of the registration
statement and the prospectus included therein (including each preliminary
prospectus) and any amendments or supplements thereto in conformity with the
requirements of the Securities Act and any exhibits filed therewith and such
other documents and information as they may reasonably request;
(d) use all reasonable efforts to register or qualify the Registrable
Stock covered by such registration statement under such other securities or blue
sky laws of such jurisdiction within the United States and Puerto Rico as shall
be reasonably appropriate for the distribution of the Registrable Stock covered
by the registration statement; 2rovided, however, that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business in or to file a general consent to service of process in any
jurisdiction wherein it would not but for the requirements of this paragraph (d)
be obligated to do so; and provided, further, that the Company shall not be
required to qualify such Registrable Stock in any jurisdiction in which the
securities regulatory authority requires that any Holder submit any shares of
its Registrable Stock to the terms, provisions and restrictions of any escrow,
lockup or similar agreement(s) for consent to sell Registrable Stock in such
jurisdiction unless such Holder agrees to do so;
(e) promptly notify each Holder for whom such Registrable Stock is
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances under
which they were made, and at the request of any such Holder promptly prepare and
furnish to such Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made. In the
event the Company shall give such notice, the Company shall extend the period
during which such Registration Statement shall be maintained effective as
provided in Section 2.05(a) by the number of days during the period from and
including the date of the giving of such notice to the date when the Company
shall make available to the Holders such supplemented or amended prospectus;
(f) furnish, at the request of any Holder requesting registration of
Registrable Stock pursuant to Sections 2.03, if the method of distribution is by
means of an underwriting, on the date that the shares of Registrable Stock are
delivered to the underwriters for sale pursuant to such registration, or if such
Registrable Stock is not being sold through underwriters, on the date that the
registration statement with respect to such shares of Registrable Stock becomes
effective, (1) a signed opinion, dated such date, of the independent legal
counsel representing the Company
<PAGE>
8
for the purpose of such registration, addressed to the underwriters, if any, as
to such matters as such underwriters may reasonably request and as would be
customary in such a transaction; and (2) letters dated such date and the date
the offering is priced from the independent certified public accountants of the
Company, addressed to the underwriters, if any, (i) stating that they are
independent certified public accountants within the meaning of the Securities
Act and that, in the opinion of such accountants, the financial statements and
other financial data of the Company included in the registration statement or
the prospectus, or any amendment or supplement thereto, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act and (ii) covering such other financial matters with respect to the
registration in respect of which such letter is being given as such underwriters
may reasonably request and as would be customary in such a transaction;
(g) enter into customary agreements (including if the method of
distribution is by means of an underwriting, an underwriting agreement in
customary form) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of the Registrable Stock to be so
included in the registration statement;
(h) otherwise use all reasonable efforts to comply with all applicable
rules and regulations of the Commission; and
(i) use all reasonable efforts to list the Registrable Stock covered
by such registration statement with any securities exchange on which the Company
Common Stock is then listed.
For purposes of Sections 2.05(a) and 2.05(b), the period of distribution of
Registrable Stock in a firm commitment underwritten public offering shall be
deemed to extend until each underwriter has completed the distribution of all
securities purchased by it, and the period of distribution of Registrable Stock
in any other registration shall be deemed to extend until the earlier of the
sale of all Registrable Stock covered thereby and 120 days after the effective
date thereof.
Section 11.6 Additional Holder Obligations. (a) It shall be a condition
------------------------------------------
precedent to the obligations of the Company to take any action pursuant to this
Agreement that the Holders shall furnish to the Company such information
regarding themselves, their relationship with the Company and its Affiliates,
their beneficial ownership of Company Common Stock, the Registrable Stock held
by them, and the intended method of disposition, if any, of such securities as
the Company shall reasonably request and as shall be required in connection with
the action to be taken by the Company.
(b) The Company may, upon written notice to such Holder, suspend such
Holder's use of the prospectus for a reasonable period not to exceed sixty (60)
days if the Company in its reasonable judgment believes it may possess material
non-public information the disclosure of which at that point in time in its
reasonable judgment would have a material Adverse effect on the Company or
interfere with any material transaction then being pursued by the Company;
provided that (A) the Company may not effect any suspension under this Section
2.06 (b) more than three times in any twelve-month period and (B) all
suspensions under this Section 2.06(b) in any twelve-month period shall not
exceed 60 days in aggregate. Each Holder further agrees by acquisition of such
Registrable Stock that, upon receipt of any notice from the
<PAGE>
9
Company of the happening of any event of the kind described in Section 2.05(e)
or this Section 2.06(b), such Holder will forthwith discontinue disposition of
such Registrable Stock covered by the registration (other than in transactions
exempt from the registration requirements under the Securities Act) until such
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 2.05(e), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such prospectus. If the Company shall give any such notice, the
Company shall extend the period during which the registration shall be
maintained effective as provided herein by the number of days during such period
from and including the date of the giving of such notice to and including the
date when each Holder shall have received (x) the copies of the supplemented or
amended prospectus contemplated by Section 2.05(e) or (y) the Advice, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such prospectus.
(c) Each Holder understands that information provided to it pursuant
to any notice under Sections 2.05 or 2.06(b) or otherwise pursuant to this
Agreement or any of the registrations to be effected hereby may contain
confidential information, as designated in writing by the Company, and agrees
that unless such information otherwise becomes generally known to the public to
maintain such information in confidence and not use such information for its own
benefit other than as expressly contemplated by this Agreement.
