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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 8, 1998
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ANDREA ELECTRONICS CORPORATION
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(Exact Name of Registrant as Specified in Charter)
New York 1-4324 11-0482020
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
11-40 45th Road, Long Island City, New York 11101
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (718) 729-8500
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Not Applicable
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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.
On May 5, 1998, Andrea Electronics Corporation, a New York Corporation
(the "Registrant" or "Andrea"), acquired all of the outstanding ordinary
shares of capital stock of Lamar Signal Processing, Ltd. (respectively, the
"Lamar Shares" and "Lamar"), an Israeli corporation which develops digital
signal processing (DSP) noise cancellation microphone solutions for
voice-driven interfaces covering a wide range of audio and acoustic
applications. The consideration paid by Andrea for the acquisition of the
Lamar Shares was $3,000,000 in cash and 1,800,000 shares of Andrea's common
stock, par value $.50 per share (the "Andrea Shares"). The Company issued a
press release announcing the completion of the acquisition of Lamar on May 6,
1998, a copy of which is attached hereto as Exhibit 99.1 and incorporated
herein by reference.
Of the aggregate cash consideration paid by Andrea for the Lamar Shares,
$1,000,000 was paid on May 5, 1998 and the remainder is payable in four equal
installments on each of the sixth, twelfth, twenty-fourth and thirty-six
month anniversaries of the closing.
Of the 1,800,000 Andrea Shares comprising the share consideration paid
by Andrea for the Lamar Shares, one-third shall become freely transferable on
the first anniversary of the Closing, an additional one-third shall become
freely transferable on the second anniversary of the Closing, and the last
one-third shall become freely transferable on the third anniversary of the
Closing. During the period prior to each such anniversary, the Andrea Shares
comprising the share consideration that have not yet become freely tradeable
shall not be sold, offered, pledged or otherwise disposed of or transferred
by a holder except under certain limited conditions.
The foregoing summary of the acquisition is qualified in its entirety by
reference to the copies of the acquisition agreements attached hereto as
Exhibit 2.1 and Exhibit 2.2 and incorporated herein by reference.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired. The financial statements
required to be submitted with this Form 8-K will be filed by amendment before
July 19, 1998 (the date that is 60 days from the date that this form must be
filed pursuant to Item 7(a)(4) of the instructions to Form 8-K).
(b) Pro Forma Financial Information. The pro forma financial information
required to be submitted with this Form 8-K will be filed by amendment before
July 19, 1998 (the date that is 60 days from the date that this form must be
filed pursuant to Item 7(b)(2) of the instructions to Form 8-K).
(c) Exhibits:
Exhibit
Number Description
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2.1 Stock Purchase Agreement dated April 6, 1998
2.2 Amendment No. 1 to the Stock Purchase Agreement dated
May 5, 1998
99.1 Press release dated May 6, 1998
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SIGNATURES
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 hereunto duly authorized.
Dated: May 7, 1998 ANDREA ELECTRONICS CORPORATION
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(Registrant)
/s/ Patrick D. Pilch
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Patrick D. Pilch
Executive Vice President,
Chief Financial Officer
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EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
by and among
THE SELLING SHAREHOLDERS SPECIFIED HEREIN,
LAMAR SIGNAL PROCESSING, LTD.,
and
ANDREA ELECTRONICS CORPORATION
Dated as of April 6, 1998
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of April 6, 1998, by
and among EACH PERSON SPECIFIED IN SCHEDULE 4(e) HERETO (each a "Seller";
together the "Sellers"), and LAMAR SIGNAL PROCESSING, LTD., an Israeli
corporation ("Lamar"), on the one hand, and ANDREA ELECTRONICS CORPORATION, a
New York Corporation (the "Buyer"), on the other hand.
RECITALS
WHEREAS, the Buyer and Lamar executed that certain Letter
Agreement dated February 10, 1998, providing for the grant to the Buyer from
the Sellers of an option to takeover all of the Sellers' equity interest of
Lamar;
WHEREAS, the Sellers own all of the outstanding shares of
capital stock of Lamar (the "Shares");
WHEREAS, each Seller desires to sell to the Buyer, and the
Buyer desires to purchase from each Seller, all the Shares owned by such
Seller in exchange for the consideration described herein (the
"Consideration"), so that following such purchase Lamar becomes a
wholly-owned subsidiary of the Buyer; and
WHEREAS, the Parties desire to set forth in this Agreement
the terms and conditions upon which the Buyer will purchase the Shares from
the Sellers;
NOW, THEREFORE, in consideration of the mutual covenants set forth herein and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, the Parties hereby
agree as follows:
1. DEFINITIONS.
(a) The following terms, as used in this Agreement, shall have
the
following meanings (such meanings to be equally applicable both to the
singular and plural forms of the terms defined):
"Andrea Shares" shall mean the common stock, par value $.50 per share, of the
Buyer.
"Affiliate" shall mean a person that, directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the person specified.
"Applicable Laws" shall have the meaning assigned to that term in Section
4(r).
"Balance Sheet" shall have the meaning assigned to that term in Section 4(i).
"Benefit Plans" shall have the meaning assigned to that term in Section 4(q).
"Buyer" shall mean Andrea Electronics Corporation, a New York corporation.
"Cash Consideration" shall have the meaning assigned to that term in Section
2(b)(i).
"Closing" shall have the meaning assigned to that term in Section 3(a).
"Code" shall mean the U.S. Internal Revenue Code of 1986, as amended, or any
similar U.S. federal statute, and the rules and regulations thereunder, all
as the same shall be in effect at the time.
"Competitive Activities" shall have the meaning assigned to that term in
Section 6(j).
"Consideration" shall mean the aggregate consideration to be paid by the
Buyer for the Shares and shall be comprised of the Cash Consideration and the
Share Consideration, as specified in Section 2(b).
"Contracts" shall have the meaning assigned to that term in Section 4(n).
"Detrimental Activities" shall have the meaning assigned to that term in
Section 6(j).
"Election" shall have the meaning assigned to that term in Section 12(a).
"Employment Agreements" shall have the meaning assigned to that term in
Section 6(f).
"ERISA" shall mean the U.S. Employee Retirement Income Security Act of 1974,
as amended, or any similar U.S. federal statute, and the rules and
regulations thereunder, all as the same shall be in effect at the time.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the SEC (or of
any other U.S. federal agency then administering the Exchange Act)
thereunder, all as the same shall be in effect at the time.
"Executives" shall have the meaning assigned to that term in Section 6(f).
"Financial Statements" shall have the meaning assigned to that term in
Section 4(i).
"Governmental Entity" shall mean any U.S. federal, state or local, Israeli
state or local, or other non-U.S., non-Israeli government or any court of
competent jurisdiction, administrative agency or commission or other
governmental authority or instrumentality, U.S., Israeli or otherwise, or any
national securities or commodities exchange or other regulatory or
self-regulatory body or association.