(d) Each Holder agrees to comply with the prospectus delivery
requirements under the Securities Act in connection with the sale of any
Registrable Stock pursuant to a registration statement filed hereunder.
Section 11.7 Expenses of Registration. All expenses incurred by the Company
-------------------------------------
in connection with each registration pursuant to Sections 2.03 and 2.04 of this
Agreement, excluding underwriters' discounts and commissions, but including
without limitation all registration, filing and qualification fees, word
processing, duplicating, printers' and accounting fees (including the expenses
of any special audits or "cold comfort" letters required by or incident to such
performance and compliance), fees of the National Association of Securities
Dealers, Inc. or listing fees, messenger and delivery expenses, all fees and
expenses of complying with state securities or blue sky laws, and the fees and
disbursements of counsel for the Company, shall be paid by the Company;
provided, however, that if a registration request pursuant to Section 2.03 is
subsequently withdrawn by the Holders of a number of Registrable Stock such that
the remaining Holders requesting registration would not have been able to
request registration under the provisions of such Section 2.03, the Company
shall not be required to pay any expenses of such registration proceeding, and
such withdrawing Holders shall bear such expenses. The Holders shall bear and
pay the underwriting commissions and discounts applicable to securities offered
for their account and the fees and disbursements of their counsel in connection
with any registrations, filings and qualifications made pursuant to this
Agreement.
Section 11.8 Underwriting Requirements. In connection with any underwritten
--------------------------------------
offering, the Company shall not be required under Section 2.04 to include shares
of Registrable Stock in such underwritten offering unless the Holders of such
shares of Registrable Stock accept
<PAGE>
10
the terms of the underwriting of such offering that have been reasonably agreed
upon between the Company and the underwriters selected by the Holders.
Section 11.9 Rule 144 Information. With a view to making available the
---------------------------------
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable stock to the public without
registration, at all times after 90 days after any registration statement
covering a public offering of securities of the Company under the Securities Act
shall have become effective, the Company agrees to:
(a) I make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) I use its reasonable best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Exchange Act; and I
(c) I furnish to each Holder of Registrable Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule ~ 44 and of the Securities Act and Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents so filed by the Company as such Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such Holder to sell any Registrable Stock without
registration.
Section 11.10 Indemnification. In the event any Registrable Stock is
-----------------------------
included in a registration statement under this Agreement:
(a) The Company shall indemnify and hold harmless each Holder, such
Holder's directors, officers, agents, trustees and stockholders, and each Person
who participates in the offering of such Registrable Stock, including
underwriters (as defined in the Securities Act), and each Person, if an, who
controls such Holder or participating Person within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which they may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or proceedings in
respect thereof) arise out of or are based on any untrue or alleged untrue
statement of any material fact contained in such registration statement on the
effective date therof (including any prospectus filed under Rule 424 under the
Securities Act or any amendments r supplements thereto) or arise out of or are
based upon the omission or alleged omission t state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse each such Holder, such Holder's directors and
officers, such participating person or controlling person for any legal or other
expenses reasonably incurred by them (but not in excess of expenses incurred in
respect of one counsel for all oft em, subject to the limitations set forth in
Section 2.10(c)) in connection with investigating or d fending any such loss,
claim, damage, liability or action; provided, however, that the indemnity I
agreement contained in this Section 2.10(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company; provided, further,
that the Company shall not be liable to any Holder, such Holder's directors,
officers, agents, trustees and stockholders, and participating
<PAGE>
11
Person or controlling Person in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon (i) an
untrue statement or alleged untrue statement or omission or alleged omission
made in connection with such registration statement, preliminary prospectus,
final prospectus or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, such Holder's directors, officers,
agents, trustees and stockholders, and participating Person or controlling
Person or (ii) an untrue statement or alleged untrue statement or omission or
alleged omission made in connection with such registration statement,
preliminary prospectus, final prospectus or amendments or supplements thereto
corrected in a final or amended registration statement or prospectus if such
Holder or underwriter received written notice of such final or amended
prospectus prior to the confirmation of any sale but failed to deliver a copy of
the final or amended prospectus at or prior to the confirmation of the sale of
the Registrable Stock to the person asserting such loss, claim, damage or
liability. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of any such Holder, such Holder's
directors, officers, agents, trustees and stockholders, and participating Person
or controlling Person, and shall survive the transfer of such securities by such
Holder.
(b) Each Holder requesting or joining in a registration severally and
not jointly shall indemnify and hold harmless the Company, each of its directors
and officers, each Person, if any, who controls the Company within the meaning
of the Securities Act, and each agent and any underwriter for the Company
(within the meaning of the Securities Act) against any losses, claims, damages
or liabilities, joint or several, to which the Company or any such director,
officer, controlling Person, agent or underwriter may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or proceedings in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in such registration statement on the effective date thereof (including any
prospectus filed under Rule 424 under the Securities Act or any amendments or
supplements thereto) or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such registration
statement, preliminary or final prospectus, or amendments or supplements
thereto, in reliance upon and in conformity with written information furnished
by or on behalf of such Holder expressly for use in connection with such
registration; and each such Holder shall reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
Person, agent or underwriter (but not in excess of expenses incurred in respect
of one counsel for all of them) in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 2.1 (b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of such Holder, and provided,
further, that the liability of each Holder hereunder shall be limited to the
amount received by such Holder from the sale of all Registrable Stock covered by
such registration statement.
(c) Promptly after receipt by an indemnified party under this Section
2.10 of notice of the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against any indemnifying party under
this Section 2.10, notify the
<PAGE>
12
indemnifying party in writing of the commencement thereof and the indemnifying
party shall have the right to participate in and assume the defense thereof with
counsel selected by the indemnifying party and reasonably satisfactory to the
indemnified party (unless (i) such indemnified party reasonably objects to such
assumption on the grounds that there may be defenses available to it which are
different from or in addition to those available to such indemnifying party,
(ii) the indemnifying party and such indemnified party shall have mutually
agreed to the retention of such counselor (iii) in the reasonable opinion of
such indemnified party representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding, in which case the indemnified
party shall be reimbursed by the indemnifying party for the reasonable expenses
incurred in connection with retaining separate legal counsel); provided,
however, that an indemnified party shall have the right to retain its own
counsel, with all fees and expenses thereof to be paid by such indemnified
party, and to be apprised of all progress in any proceeding the defense of which
has been assumed by the indemnifying party. The failure to notify an
indemnifying party promptly of the commencement of any such action shall not
relieve the indemnifying party from any liability in respect of such action
which it may have to such indemnified party on account of the indemnity
contained in this Section 2.10, unless (and only to the extent) the indemnifying
party was prejudiced by such failure, and in no event shall such failure relieve
the indemnifying party from any other liability which it may have to such
indemnified party. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any claim or pending
or threatened proceeding in respect of which the indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability arising out of such claim or
proceeding.
(d) (i) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of, such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified party in
connection with the actions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any' action in
question, including any untrue or alleged untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by,
or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages or
liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or ' proceeding.
(ii) The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2.10(d) were determined by pro
rata allocation or by any other method of allocation which does not
take account of the equitable
<PAGE>
13
considerations referred to in the immediately preceding paragraph. No
person guilty of fraudulent misrepresentation (within the meaning of
Section ll(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation.
Section 11.11 Lockup. Each Holder shall, in connection with any
--------------------
registration of the Company's securities, upon the request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
agree in writing not to effect any sale, disposition or distribution of any
Company Common Stock (other than that included in the registration) without the
prior written consent of the Company or such underwriters, as the case may be,
for such period of time from 30 days prior to the effective date of such
registration as the Company or the underwriters may specify; Provided, however,
that (i) all executive officers and directors of the Company and holders of
Company Common Stock participating in such registration shall also have agreed
not to effect any sale, disposition or distribution of any Company Common Stock
under the circumstances and pursuant to the terms set forth in this Section 2.11
and (ii) in no event shall the Holders be required to not effect any sale,
disposition or distribution for longer than 90 days after the Registration
Statement becomes effective.
ARTICLE XII.
- ------------
Miscellaneous
- -------------
Section 12.1 Transfer of Registration Rights. The registration rights of
---------------------------------------------
any Holder under this Agreement with respect to any Registrable Stock may be
transferred to a Permitted Transferee; Provided, however, that (i) the
transferring Holder shall give the Company notice at or prior to the time of
such transfer stating the name and address of the transferee and identifying the
securities with respect to which the rights under this Agreement are to be
transferred, (ii) such transferee shall agree in writing, in form and substance
reasonably satisfactory to the Company, to be bound as a Holder by the
provisions of this Agreement and (iii) immediately following such transfer the
further disposition of such securities by such transferee is restricted under
the Securities Act. Any transfer of Registrable Stock other than as set forth in
this Section 3.01 shall cause such Registrable Stock to lose such status.
Section 12.2 Interpretation. (a) The headings contained in this Agreement
---------------------------
and, in the table of contents to this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
(b) In the event of an ambiguity or a question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
(c) The definitions of the terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation". The word "will" shall be
construed to have the same meaning and effect as the word "shall". Unless the
context requires otherwise (i) any definition of or reference to any agreement,
instrument or other
<PAGE>
14
document herein shall be construed as referring to such agreement, instrument or
other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (ii) any reference herein to any Person shall be construed to
include the Person's successors and permitted assigns, (iii) the words "herein",
"hereof' and "hereunder", and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof, and (iv) all references herein to Articles and Sections shall be
construed to refer to Articles and Sections of this Agreement.
Section 12.3 Amendments. No amendment, modification or waiver in respect of
-----------------------
this Agreement shall be effective unless it shall be in writing and signed by
both parties hereto.
Section 12.4 Assignment. Except where otherwise expressly provided herein,
-----------------------
this Agreement and the rights and obligations hereunder shall not be assignable
or transferable by the parties hereto (except by operation of law in connection
with a merger, or sale of substantially all the assets, of the parties hereto)
without the prior written consent of the other party hereto. Any attempted
assignment in violation of this Section 3.04 shall be void. Notwithstanding
anything to the contrary in this Agreement, it is acknowledged and agreed that
any change in any trustee or fiduciary acting for a Stockholder that is an
employee benefit plan, or any transfer of any Registrable Stock to one or more
successor trusts or plans by merger or reorganization, shall not be deemed an
assignment of this Agreement or any rights hereunder, or an assignment or
transfer of such Registrable Stock, for purposes of, or in any way prohibited
by, or subject to any limitations or requirements of this Agreement and that
such trustee, fiduciary, trust or plan shall have all of the benefits hereunder
and that such Registrable Stock shall continue to be Registrable Stock
hereunder.
Section 12.5 No Third-Party Beneficiaries. This Agreement is for the sole
-----------------------------------------
benefit of the parties hereto and their permitted assigns and nothing herein
expressed or implied shall give or be construed to give to any Person, other
than the parties hereto and such assigns, any legal or equitable rights
hereunder.