"Indebtedness" means (i) any liability for borrowed money or evidenced by a
note or similar obligation given in connection with the acquisition of any
property or other assets (other than trade accounts payable incurred in the
ordinary course of business); (ii) all guaranties, endorsements and other
contingent obligations, in respect of Indebtedness of others, whether or not
the same are or should be reflected in Lamar's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business; and (iii) the present value of any lease payments due under leases
required to be capitalized in accordance with applicable financial accounting
standards, determined by discounting all such payments at the interest rate
determined in accordance with applicable financial accounting standards.
"Intellectual Property" means any and all, whether U.S. or non-U.S., patents,
patent applications, patent rights, trade secrets, know-how, confidential
business information, formula, laboratory notebooks, algorithms, copyrights,
mask works, claims of infringement against third parties, licenses, permits,
license rights to or of technologies, contract rights with employees,
consultants or third parties, trademarks, trademark rights, inventions and
discoveries, and other such rights generally classified as intangible,
intellectual property assets in accordance with generally accepted accounting
principles.
"Investment Center" shall mean the Directorate of the Investment Center in
the Ministry of Industry and Commerce of the State of Israel.
"IRS" shall mean the United States Internal Revenue Service or any other U.S.
federal agency then administering the Code.
"Key Employee" shall mean the Chief Executive Officer, President, Chief
Financial Officer, any executive officer or any other valuable employee of
Lamar, as determined by the board of directors of the Buyer. A Key Employee
may, but need not, be an officer or director of Lamar.
"Lamar" shall mean Lamar Signal Processing, Ltd., an Israeli corporation.
"Lamar Business Plan" shall be the business plan of Lamar set forth in
Schedule 4(a).
"Lamar Constituent Documents" shall mean the Memorandum of Association and
Articles of Association of Lamar.
"Leased Property" shall have the meaning assigned to that term in Section
4(m).
"Loss" shall have the meaning assigned to that term in Section 11(d).
"Material Adverse Effect" shall have the meaning assigned to that term in
Section 4(a).
"Non-competition Agreement" shall be an agreement substantially in the form
set forth in Schedule 4(w).
"NOL" shall have the meaning assigned to that term in Section 4(k)(v).
"Nondisclosure and Assignment of Inventions Agreement" shall be an agreement
substantially in the form set forth in Schedule 4(w).
"Pension Plan" shall have the meaning assigned to that term in Section 4(q).
"Permitted Liens" shall have the meaning assigned to that term in Section
4(l).
"Person" or "person" means an individual, corporation, partnership, joint
venture, trust, university, or unincorporated organization, or a government
or any agency or political subdivision thereof.
"Pre-Closing Tax Period" shall have the meaning assigned to that term in
Section 4(k).
"Property Taxes" shall have the meaning assigned to that term in Section
11(a).
"Records" shall have the meaning assigned to that term in Section 8(e).
"Registration Rights Agreement" shall mean the Registration Rights Agreement
substantially in the form attached as Schedule 9(b)(iv) hereto.
"SEC" shall mean the U.S. Securities and Exchange Commission or any other
U.S. federal agency then administering the Securities Act or Exchange Act.
"SEC Documents" shall have the meaning assigned to that term in Section 5(e).
"Securities Act" means the U.S. Securities Act of 1933, as amended, or any
similar U.S. federal statute, and the rules and regulations of the SEC (or of
any other U.S. federal agency then administering the Securities Act)
thereunder, all as the same shall be in effect at the time.
"Seller" or "Selling Party" shall have the meaning assigned to that term in
the first paragraph of this Agreement.
"Seller's Pro Rata Portion" shall have the meaning assigned to that term in
Section 3(b).
"Sellers' Representative" shall have the meaning assigned to that term in
Section 11(g).
"Share Consideration" shall have the meaning assigned to that term in Section
2(b)(ii).
"Share Consideration Trading Restriction" shall mean the trading restriction
imposed on the Sellers in Section 2(d) with respect to the Share
Consideration.
"Share Certificates" shall have the meaning assigned to that term in Section
3(b).
"Shares" shall mean all or any portion of the issued and outstanding ordinary
shares, par value NIS 1.00 per share, of Lamar.
"Straddle Period" shall have the meaning assigned to that term in Section
11(a).
"Tax" shall have the meaning assigned to that term in Section 4(k).
"Tax Claim" shall have the meaning assigned to that term in Section 11(g).
"Tax Return" shall have the meaning assigned to that term in Section 4(k).
"Third Party Claim" shall have the meaning assigned to that term in Section
11(e).
(b) All accounting terms not specifically defined herein shall be
construed in accordance with U.S. generally accepted accounting principles,
consistently applied, and, except as otherwise expressly provided herein, all
financial data submitted pursuant to this Agreement shall be prepared in
accordance with such principles.
2. PURCHASE AND SALE OF THE SHARES.
(a) PURCHASE AND SALE. On the terms and subject to the conditions of
this Agreement, the Sellers shall sell, transfer and deliver or cause to be
sold, transferred and delivered to the Buyer, and the Buyer shall purchase
from the Sellers, in each case free and clear of all liens, charges and
encumbrances of any kind, the Shares for the Consideration, payable as set
forth in this Section 2.
(b) CONSIDERATION. The Consideration for the Shares shall be
Eighteen
Million United States Dollars (US$18,000,000), comprised of:
(i) Three Million United States Dollars (US$3,000,000) payable in
accordance with Section 2(c) (the "Cash Consideration"); and
(ii) One Million Eight Hundred Thousand (1,800,000) Andrea Shares,
subject to adjustment pursuant to Section 2(f) (the "Share Consideration").
(c) CASH CONSIDERATION PAYMENT SCHEDULE. The aggregate Cash
Consideration shall be payable in accordance with the following schedule:
(i) One Million United States Dollars (US$1,000,000) upon Closing;
(ii) Five Hundred Thousand United States Dollars (US$500,000) upon
the six month anniversary of the Closing;
(iii) Five Hundred Thousand United States Dollars (US$500,000)
upon the twelve month anniversary of the Closing;
(iv) Five Hundred Thousand United States Dollars (US$500,000) upon
the twenty-four month anniversary of the Closing; and
(v) Five Hundred Thousand United States Dollars (US$500,000) upon
the thirty-six month anniversary of the Closing.
(d) SHARE CONSIDERATION TRADING RESTRICTION.