Section 12.6 Notices. All notices or other communications required or
--------------------
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent by prepaid telex, cable or telecopy or sent, postage prepaid, by
registered, certified or express mail or reputable overnight courier service and
shall be deemed given when so delivered by hand, telexed, cabled or telecopied,
or if mailed, five days after mailing (two Business Days in the case of express
mail or overnight courier service), as follows:
(i) if to the Company,
Lernout & Hauspie Speech Products N .V.
Flanders Language Valley 50
8900 Ieper
Belgium
Attention: General Counsel and Chief Financial Officer
with a copy to:
<PAGE>
15
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, MA 02111
Attention: Philip J. Flink
(ii) if to the Stockholders,
c/o Stonington Partners Inc.
767 Fifth Avenue, 48th Floor
New York, NY 10153
Attention: Albert J. Fitzgibbons, III
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Clare O'Brien
(ii) if to Bell Atlantic Master Trust
Mellon Bank, N.A., as
Trustee for the Bell Atlantic
Master Trust
One Mellon Bank Center
Pittsburgh, PA 15258-0001
Attention: Robert F. Sass
Fax: (412) 236-4225
Tel: (412) 234-2201
and
Bell Atlantic Asset Management Company
245 Park Avenue
40th Floor
New York, New York 10067
Attention: Conrad A. Francis
Fax: (212) 557-4564
Tel: (212) 557-5329
Email: [email protected]
---------------------------------
Section 12.7 Counterparts. This Agreement may be executed in one or more
-------------------------
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other party. Copies of executed
counterparts transmitted by te1ecopy, telefax or other electronic transmission
service shall be considered original executed counterparts for purposes of this
Section 3.07; provided that receipt of copies of such counterparts is confirmed.
<PAGE>
EXHIBIT 4.2
-----------
STOCKHOLDERS' AGREEMENT
-----------------------
(Exhibits and Schedules are omitted pursuant to Item 601(b)(2) of Regulation
S-K. The Company agrees, however, to furnish supplementary a copy of such
omitted items to the Commission upon request.)
<PAGE>
5/19/00
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of May 5, 2000 (this "Agreement"), among
STONINGTON HOLDINGS, L.L.C., a Delaware limited liability company (the
"Stockholder"), LEHA, a Netherlands foundation, L&H HOLDING N.V., a Belgium
corporation, L&H HOLDING III, a Luxembourg corporation, OLDCO N.V., a Belgium
corporation, and L&H INVESTMENT COMPANY N.V., a Belgium corporation
(collectively, the "L&H Control Group") and LERNOUT & HAUSPIE SPEECH PRODUCTS
N.V., a Belgium corporation (the "Company")
WHEREAS, the execution and delivery of this Agreement is a condition to the
obligations of the Company and Dictaphone Corporation, a Delaware corporation
("Dictaphone") under the Agreement and Plan of Merger dated as of March 7, 2000,
among the Company, Dark Acquisition Corp., a Delaware corporation and a direct
wholly owned subsidiary of the Company ("Merger Sub"), and Dictaphone (the
"Merger Agreement"), pursuant to which Dictaphone shall merge with and into
Merger Sub, all upon the terms and subject to the conditions set forth in the
Merger Agreement;
WHEREAS, upon consummation of the transactions contemplated by the Merger
Agreement, the Stockholder will beneficially own 9,064,329 shares of common
stock of the Company, adjusted for the two for one stock split of the Company
that will be effective as of May 12, 2000, BEF 10.77 fractional value (together
with any common stock of the Company issued as a dividend or other distribution
with respect thereto, or in exchange therefor, or in replacement thereof, the
"Company Common Stock") and the L&H Control Group (without regard to the
Stockholder) will beneficially own 22,352,984 shares of the Company Common Stock
(the "L&H Shares");
WHEREAS, the Company, the L&H Control Group and the Stockholder now wish to
enter into this Agreement to set forth their understanding as to the matters set
forth herein with respect to, among other things, representation on the
Company's Board of Directors (the "Board") and the holding, acquisition and
transfer of Company Common Stock by the Stockholder and its Affiliates (as
defined below); and
WHEREAS, the parties agree that the arrangements contained in this
Agreement are in the corporate interest of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, the parties hereto hereby agree as follows:
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
INTELLECTUAL PROPERTY................................................ 10
- ---------------------
ARTICLE I DEFINITIONS............................................... 10
-----------
SECTION 1.01. Definitions........................................... 10
-----------
ARTICLE II........................................................... 10
GOVERNANCE........................................................... 10
- ----------
SECTION 2.01. Initial Board Representation.......................... 10
----------------------------
SECTION 2.02. Continuing Board Representation....................... 10
-------------------------------
SECTION 2.03. Resignations and Replacements......................... 10
-----------------------------
SECTION 2.04. Voting Agreement...................................... 10
----------------
SECTION 2.05. Removal............................................... 10
-------
ARTICLE III STANDSTILL PROVISIONS................................... 10
---------------------
SECTION 3.01. Standstill Period..................................... 10
-----------------
SECTION 3.02. Transfer Restrictions................................. 10
---------------------
SECTION 3.03. Acquisition of Additional Shares; Other Restrictions.. 10
----------------------------------------------------
SECTION 3.04. Additional Shares..................................... 10
-----------------
ARTICLE IV MISCELLANEOUS............................................ 10
-------------
SECTION 4.01. Interpretation........................................ 10
--------------
SECTION 4.02. Amendments............................................ 10
----------
SECTION 4.03. Assignment............................................ 10
----------
SECTION 4.04. No Third-Party Beneficiaries.......................... 10
----------------------------
SECTION 4.05. Notices............................................... 10
-------
SECTION 4.06. Counterparts.......................................... 10
------------
SECTION 4.07. Severability.......................................... 10
------------
SECTION 4.08. Consent to Jurisdiction............................... 10
-----------------------
SECTION 4.09. Termination........................................... 10
-----------
SECTION 4.10. Specific Performance.................................. 10
--------------------
SECTION 4.11. Governing Law......................................... 10
-------------
</TABLE>
<PAGE>
ARTICLE I Definitions SECTION 1.01. Definitions . (a) As used in this
Agreement, the following terms shall have the following meanings:
"Affiliate" means a Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, a
specified person.
"beneficially own" has the meaning set forth in Rule 13d-3, as in effect on
the date hereof, under the Exchange Act.
"Business Day" means any day that is not a Saturday, Sunday or other day on
which banks are closed in The City of New York or in Belgium.
"Change of Control Transaction" means any transaction in which any Person
or two or more Persons acting in concert shall have acquired, or shall have
entered into a definitive agreement providing for the acquisition of, beneficial
ownership, directly or indirectly, of the voting securities of the Company
representing 50% or more of the combined voting power of all voting securities
of the Company.
"Closing" has the meaning set forth in the Merger Agreement.
"Closing Date" has the meaning set forth in the Merger Agreement.
"control" (including the terms "controlled by" or "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of the Company, whether
through the ownership of voting securities, by contract, or otherwise.
"Director" means a member of the Board.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended.
"Group" has the meaning set forth in Rule 13d-5, as in effect on the date
hereof, under the Exchange Act.
"Holder" means the Stockholder and any Permitted Transferee.
"Indemnity and Escrow Agreement" means the Indemnity and Escrow Agreement,
dated as of the date hereof, among the Company, the Stockholder, certain other
stockholders of the Company and an escrow agent.
"Initial Shares" means the number of Stockholder Shares acquired by the
Stockholder at the Closing, taking into account any increase or decrease thereof
by reason of any securities issued or issuable with respect to any such
Stockholder Shares by way of conversion,
3
<PAGE>
exchange, replacement, stock dividend, stock split or other distribution or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise.
"Note Termination Agreement" means the Note Termination Agreement among
Company, Dictaphone and Stonington Financing IV, LLC, date as of March 7, 2000.
"Permitted Transferee" means any Affiliate of the Stockholder.
"Person" means any individual, firm, corporation, partnership, limited
partnership, limited liability company, association, trust, unincorporated
organization or other entity, as well as any syndicate or group acting for the
purpose of acquiring, holding, or disposing of securities.
"Stockholder Director" means a Director designated by the Stockholder
pursuant to this Agreement.
"Stockholder Shares" means the Initial Shares, any other Company Common
Stock now or hereafter beneficially owned by the Stockholder or a Permitted
Transferee and any securities issued or issuable with respect to any such Common
Stock by way of conversion, exchange, replacement, stock dividend, stock split
or other distribution or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
"Third Party Offer" means an unsolicited bona fide offer by a Person other
than the Holder to acquire more than 50% of the outstanding voting securities of
the Company.
"Transfer" means transfer of a right in rem in shares, for valuable
consideration or for free, even when carried out by way of public auction,
voluntarily or by virtue of a judicial decision, including, but not limited to,
contributions, exchange transactions, transfers of substantially all of assets,
mergers, demergers, absorptions, liquidations or similar transactions, as well
as the granting of options to purchase or sell shares or the conclusion of a
swap or other agreement, that completely or partly transfers the economic
benefits or the ownership of the shares, regardless of whether such a
transaction is realized by means of delivery of securities, in cash or
otherwise.
(b) The following terms have the meanings set forth in the Sections set
forth below:
Term Location
---- --------
Agreement..................................... Preamble
Board......................................... Recitals
Cause......................................... (S)2.05
Company....................................... Preamble
4
<PAGE>
Company Common Stock.......................... Recitals
Dictaphone.................................... Recitals
Initial Restriction Period.................... (S)3.02(a)
L&H Control Group............................. Preamble
L&H Shares.................................... Recitals
Merger Agreement.............................. Recitals
Merger Sub.................................... Recitals
Standstill Period............................. (S)3.01(a)
Stockholder................................... Preamble
ARTICLE II Governance. SECTION 2.01. Initial Board Representation. (a) As
and from the date hereof, Albert J. Fitzgibbons, III, as a representative of the
Stockholder, shall have the right to attend meetings of the Board pursuant to a
resolution of the Board dated May 2, 2000.
(b) As soon as practicable following the Closing and in any event, no
later than May 22, 2000, the Company will convene a special stockholders'
meeting seeking approval to (i) increase the size of the Board to 17 members,
and (ii) elect the Stockholder Director to the Board for one year. In
connection with such special stockholders meeting, the Stockholder may nominate
a Stockholder Director for election to the Board, and the Company agrees to
cause the slate of Directors presented to the stockholders of the Company for
election to the Board to include the Stockholder Director. The initial
Stockholder Director shall be Albert J. Fitzgibbons, III.
SECTION 2.02. Continuing Board Representation. As long as the
Holders, in the aggregate, own Stockholder Shares constituting at least 55% of
the Initial Shares, the Stockholder may nominate the Stockholder Director for
appointment to the Board and the parties hereto shall exercise all authority
under applicable law to cause any slate of Directors presented to the
stockholders of the Company for election to the Board to include the Stockholder
Director.