(i) Subject to Section 2(e) hereof, of the Andrea Shares
comprising the Share Consideration, one-fifth (1/5th) shall become freely
transferable by the holders thereof upon the
first anniversary of the Closing, and an additional one-fifth (1/5th) shall
become freely transferable on each of the second, third, fourth and fifth
anniversaries of the Closing, respectively. Prior to such times that such
portions of the Andrea Shares comprising the aggregate Share Consideration
become freely transferable in accordance with the immediately preceding
sentence, such Andrea Shares shall not be transferable by any holder thereof
(such restriction on transfer being the "Share Consideration Trading
Restriction") except that (A) in the case of a holder that is an individual,
Andrea Shares comprising the Share Consideration may be transferred, either
during the lifetime of such holder or upon death by will or by intestacy, to
such holder's Immediate Family or to a trust the beneficiaries of which are
exclusively such holder and/or a member of such holder's Immediate Family or
to a Charitable Organization, (B) in the case of a holder that is a
corporation, Andrea Shares comprising the Share Consideration may be
transferred by the corporation to any shareholder or subsidiary of such
corporation, and any shareholder who is an individual and to whom such Andrea
Shares are transferred may transfer the Andrea Shares comprising the Share
Consideration by gift, will or intestate succession to such shareholder's
Immediate Family or to a Charitable Organization, (C) in the case of a holder
that is a partnership, Andrea Shares comprising the Share Consideration may
be transferred by the partnership to a partner of such partnership or a
retired partner, and any partner who is an individual and to whom such Andrea
Shares are transferred may transfer the Andrea Shares comprising the Share
Consideration by gift, will or intestate succession to such partner's
Immediate Family or to a Charitable Organization and (D) in the case of a
holder that is a Seller, Andrea Shares comprising the Share Consideration may
be pledged as collateral to secure any borrowing the sole use of the proceeds
from which is the payment of Taxes (as hereinafter defined) arising as a
result of the sle of the Shares hereunder; provided, however, that no such
transfer in accordance with the immediately preceding clauses (A), (B), (C)
and (D) will be permitted unless the respective transferees thereof agree in
writing to be bound by the Share Consideration Trading Restriction set forth
in this Section 2(d) and Section 6(i) in respect of such transferred Andrea
Shares and there shall be no further transfer of such Andrea Shares except in
accordance with this Agreement. For purposes of this Section 2(d), "Immediate
Family" shall mean spouse, lineal descendent, father, mother, brother or
sister of the holder and "Charitable Organization" shall mean an organization
described in Section 501(c)(3) of the Code.
(ii) The Andrea Shares comprising the Share Consideration shall be
legended to reflect the Share Consideration Trading Restriction as
contemplated by the form of legend set forth in Section 4(y) and the transfer
agent for the Andrea Shares shall be advised with stop transfer instructions
to reflect the Share Consideration Trading Restriction.
(iii) Notwithstanding anything to the contrary set forth herein,
the Andrea Shares comprising the Share Consideration that become freely
transferable upon the first anniversary of this Agreement shall become freely
transferable upon the earlier to occur of (a) the first anniversary of this
Agreement and (b) the inclusion of such Andrea Shares in a registration
statement under the Securities Act covering a successful offering of at least
one million (1,000,000) Andrea Shares with gross proceeds from such offering
of at least Thirty-five Million United States Dollars (US$35,000,000). In
the event of such inclusion of such Andrea Shares in any such offering, each
of the dates of the release from the Share Consideration Trading Restriction
for the remaining Andrea Shares shall be accelerated by twelve (12) months.
(e) ESCROW SHARES. Notwithstanding anything in this Agreement to the
contrary, at the Closing, 450,000 Andrea Shares comprising the Share
Consideration shall be deposited in escrow with LaSalle National Bank, as
escrow agent (the "Escrow Agent"), to be held and administered in accordance
with the terms of this Agreement and an Escrow Agreement substantially in the
form of Schedule 2(e) attached hereto (the "Escrow Agreement") (such
aggregate number of Andrea Shares to be so escrowed being herein referred to
as the "Total Escrow Shares Amount"); provided, however, that the amount of
Andrea Shares comprising the Total Escrow Shares Amount shall be reduced to
360,000 Andrea Shares upon the receipt of evidence reasonably satisfactory to
the Buyer that the Buyer will not have a withholding or other obligation to
any Governmental Entity in Israel in connection with the payment of the
Consideration to the Sellers. At Closing, the Buyer on behalf of each Seller
shall deposit in such escrow that number of Andrea Shares comprising the
Share Consideration otherwise deliverable to such Seller as is equal to such
Seller's Pro Rata Portion of the Total Escrow Shares Amount (such number of
Andrea Shares in respect of each Seller being herein referred to as such
Seller's "Escrow Shares"; and the aggregate amount of Escrow Shares in
respect of all Sellers being herein referred to collectively as the "Escrow
Shares"). The Escrow Shares shall be registered in the name of the
respective Sellers and shall be accompanied by stock powers endorsed in
blank.
(f) ADJUSTMENTS. If at any time during the period between the date
of
this Agreement and the Closing, any change in the outstanding Andrea Shares
shall occur, including by reason of any reclassification, recapitalization,
stock split or combination, exchange or readjustment of shares, or any stock
dividend thereon with a record date during such period, the number of Andrea
Shares constituting the Share Consideration shall be appropriately adjusted.
3. CLOSING.
(a) TIME AND PLACE. The closing (the "Closing") of the purchase and
sale of the Shares shall be held at a mutually agreed upon location at 10:00
a.m. on the later of (i) April 23, 1998 and (ii) the next U.S. business day,
that is not a banking holiday, following the satisfaction of all of the
conditions to the Closing set forth in Section 9. The date on which the
Closing shall occur is hereinafter referred to as the "Closing Date".
(b) DELIVERIES AT CLOSING. At the Closing,
(i) the Buyer shall deliver to each Seller, subject to adjustment
as provided in Section 2(f), such Seller's pro rata portion (based upon the
ratio of the number of Shares held of record by such Seller immediately prior
to the Closing, as specified in Section 4(e), to the total number of Shares
(such ratio, the "Seller's Pro Rata Portion")) of the Consideration, which
shall be delivered in the following form:
(A) a check payable to the order of each Seller, or a wire
transfer of funds to the account designated by such Seller, in an amount
equal to such Seller's Pro Rata Portion of the Cash Consideration payable at
Closing;
(B) a promissory note in the form set forth in Schedule
3(b)(i)(B) made to the order of such Seller in an amount equal to such
Seller's Pro Rata Portion of the Cash Consideration payable following Closing
and providing for payments in accordance with the Cash Consideration payments
schedule set forth in clauses (ii) through (v) of Section 2(c); and
(C) certificates evidencing such Seller's Pro Rata Portion
of the Share Consideration registered in the name of such Seller (the "Andrea
Share Certificates");
(ii) each Seller shall deliver or cause to be delivered to the Buyer
(A) certificates representing all Shares owned of record by such Seller, duly
endorsed in blank or accompanied by stock powers duly endorsed in blank in
proper form for transfer, with appropriate transfer stamps, if any, affixed
(the "Share Certificates") and (B) a Share Transfer Deed satisfactory to the
Buyer to evidence the transfer of the Shares to the Buyer.
4. REPRESENTATIONS AND WARRANTIES OF LAMAR AND THE SELLERS.
Lamar and each Seller hereby jointly and severally represent and
warrant to the Buyer as follows:
(a) ORGANIZATION AND STANDING; BOOKS AND RECORDS. Lamar is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Israel and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as presently conducted and as proposed to be conducted in the Lamar
Business Plan (as set forth in Schedule 4(a) hereto) and to enable it to own,
lease or otherwise hold its properties and assets. Lamar is duly qualified
to do business and in good standing as a foreign corporation in each
jurisdiction in which the conduct or nature of its business or the ownership,
leasing or holding of its properties or assets makes such qualification
necessary, except such jurisdictions where the failure to be so qualified or
in good standing, individually or in the aggregate, would not have a material
adverse effect on the business, condition (financial or otherwise), results
of operations or prospects of Lamar or on any of its properties or assets,
including, without limitation, its Intellectual Property (a "Material Adverse
Effect"). The copies of the Lamar Constituent Documents, each as amended to
date, previously delivered to Buyer are true, accurate and complete copies of
such instruments, and the stock certificate and transfer books and the minute
books of Lamar (which have been made available for inspection by the Buyer
prior to the execution and delivery of this Agreement) are true, accurate and
complete.
(b) AUTHORITY. Lamar and each Seller has all requisite power and
authority to enter into this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. All acts and other
proceedings required to be taken by Lamar and each Seller to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly and properly taken. This
Agreement has been duly executed and delivered by Lamar and each Seller and
constitutes a legal, valid and binding obligation of Lamar and each Seller,
enforceable against Lamar and each Seller in accordance with its terms.
(c) NO CONFLICTS; CONSENTS. The execution and delivery of this
Agreement by Lamar and each Seller does not, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof will
not, conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any lien, charge or
encumbrance of any kind upon any of the properties or assets of Lamar or any
Seller, any provision of (i) the Lamar Constituent Documents, (ii) any note,
bond, mortgage, indenture, deed of trust, license, lease, contract,
commitment, agreement or arrangement to which any Seller or Lamar is a party
or by which any of them or any of their respective properties or assets is
bound or (iii) any judgment, order or decree, or statute, law, ordinance,
rule or regulation, applicable to any Seller or Lamar or any of their
respective properties or assets. With the exception of a consent from the
Investment Center of the State of Israel, no consent, approval, license,
permit, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required to be obtained or made by or with
respect to any Seller or Lamar or any of their respective affiliates in
connection with (A) the execution, delivery and performance of this Agreement
or the consummation of the transactions contemplated hereby or (B) the
conduct by Lamar of its business following the Closing as conducted on the
date hereof and as contemplated by the Lamar Business Plan.
(d) CAPITAL STOCK OF LAMAR. The authorized capital stock of Lamar
consists of 22,900 ordinary shares, par value NIS 1.00 per share, of which
22,900 ordinary shares, constituting all of the Shares, are duly authorized
and validly issued and outstanding, fully paid and nonassessable, and all the
certificates representing the Shares are in the physical possession of the
Sellers. Except for the Shares, there are no shares of capital stock or
other equity securities of Lamar outstanding. None of the Shares have been
issued in violation of, or are subject to, any purchase option, call, right
of first refusal, preemptive, subscription or similar right under any
provision of applicable law, the Lamar Constituent Documents or any
agreement, contract or instrument to which any Seller or Lamar is a party or
by which any of them or any of their respective properties or assets is
bound. There are no outstanding warrants, options, rights, "phantom" stock
rights, agreements, convertible or exchangeable securities or other
commitments (other than this Agreement) (i) pursuant to which any Seller or
Lamar is or may become obligated to issue, sell, purchase, return or redeem
any shares of capital stock or other securities of Lamar or (ii) that give
any person the right to receive any benefits or rights similar to any rights
enjoyed by or accruing to the holders of shares of capital stock of Lamar.
There are no equity securities of Lamar reserved for issuance for any
purpose. There are no outstanding bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which stockholders of
Lamar may vote.
(e) OWNERSHIP OF CAPITAL STOCK OF LAMAR; THE SHARES. Each Seller is
the record owner of the amount of Shares that is specified next to the name
of such Seller in Schedule 4(e), the aggregate of such specified amounts of
Shares constituting all of the issued and outstanding capital stock of Lamar.
On the Closing Date, each Seller will have good and valid title to such
Shares held of record, in each case free and clear of any liens, charges or
encumbrances of any kind. Assuming the Buyer has the requisite power and
authority to be the lawful owner of the Shares, upon delivery to the Buyer at
the Closing of certificates and Stock Transfer Deeds representing the Shares,
duly endorsed by the Sellers for transfer to the Buyer, and upon the Sellers'
receipt of the Consideration, good and valid title to the Shares will pass to
the Buyer, free and clear of any liens, charges or encumbrances of any kind,
other than those arising from acts of the Buyer or its affiliates. Other
than this Agreement, on the Closing Date the Shares will not be subject to
any agreement, contract, commitment, understanding or arrangement, including
any such agreement, contract, commitment, understanding or arrangement
restricting or otherwise relating to the voting, dividend rights or
disposition of the Shares.
(f) EQUITY INTERESTS; INVESTMENTS IN OTHER PERSONS. Except as set
forth in Schedule 4(f) and the other schedules hereto, Lamar does not
directly or indirectly own any capital stock of or other equity interests in
any corporation, partnership or other person, and Lamar is not a member of or
participant in any partnership, joint venture or similar person. Except as
set forth in Schedule 4(f), Lamar has not made any loans or advances which
are outstanding on the date of this Agreement, nor is it committed or
obligated to make any such loans or advances. Lamar does not have, and has
not since its incorporation had, any subsidiaries.
(g) SECURITIES LAWS. The Sellers and Lamar have complied and will
comply with all applicable securities laws within the United States, any
state in the United States and the State of Israel in connection with the
sale of the Shares hereunder.
(h) BURDENSOME AGREEMENTS. Except as set forth in Schedule 4(h), (i)
Lamar is not a party to, nor is Lamar or any of its properties or assets
subject to or bound by, any judgment, order or decree of any Governmental
Entity or any charter or other corporate restriction, and (ii) Lamar is not a
party to, nor is Lamar or any of its properties or assets subject to or bound
by, any contract, agreement or other instrument, in the cases of both clauses
(i) and (ii) which has or is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect.