SECTION 2.03. Resignations and Replacements. Subject to Section
2.02 and Section 2.05, if a Stockholder Director ceases to serve as a Director
for any reason, the vacancy created by such Director ceasing to serve shall be
filled by the affirmative vote of a majority of the remaining Directors then in
office with an individual designated by the Stockholder, who shall hold office
as a Director until the next general stockholders' meeting of the Company, at
which time such new Stockholder Director shall be presented to the stockholders
of the Company for election to the Board in accordance with Section 2.02.
SECTION 2.04. Voting Agreement. (a) The L&H Control Group shall
take all actions necessary to vote all the L&H Shares entitled to vote and owned
or held of record by the L&H Control Group at any annual or special stockholders
meeting at which one or more directors are elected in favor of, or shall take
all actions by written consent in lieu of any such
5
<PAGE>
meeting necessary to cause, the election of the Stockholder Director to the
Board, so long as the Stockholder Director is entitled to be a member of the
Board pursuant to this Article II. If the L&H Control Group shall refuse to vote
the L&H Shares as provided in this Section 2.04(a) at any meeting of
stockholders of the Company, or shall refuse to give its written consent in lieu
of a meeting, thereupon, without further action by the Stockholder, the
Stockholder shall be, and hereby is, irrevocably constituted the attorney-in-
fact and proxy of the L&H Control Group solely for the purpose of voting, and
shall vote such L&H Shares at such meeting as provided in this Section 2.04(a)
or give such consent, as the case may be. In connection herewith, the L&H
Control Group agrees to execute such proxy documents as may be necessary to
comply with the provisions of article 74, section 2 of the Belgium Coordinated
Laws on Commercial Companies (the "BCLCC").
(b) The Stockholder shall take all actions necessary to vote all the
Stockholder Shares entitled to vote and owned or held of record by the
Stockholder at any annual or special stockholders meeting at which one or more
directors are elected in favor of, or shall take all actions by written consent
in lieu of any such meeting necessary to cause, the election of the designees of
the L&H Control Group to the Board, so long as the Stockholder Director is
entitled to be a member of the Board pursuant to this Article II. If the
Stockholder shall refuse to vote the Stockholder Shares as provided in this
Section 2.04(b) at any meeting of stockholders of the Company, or shall refuse
to give its written consent in lieu of a meeting, thereupon, without further
action by the L&H Control Group, any representative of the L&H Control Group
shall be, and hereby is, irrevocably constituted the attorney-in-fact and proxy
of the Stockholder for the purpose of voting, and shall vote such Stockholder
Shares at such meeting as provided in this Section 2.04(b) or give such consent,
as the case may be. In connection therewith, the Stockholder agrees to execute
such proxy document as may be necessary to comply with the provisions of article
74, section 2 of the BCLCC.
SECTION 2.05. Removal. (a) The L&H Control Group agrees that, if,
at any time, the L&H Control Group is then entitled to vote for the removal of
directors of the Company, so long as the Stockholder Director is entitled to be
a member of the Board pursuant to this Article II, the L&H Control Group will
not vote any L&H Shares in favor of the removal of any Stockholder Director
elected pursuant to Section 2.01, 2.02 or 2.03 unless such removal shall be for
Cause. Removal for "Cause" shall mean removal of a director because of such
director s (A) willful or persistently repeated material non-performance of the
director's duties to the Company (other than by reason of the incapacity of the
director due to physical or mental illness) after notice by the Board of such
failure and the director's non-performance and continued, willful or
persistently repeated material non-performance after such notice, (B) the
indictment of the director for a felony offense, or (C) the commission by the
director of fraud or any willful misconduct that brings the reputation of the
Company into serious disrepute or causes the director to cease to be able to
perform his duties.
(b) The Stockholders agrees that, if, at any time, the Stockholder is
entitled to vote for the removal of directors of the Company, so long as the
Stockholder Director is entitled to be a member of the Board pursuant to this
Article II, the Stockholder will not vote any
6
<PAGE>
Stockholder Shares in favor of the removal of any director nominated to the
Board by the L&H Control Group unless such removal shall be for Cause.
ARTICLE III Standstill Provisions. SECTION 3.01. Standstill Period. The
"Standstill Period" shall mean the period beginning on the Closing Date and
continuing until the second anniversary of the Closing Date. Without limiting
the rights of the Stockholder set forth in Article II, the Standstill Period
shall be suspended:
(A) during such time as the Company is engaged in a process
calculated to result in a Change of Control Transaction, but only so long
as the Company has not terminated such process; provided that the
Stockholder will be notified promptly by the Company of its determination
to engage in any such process; or
(B) during such time as a Third Party Offer is outstanding.
SECTION 3.02. Transfer Restrictions. (a) Subject to the terms of
Section 3.02(b), during the Standstill Period, the Stockholder shall not,
directly or indirectly, Transfer any Initial Shares except (i) pursuant to the
terms of the Indemnity and Escrow Agreement or (ii) pursuant to a Third Party
Offer.
(b) The restrictions set forth in Section 3.02(a) shall not apply to
the Transfer by the Stockholder of up to 5,435,069 Initial Shares.
(c) From and after the end of the Standstill Period, Holders may
Transfer any Stockholder Shares free of any restrictions in this Agreement.
(d) In the event any Holder intends to Transfer Stockholder Shares in
a block trade of 50,000 or more shares, the Holder shall give prior notice
thereof to the Company.
(e) Each certificate representing the Stockholder Shares shall, except
as otherwise provided in this Section 3.02, be stamped or otherwise be imprinted
with legends substantially in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON DISPOSITION AND OTHER RESTRICTIONS OF A
STOCKHOLDERS AGREEMENT DATED AS OF MAY 5, 2000, BETWEEN THE
HOLDER HEREOF AND LERNOUT & HAUSPIE SPEECH PRODUCTS N.V."