(i) FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(i) Schedule 4(i) sets forth (A) the unaudited balance sheet of
Lamar as of March 31, 1998 (the "Balance Sheet"), and the unaudited
statements of operations, changes in shareholders' equity and cash flows of
Lamar for the two month period ended March 31, 1998, together with the notes
to such financial statements, (B) the audited balance sheet of Lamar as of
December 31, 1997, and the audited statements of operations, changes in
shareholders' equity and cash flows of Lamar for the year ended December 31,
1997, together with the notes to such financial statements and (C) the
audited balance sheet of Lamar as of December 31, 1996 and the audited
statements of operations, changes in shareholders' equity and cash flows of
Lamar for the fourteen-month period ended December 31, 1996, together with
the notes to such financial statements (the financial statements described in
the immediately preceding clauses (A), (B) and (C), together with the notes
to such financial statements, are collectively referred to herein as the
"Financial Statements").
(ii) The Financial Statements are complete and correct, are in
accordance with the books and records of Lamar and have been prepared in
conformity with generally accepted accounting principles consistently applied
in the State of Israel (except in each case as described in the notes
thereto) and on that basis fairly present (subject, in the case of the
unaudited statements, to normal, recurring year-end audit adjustments) the
financial condition and results of operations of Lamar as of the respective
dates thereof and for the respective periods indicated.
(iii) Lamar does not have any liabilities or obligations of any
nature (whether accrued, absolute, contingent, threatened or otherwise),
except (A) as disclosed, reflected or reserved against in the Balance Sheet
and the notes thereto, (B) for items set forth in Schedule 4(i), (C) for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of the Balance Sheet, incurred
not in violation of this Agreement and that would not, individually or in the
aggregate, result in a Material Adverse Effect and (D) for Taxes set forth in
Schedule 4(i).
(j) ABSENCE OF CHANGES OR EVENTS. Except as set forth in Schedule
4(j), since the date of the Balance Sheet, there has not been any material
adverse change (or any development that is reasonably likely to result in any
material adverse change) in the business, assets, condition (financial or
otherwise), results of operations or prospects of Lamar. Except as set forth
in Schedule 4(j), since the date of the Balance Sheet, the business of Lamar
has been conducted in the ordinary course and in substantially the same
manner as previously conducted, and Lamar has not (i) declared or paid any
dividend or made any other distribution to its stockholders whether or not
upon or in respect of any shares of its capital stock, (ii) redeemed or
otherwise acquired any shares of its capital stock or issued any capital
stock or any option, warrant or right relating thereto or any securities
convertible into or exchangeable for any shares of capital stock, (iii)
adopted or amended any Benefit Plan, except as required by law, or entered
into or amended any employment, severance or consulting agreement, contract
or similar arrangement, (iv) granted to any director, officer or employee any
increase in compensation or benefits, (v) incurred or assumed any liability,
obligation or indebtedness for borrowed money or guaranteed any such
liability, obligation or indebtedness, (vi) permitted, allowed or suffered
any of its assets to become subject to any mortgage, security interest, lien
or other similar restriction of any nature whatsoever, (vii) cancelled any
indebtedness or waived any claims or rights of substantial value, or (viii)
entered into, or modified, amended, terminated, or permitted the lapse of,
any lease of real property or other agreement relating to real property.
(k) TAXES.
(i) For purposes of this Agreement, (A) "Tax" or "Taxes" shall
mean all taxes, charges, fees, levies or other assessments, including,
without limitation, income, gross receipts, excise, property, sales,
withholding, social security, occupation, use, service, license, payroll,
franchise, customs, ad valorem, value added, employees' income withholding,
'bituach leumi', transfer and recording taxes, fees and charges, including
estimated taxes, imposed by the United States, any state thereof, the State
of Israel or any local, county or other taxing authority (U.S., Israeli or
otherwise), whether computed on a separate, consolidated, unitary, combined
or any other basis; and such term shall include any interest, fines,
penalties or additional amounts attributable to, or imposed upon, or with
respect to any such taxes, charges, fees, levies or other assessments; (B)
"Tax Return" shall mean any return, report, estimate, information return,
statement or other document or information required to be supplied to a
taxing authority in connection with Taxes; and (C) "Pre-Closing Tax Period"
shall mean all taxable periods ending on or before the Closing Date and the
portion
ending on the Closing Date of any taxable period that includes (but does not
end on) such day.
(ii) For purposes of Taxes under the laws of the State of Israel,
Lamar is an Israeli corporation approved by the Investment Center as an
"Approved Enterprise". For purpose of Taxes under the laws of the United
States, Lamar is not a "controlled foreign corporation" under Section 957(a)
of the Code.
(iii) Since its inception, the only jurisdictions where Lamar
been required to file and has filed any income tax returns are within the
State of Israel.
(iv) Except as set forth in Schedule 4(k), (A) Lamar has (I) duly
filed with the appropriate Governmental Entities all Tax Returns required to
be filed by it on or prior to the date hereof, and such Tax Returns are true,
accurate, correct and complete in all material respects and (II) duly paid in
full or made provision in accordance with generally accepted accounting
principles for the payment of all Taxes for all periods ending through the
date hereof, (B) there are no liens for Taxes upon the Shares or the assets
of Lamar except for statutory liens for current Taxes not yet due, (C) Lamar
has complied in all respects with all applicable laws, rules and regulations
relating to the payment and withholding of Israeli Taxes and has, within the
time and the manner prescribed by law, withheld from and paid over to the
proper Governmental Entities all amounts required to be so withheld and paid
over under applicable laws, (D) no federal, state, local or foreign audits or
other administrative proceedings or court proceedings are presently pending
with regard to any Taxes or Tax Returns of Lamar, and Lamar has not received
written notice of any pending audits or proceedings, (E) there are no
outstanding written requests, agreements, consents or waivers to extend the
statutory period of limitations applicable to the assessment of any Taxes
against Lamar, (F) Lamar is not a party to any agreement providing for the
allocation or sharing of Taxes and (G) no power of attorney has been executed
by Lamar with respect to any matter relating to Taxes which is currently in
force.
(v) As of the close of business on the Closing Date, the aggregate
consolidated net operating loss carryovers ("NOLs") for Israeli income tax
purposes of Lamar will not be less than NIS 1,467,000.00. Except as a result
of entering into this Agreement and the sale of Shares as contemplated by
Section 2(a), none of the NOLs is subject to any limitations under Israeli
tax law. The taxable years of Lamar in which the NOLs arose, and the taxable
years in which the NOLs will expire, are set forth in Schedule 4(k). The
Sellers represent that these NOLs will not expire as a result of the Buyer's
acquisition of the Shares as contemplated by this Agreement. Except as set
forth in Schedule 4(k), no taxable income economically attributable to
transactions occurring on or prior to the Closing Date will be required to be
recognized by Lamar for Israeli tax purposes after the Closing Date.
(l) ASSETS OTHER THAN REAL PROPERTY INTERESTS.
(i) Lamar has good and valid title to all assets (other than
real property interests) reflected on the Balance Sheet or acquired after the
date thereof, except those sold or otherwise disposed of for fair value since
the date of the Balance Sheet in the ordinary course of business consistent
with past practice and not in violation of this Agreement and except as
permitted by Section 6(b)(vi) hereof, in each case free and clear of all
liens, charges or encumbrances of any kind except (A) such as are set forth
in Schedule 4(l), (B) mechanics', carriers', workmen's, repairmen's or other
like liens arising or incurred in the ordinary course of business, liens
arising under original purchase price conditional sales contracts and
equipment leases with third parties entered into in the ordinary course of
business and liens for Taxes that are not due and payable or that may
thereafter be
paid without penalty and (C) other imperfections of title or encumbrances,
if any, that do not, individually or in the aggregate, materially impair the
continued use and operation of the assets to which they relate in the
business of Lamar as presently conducted (the liens and imperfections of
title described in the immediately preceding clauses (B) and (C) are
hereinafter referred to collectively as "Permitted Liens"). All accounts
receivable of Lamar whether reflected on its Balance Sheet or subsequently
created have arisen from bona fide transactions in the ordinary course of
business.
(ii) All the material tangible personal property of Lamar has been
maintained in all material respects in accordance with the past practice of
Lamar and generally accepted industry practice. Each item of material
tangible personal property of Lamar is in all material respects in reasonably
good operating condition and repair, ordinary wear and tear excepted. All
leased personal property of Lamar is in all material respects in the
condition required of such property by the terms of the lease applicable
thereto during the term of the lease and upon the expiration thereof, and
Lamar has made all payments required by all such leases.
(m) REAL PROPERTY INTERESTS. Lamar does not own in fee any real
property. Schedule 4(m) sets forth a complete list of all real property and
interests in real property leased by Lamar (each a "Leased Property"). Lamar
has good and valid title to the leasehold estates in all Leased Property free
and clear of all liens, charges and encumbrances (including, without
limitation, leases, subleases, assignments, easements, covenants, rights of
way and other similar restrictions of any nature whatsoever), except (A) such
as are set forth in Schedule 4(m), (B) Permitted Liens, (C) easements,
covenants, rights of way and other similar restrictions of record, (D) any
other conditions or restrictions or security interests, none of which items,
individually or in the aggregate, materially impair the continued use and
operation of the property to which they relate in the business of Lamar as
presently conducted.
(n) CONTRACTS. Except as set forth in Schedule 4(n) or Schedule
4(q), Lamar is not a party to or otherwise bound by any:
(i) employment, severance or consulting agreement, contract or
other arrangement;
(ii) covenant not to compete or covenant restricting the
development, marketing or distribution of the products and services of the
company:
(iii) agreement, contract or other arrangement with (A) any
Seller or any affiliate of any Seller or (B) any current or former officer,
director or employee of Lamar, any Seller or any affiliate of any Seller;
(iv) lease, sublease or similar agreement or other arrangement with
any person under which Lamar is a lessor or sublessor of, or makes available
for use to any person, (A) any Leased Property or (B) any portion of any
premises otherwise occupied by Lamar; (v) lease or similar agreement or
other arrangement with any person under which (A) Lamar is lessee of, or
holds or uses, any machinery, equipment, vehicle or other tangible personal
property owned by any person or (B) Lamar is a lessor or sublessor of, or
makes available for use by any person, any tangible personal property owned
or leased by Lamar;
(vi) (A) continuing agreement, contract or other arrangement for the
future purchase of supplies or equipment, (B) management, service, consulting
or other similar type of agreement, contract or other arrangement or (C)
advertising agreement, contract or other arrangement;
(vii) license, option or similar agreement, contract or other
arrangement relating in whole or in part to Intellectual Property (including,
without limitation, any license or other agreement under which Lamar is
licensee or licensor of any such Intellectual Property) or to trade secrets,
confidential information or proprietary rights and processes of Lamar or any
other person;
(viii) agreement, contract or other instrument or arrangement under
which Lamar has borrowed any money from, or issued any note, bond, debenture,
guarantee or other evidence of indebtedness to, any person;
(ix) agreement, contract or other instrument or arrangement under
which Lamar has, directly or indirectly, made any advance, loan, extension of
credit or capital contribution to, or other investment in, any person;
(x) agreement, contract or other instrument or arrangement providing
for indemnification of any person with respect to liabilities relating to any
current or former business of Lamar or any predecessor person;
(xi) investment advisory or similar agreement, contract or other
arrangement; or
(xii) other agreement, contract or other arrangement to which
Lamar is a party or by which it or any of its properties or assets is bound.
Except as set forth in Schedule 4(n), all agreements, contracts, leases,
subleases, licenses, options, instruments or arrangements of Lamar listed in
the Schedules hereto (collectively, the "Contracts") are valid, binding and
in full force and effect and are enforceable by Lamar in accordance with its
terms. Except as set forth in Schedule 4(n), Lamar has performed all
material obligations required to be performed by it to date under the
Contracts and it is not (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder and
no other party to any of the Contracts is (with or without the lapse of time
or the giving of notice, or both) in breach or default in any material
respect thereunder.
(o) LITIGATION. There is no litigation or governmental proceeding or
investigation pending or threatened against Lamar affecting the business,
business prospects, operations, affairs or condition (financial or otherwise)
of Lamar or any of the properties or assets of Lamar, or against any officer
or Seller relating to Lamar or its business, nor has there occurred any event
or does there exist any condition on the basis of which it is reasonably
likely that any litigation, proceeding or investigation might properly be
instituted. There are no actions or proceedings pending or threatened (or
any basis therefor known to the Sellers) which might result in a Material
Adverse Effect or which might call into question the validity of this
Agreement, any of the Shares, or any action taken or to be taken pursuant
hereto or thereto. There is not in existence any judgment, order or decree
of any Governmental Entity enjoining or prohibiting Lamar from taking, or
requiring Lamar to take, any action of any kind or to which Lamar or any of
its properties or assets is subject or bound. Lamar is not in violation in
any material respect of any judgment, order or decree of any Governmental
Entity.
(p) INSURANCE. Lamar maintains policies of fire and casualty,
liability and other forms of insurance (including broker's blanket bond) in
such amounts, with such deductibles and against such risks and losses as are
reasonable for the business and assets of Lamar. The insurance policies
maintained with respect to Lamar and its assets and properties are listed in
Schedule 4(p). All such policies are in full force and effect, all premiums
due and payable thereon have been paid (other than retroactive or
retrospective premium adjustments that are not yet, but may be, required to
be paid with respect to any period ending prior to the Closing Date), and no
notice of cancellation or termination has been received with respect to any
such policy which has not been replaced on substantially similar terms prior
to the date of such cancellation. The activities and operations of Lamar
have been conducted in a manner so as to conform in all material respects to
all applicable provisions of such insurance policies.