SECTION 3.03. Acquisition of Additional Shares; Other Restrictions .
During the Standstill Period (excluding such period during which the Standstill
Period may be suspended pursuant to Section 3.01(a)), other than as provided in
the Note Termination
7
<PAGE>
Agreement, the Stockholder shall not, directly or indirectly, and shall cause
its Affiliates not to, directly or indirectly:
(a) Acquire, announce an intention to acquire, offer to acquire, or
enter into any agreement, arrangement or undertaking of any kind the purpose of
which is to acquire, by purchase, exchange or otherwise, (i) any shares of
Company Common Stock or (ii) any other security convertible into, or any option,
warrant or right to acquire, Company Common Stock or (iii) all or substantially
all of the assets of the Company or any of its Affiliates, provided that
Sections 3.03(a)(i) and (ii) shall not be applicable if the aggregate percentage
of outstanding Company Common Stock is increased solely as a result of corporate
action taken by the Company and not caused by any action taken by the
Stockholder or any of its Affiliates.
(b) Solicit, or participate in any solicitation of, proxies with
respect to any Company Common Stock, or become a "participant" in a
"solicitation" (as such terms are defined in Regulation 14A of the Exchange Act)
in opposition to any matter that has been recommended by a majority of the
Directors or in favor of any matter that has not been approved by a majority of
the Directors.
(c) Propose or otherwise solicit stockholders of the Company for the
approval of one or more stockholder proposals, seek or solicit support for
(whether publicly or privately) any written consent of stockholders of the
Company, attempt to call a special meeting of stockholders, nominate or attempt
to nominate any Person for election as a Director (except in accordance with
Article II), or seek the removal or resignation of any Director (other than a
Stockholder Director) (except in accordance with Article II), in each case in
opposition to any matter that has been recommended by a majority of the
Directors (and such recommendation has not been revoked or withdrawn) or in
favor of any matter that has not been approved by a majority of the Directors.
(d) Deposit any Company Common Stock in a voting trust or similar
agreement or subject any Company Common Stock to any arrangement or agreement
with respect to the voting of such Company Common Stock.
(e) Take any action to form, join or in any way participate in any
partnership, limited partnership, syndicate or other Group with respect to
Company Common Stock or otherwise act in concert with any Person for the purpose
of circumventing the provisions or purposes of this Agreement.
(f) Propose (or publicly announce or otherwise disclose an intention
to propose), solicit, offer, seek to effect, negotiate with or provide any
confidential information relating to the Company or its business to any other
Person with respect to, any tender or exchange offer, merger, consolidation,
share exchange, business combination, restructuring, recapitalization or similar
transaction involving the Company or fail to withdraw from any such proposal
that, in the opinion of counsel to the Company, would require the Company to
make a public announcement with respect thereto; provided, that nothing set
forth in this Section 3.03(f)
8
<PAGE>
shall prohibit the Stockholder from soliciting, offering, seeking to effect and
negotiating with any Person with respect to Transfers of Company Common Stock
otherwise permitted by this Article III; provided further, that in so doing the
Stockholder shall not (x) issue any press release or otherwise make any public
statements (other than statements made in response to any request by any Person
for confirmation by the Stockholder or any of its Affiliates of information
contained in any statement on Schedule 13D under the Exchange Act) with respect
to such action (provided that the Stockholder may, and may permit its Affiliates
to, make any statement required by applicable law, including without limitation,
the amendment of any statement on Schedule 13D under the Exchange Act);
provided, however, that in doing so Stockholder shall not provide any
confidential information relating to the Company or its business to any such
Person, and; provided, further, that nothing in this Section 3.03(f), shall
apply to discussions between or among officers, employees or agents of
Stockholder and the Stockholder Director.
(g) Assist, advise, encourage or influence in any respect any third
party to seek to control management of the Company including, without limitation
assisting such third party in (i) influencing the Board or the management or
policies of the Company or (ii) acquiring, holding, voting or disposing of
voting securities of the Company.
(h) Take any other action to seek control of the Company.
(i) Make or in any way advance any request or proposal to amend,
modify or waive any provision of this Agreement except in a nonpublic and
confidential manner.
(j) Announce an intention to do, or solicit, assist, prompt, induce or
attempt to induce any Person to do, any of the actions restricted or prohibited
under subparagraphs (a) through (i) above.
Notwithstanding the restrictions contained in this Section 3.03, none
of actions taken by any Stockholder Director as a member of the Board pursuant
to such Person's responsibilities in such capacity or the exercise by any Holder
of its voting rights with respect to any Stockholder Shares shall be deemed to
violate this Section 3.03.
SECTION 3.04. Additional Shares. All shares of Company Common Stock
acquired by a Holder pursuant to this Article III or as a result of a
recapitalization of the Company or any other action taken by the Company, shall
be subject to all of the terms, covenants and conditions of this Agreement.
ARTICLE IV Miscellaneous. SECTION 4.01. Interpretation.
(a) The headings contained in this Agreement and, in the table of
contents to this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
(b) In the event of an ambiguity or a question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or
9
<PAGE>
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
(c) The definitions of the terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed
to be followed by the phrase "without limitation". The word "will" shall be
construed to have the same meaning and effect as the word "shall". Unless the
context requires otherwise (i) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (ii) any reference
herein to any Person shall be construed to include the Person's successors and
permitted assigns, (iii) the words "herein", "hereof" and "hereunder", and words
of similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, and (iv) all references herein to
Articles and Sections shall be construed to refer to Articles and Sections of
this Agreement.