(q) BENEFIT PLANS.
(i) Schedule 4(q) sets forth a list and brief description of all
"employee benefit plans" (as defined in Section 3(3) of ERISA or similar law
of the State of Israel) and all other retirement, deferred compensation, life
or disability insurance, health, fringe benefit, severance or similar
employee benefit or compensation arrangements (all the foregoing being herein
called "Benefit Plans") maintained by Lamar for the benefit of any current or
former director, officer or employee of Lamar. The Sellers have delivered or
made available to the Buyer true, complete and correct copies of (A) each
Benefit Plan (or, in the case of any unwritten Benefit Plans, descriptions
thereof), (B) the most recent annual report (together with all schedules and
exhibits filed therewith) filed with the IRS or the equivalent Governmental
Entity in the State of Israel with respect to each Benefit Plan (if any such
report was required) and the most recent summary annual report distributed to
participants with respect to each Benefit Plan for which a summary annual
report is required and (C) the most recent summary plan description for each
Benefit Plan for which such a summary plan description is required. None of
the Benefit Plans is subject to Title IV of ERISA or similar law of the State
of Israel, and Lamar has not previously maintained or contributed to (or been
required to maintain or contribute to) any plan which was subject to Title IV
of ERISA or similar law of the State of Israel with respect to which Lamar
could have any liability therefor.
(ii) Each Benefit Plan has been administered in all material respects
in accordance with its terms. Lamar and all the Benefit Plans are in
compliance in all material respects with the applicable provisions of ERISA,
the Code, similar laws of the State of Israel and all other applicable laws.
There are no lawsuits, actions, termination proceedings or other proceedings
pending or threatened against or involving any Benefit Plan and, to the
knowledge of Lamar and each Seller, there are no investigations by any
Governmental Entity or other claims (except claims for benefits payable in
the normal operation of the Benefit Plans) pending or threatened against or
involving any Benefit Plan or asserting any rights to benefits under any
Benefit Plan.
(iii) Each Benefit Plan which is an "employee pension benefits
plan" (as defined in Section 3(2) of ERISA or similar law of the State of
Israel) (the "Pension Plans") is the subject of a current determination
letter from the IRS or the equivalent Governmental Entity in the State of
Israel to the effect that such Pension Plan is qualified and exempt from
federal income taxes under Sections 401(a) and 501(a), respectively, of the
Code, or similar provisions of Israeli law, as the case may be, and no such
determination letter has been revoked nor has revocation been threatened, nor
has any such Pension Plan been amended since the date of its most recent
determination letter or application therefor in any respect that would
adversely affect its qualification.
(iv) None of the Benefit Plans which is an "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA or similar law of the State of
Israel) provides for post-retirement medical or dental insurance benefits,
the cost of which is not entirely borne by the retirees eligible therefor.
(v) Except as set forth in Schedule 4(q), no director, officer or
employee or former director, officer or employee of Lamar will become
entitled to payment or accelerated vesting of any bonus, retirement,
severance, job security or similar benefit or any enhanced benefit solely as
a result of the transactions contemplated hereby.
(r) COMPLIANCE WITH APPLICABLE LAWS. Lamar is in compliance in all
material respects with all applicable statutes, laws, ordinances, rules,
orders and regulations of any Governmental Entity ("Applicable Laws"),
including, without limitation, (i) the U.S. Foreign Corrupt Practices Act and
any similar law of the State of Israel, (ii) any provision of any Applicable
Law relating to campaign financing and/or contributions to political
candidates, political parties, political action committees and the like,
(iii) any provision of any Applicable Law relating to government procurement
practices and procedures and (iv) any applicable statute, law or regulation
relating to the environment or occupational safety and health. Except as set
forth in Schedule 4(r), none of the Sellers or Lamar has received any written
communication from a Governmental Entity that alleges that Lamar is not in
compliance in any material respect with any Applicable Laws, and no material
expenditures will be required in order to comply with any Applicable Laws.
(s) EMPLOYEE AND LABOR MATTERS. Except as set forth in Schedule 4(s),
(i) no action, suit, complaint, charge, arbitration, inquiry, proceeding or
investigation by or before any Governmental Entity, brought by or on behalf
of any employee, prospective employee, former employee, retiree, labor
organization or other representative of Lamar's employees is pending or, to
the best knowledge of Lamar, threatened against Lamar or any employee of
Lamar; (ii) no grievance is pending or threatened against Lamar; (iii) Lamar
is not a party to, or otherwise bound by, any consent decree with, or
citation by, any Governmental Entity relating to employees or employment
practices; and (iv) Lamar is in compliance with all applicable laws,
agreements, contracts, and policies relating to employment, employment
practices, wages, hours, and terms and conditions of employment (including,
without limitation, with respect to any applicable workers' compensation laws
and disability insurance coverage laws). Lamar is not a party to any
collective bargaining agreements.
(t) TRANSACTIONS WITH AFFILIATES. Except as set forth in Schedule
4(t), there are no loans, leases, royalty agreements or other continuing
transactions between (A) Lamar or any of its customers or suppliers, and (B)
any officer, employee, consultant, director or shareholder of Lamar, any
member of the immediate family of such officer, employee, consultant,
director or shareholder or any corporation or other entity controlled by such
officer, employee, consultant, director or shareholder, or a member of the
immediate family of such officer, employee, consultant, director or
stockholder. Except as set forth in Schedule 4(t), after the Closing neither
any Seller nor any of its affiliates will have any interest in any real or
personal, tangible or intangible, property (including, without limitation,
any interest in any Intellectual Property) of Lamar or contract used in or
pertaining to the business of Lamar. Neither any Seller nor any affiliate of
a Seller has any direct or indirect ownership interest in any person in which
Lamar has any direct or indirect ownership interest or with which Lamar
competes or has a business relationship.
(u) CORPORATE NAME. Except as set forth in Schedule 4(u), Lamar (i)
has the exclusive right to use the name "Lamar Signal Processing Ltd." as the
name of a corporation in any jurisdiction in which Lamar does business and
(ii) has not received any notice of conflict with respect to the rights of
others regarding such name. Except as set forth in Schedule 4(u), no person
(other than Lamar) is authorized by any Seller or Lamar to use, or otherwise
has the right to use, the name "Lamar Signal Processing Ltd." (or any
variation thereof using the word "Lamar") for any purposes whatsoever.