SECTION 4.02. Amendments. No amendment, modification or waiver in
respect of this Agreement shall be effective unless it shall be in writing and
signed by all parties hereto.
SECTION 4.03. Assignment. Except where otherwise expressly
provided herein, this Agreement and the rights and obligations hereunder shall
not be assignable or transferable by the parties hereto (except by operation of
law in connection with a merger, or sale of substantially all the assets, of the
parties hereto) without the prior written consent of the other parties hereto;
provided, however, that the Stockholder may assign its rights and obligations
hereunder to a Permitted Transferee. Any attempted assignment in violation of
this Section 4.03 shall be void.
SECTION 4.04. No Third-Party Beneficiaries. This Agreement is for
the sole benefit of the parties hereto and their permitted assigns and nothing
herein expressed or implied shall give or be construed to give to any Person,
other than the parties hereto and such assigns, any legal or equitable rights
hereunder.
SECTION 4.05. Notices. All notices or other communications
required or permitted to be given hereunder shall be in writing and shall be
delivered by hand or sent by prepaid telex, cable or telecopy or sent, postage
prepaid, by registered, certified or express mail or reputable overnight courier
service and shall be deemed given when so delivered by hand, telexed, cabled or
telecopied, or if mailed, five days after mailing (two Business Days in the case
of express mail or overnight courier service), as follows:
(i) if to the Company,
10
<PAGE>
Lernout & Hauspie Speech Products N.V.
Flanders Language Valley 50
8900 Ieper
Belgium
Attention: General Counsel and Chief Financial Officer
(i) if to the L&H Control Group,
c/o Lernout & Hauspie Speech Products NV
Flanders Language Valley 50
8900 Ieper
Belgium
Attention: Chantal Mestdagh
(ii) if to the Stockholder,
c/o Stonington Partners, Inc.
767 Fifth Avenue, 48th Floor
New York, NY 10153
Attn: Albert J. Fitzgibbons, III
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Clare O'Brien
SECTION 4.06. Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more such counterparts have
been signed by each of the parties and delivered to the other party. Copies of
executed counterparts transmitted by telecopy, telefax or other electronic
transmission service shall be considered original executed counterparts for
purposes of this Section 4.06; provided that receipt of copies of such
counterparts is confirmed.
SECTION 4.07. Severability. If any provision of this Agreement
(or any portion thereof) or the application of any such provision (or any
portion thereof) to any Person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof (or the remaining portion thereof) or the application of such provision
to any other Persons or circumstances.
11
<PAGE>
SECTION 4.08. Consent to Jurisdiction. Each of the parties hereto
irrevocably submits to the exclusive jurisdiction of (a) a Federal court for the
Southern District of New York and (b) any New York state court located in the
County of New York, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
the parties hereto agrees to commence any action, suit or proceeding relating
hereto either in a Federal Court for the Southern District of New York or in a
New York state court located in the County of New York. The Company and the L&H
Control Group further agrees that service of any process, summons, notice or
document by U.S. registered mail to the offices of Brown Rudnick, Freed &
Gesmer, One Financial Center, Boston, MA 02111, Attention: Philip J. Flink
shall be effective service of process for any action, suit or proceeding in New
York with respect to any matters to which it has submitted to jurisdiction in
this Section 4.08. Each of the parties hereto irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby in (i) any
Federal court for the Southern District of New York or (ii) any New York state
court located in the County of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
SECTION 4.09. Termination. This Agreement shall expire on the
fifth anniversary hereof.
SECTION 4.10. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
.
SECTION 4.11. Governing Law. Subject to the mandatory requirements
of the internal laws of the Kingdom of Belgium, this Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State other than
Section 5-1401 of the New York General Obligations Law.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
LERNOUT & HAUSPIE SPEECH
PRODUCTS N.V.
By /s/ Pol Hauspie
---------------
Name: Pol Hauspie
Title: Managing Director
By /s/ Jo Lernout
--------------
Name: Jo Lernout
Title: Managing Director
STONINGTON HOLDINGS, L.L.C.
By /s/ Albert Fitgibbons, III
--------------------------
Name: Albert J. Fitgibbons, III
Title:
LEHA
By /s/ Jo Lernout
--------------
Name: Jo Lernout
Title: Director
By /s/ Pol Hauspie
---------------
Name: Pol Hauspie
Title: Director
L&H HOLDING N.V.
By /s/ Pol Hauspie
---------------
Name: Pol Hauspie
Title: Managing Director
By /s/ Jo Lernout
--------------
Name: Jo Lernout
Title: Managing Director
13
<PAGE>
L&H HOLDING III
By /s/ Jo Lernout
--------------
Name: Jo Lernout
Title: Director
OLDCO N.V.
By /s/ Pol Hauspie
---------------
Name: Pol Hauspie
Title: Managing Director
L&H INVESTMENT COMPANY N.V.
By /s/ Pol Hauspie
---------------
Name: Pol Hauspie
Title: Co-Chairman
By /s/ Chantal Mestdaghlde
-----------------------
Name: Chantal Mestdaghlde
Title: Director
STOCKHOLDERS AGREEMENT
Among
STONINGTON HOLDINGS, L.L.C.,
LEHA,
L&H HOLDING N.V.,
L&H HOLDING III,
OLDCO N.V.
L&H INVESTMENT COMPANY N.V.,
and
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
Dated as of May 5, 2000
14