(v) CUSTOMERS. Set forth in Schedule 4(v) is a list of all of the
customers of Lamar since January 1, 1997. Except as set forth in Schedule
4(v), since the date of the Balance Sheet, there has not been any material
adverse change in the business relationship of Lamar with any customer set
forth in Schedule 4(v).
(w) INTELLECTUAL PROPERTY. Schedule 4(w) sets forth a true, accurate
and complete list of all Intellectual Property owned, used, filed by or
licensed to Lamar. Lamar owns or has a valid right to use the Intellectual
Property being used to conduct its business (i) as now operated and (ii) as
now proposed to be operated; and the conduct of its business as now operated
and as now proposed to be operated does not and will not conflict with or
infringe upon the Intellectual Property of others. Lamar is the exclusive
owner of all right, title and interest in its Intellectual Property as
purported to be owned by Lamar and as so indicated on Schedule 4(w), and such
Intellectual Property are valid and in full force and effect. Except as set
forth on Schedule 4(w), no claim is pending or threatened against Lamar
and/or Lamar's officers, employees, consultants, directors or shareholders to
the effect that any of the Intellectual Property owned or licensed by Lamar,
or which Lamar otherwise has the right to use, is invalid or unenforceable by
Lamar or subject to any claim of infringement. Except pursuant to the terms
of any licenses specified on Schedule 4(w), Lamar has no obligation to
compensate any person for the use of any of the Intellectual Property and
Lamar has not granted any person any license or other right to use any of the
Intellectual Property or otherwise has licensed from others the Intellectual
Property of third parties, whether requiring the payment of royalties or not.
Lamar has taken reasonable measures in accordance with industry
standards to protect and preserve the security, confidentiality and value of
its Intellectual Property, including its trade secrets and other confidential
information. All employees and consultants of Lamar involved in the design,
review, evaluation or development of inventions or Intellectual Property have
executed Non-Competition and Nondisclosure and Assignment of Inventions
Agreements in the forms attached as Schedule 4(w). All trade secrets and
other confidential information of Lamar are presently valid and protectable
and are not part of the public domain or knowledge, nor, to the best
knowledge of Lamar or the Sellers after reasonable investigation, have they
been used, divulged or appropriated for the benefit of any person other than
Lamar or otherwise to the detriment of Lamar. No employee or consultant of
Lamar has used any trade secrets or other confidential or proprietary
information or techniques of any other person in the course of their work for
Lamar or is expected to use such secrets or information or techniques when
conducting the business which Lamar presently intends to conduct. Neither
Lamar, nor any of its officers, employees, consultants, directors or
shareholders has received notice of, and to the best of Lamar's or Sellers'
knowledge after reasonable investigation, there are no claims that Lamar's
Intellectual Property or the use or ownership thereof by Lamar infringes,
violates or conflicts with any such right of any third party. No government
agency or other organization which sponsored research and development
conducted by Lamar has any claim of right to or ownership of or other
encumbrance upon the Intellectual Property of Lamar except as disclosed in
Schedule 4(w).
(x) DISCLOSURE. Neither this Agreement, the Lamar Business Plan, nor
any other agreement or statement, whether oral or written, furnished to the
Buyer or its counsel by or on behalf of Lamar or the Sellers in connection
with the transactions contemplated hereby contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make
the statements contained herein or therein, in light of the circumstances in
which made, not misleading. Projections made in the Lamar Business Plan are
not considered to be facts for the purpose of this Section. Such projections
were prepared in good faith on the basis of reasonable assumptions. There is
no fact within the knowledge of the Sellers or Lamar or any of Lamar's
officers, employees, consultants or directors, or to the Sellers' knowledge,
any member of the immediate family of such officer, employee, consultant or
director or any corporation or other entity controlled by such officer,
employee, consultant or director, or a member of the immediate family of such
officer, employee, consultant or director, which has not been disclosed
herein or in writing by them to the Buyer and which would have a Material
Adverse Effect.
(y) SECURITIES ACT. It is each Seller's present intention to acquire
the Andrea Shares comprising the Share Consideration for such Seller's own
account and such Seller will be the sole beneficial owner thereof, and such
Andrea Shares are being and will be acquired by such Seller for the purpose
of investment and not with a view to distribution or resale thereof except
pursuant to registration under the Securities Act or any similar law of any
non-U.S. jurisdiction or exemption therefrom. The acquisition by such Seller
of such Andrea Shares shall constitute a confirmation of this representation
by such Seller. The Shares owned by such Seller to be sold to Andrea
hereunder were not purchased with the funds of any pension or employee
benefit plan. Further, such Seller understands and agrees that, until
registered under the Securities Act or any similar law of any non-U.S.
jurisdiction or transferred pursuant to the provisions of Rule 144 or Rule
144A as promulgated by the SEC or similar law or rule in any non-U.S.
jurisdiction, all certificates evidencing any of the Andrea Shares, whether
upon initial issuance or upon any transfer thereof, shall bear a legend,
prominently stamped or printed thereon, reading substantially as follows:
"The securities represented by this certificate have not been registered
under the U.S. Securities Act of 1933, as amended or applicable state
securities laws. These securities have been acquired for investment and not
with a view to distribution or resale. These securities may not be offered
for sale, sold, delivered after sale, transferred, pledged or hypothecated in
the absence of an effective registration statement covering such shares under
such securities laws, or the availability, in the opinion of counsel
satisfactory to the issuer of these securities, of an exemption from
registration thereunder."
"The securities represented by this certificate are subject to that certain
Share Consideration Trading Restriction set forth in that certain Stock
Purchase Agreement, dated as of April 6, 1998."
(z) TRANSFER RESTRICTIONS IMPOSED BY SECURITIES LAWS. Lamar and each
Seller understands that:
(i) no state or governmental authority has made any finding or
determination relating to the fairness of the terms of the acquisition by
such Seller of the Andrea Shares contemplated hereunder and such Andrea
Shares have not been registered under any securities laws, and, therefore,
cannot be resold unless they are subsequently registered under applicable
securities laws or unless an exemption from such registration is available;
(ii) such Seller is and must be acquiring the Andrea Shares for
investment for the account of the Seller and not for the account or benefit
of others, and not with any present view toward resale or other distribution
thereof;
(iii) such Seller agrees not to resell or otherwise dispose of all
or any part of the Andrea Shares comprising the Share Consideration to be
acquired by it hereunder, except as permitted by law, including, without
limitation, any regulations under any applicable securities laws.
(aa) ACCESS TO INFORMATION. Each Seller or the representative of
each Seller has had the opportunity to ask questions and receive answers from
the officers and other employees of Andrea regarding the terms and conditions
of this Agreement, the transactions contemplated hereby (including, without
limitation, such Seller's acquisition of the Andrea Shares comprising the
Share Consideration), as well as the affairs of Andrea and related matters,
and such Seller or representative of such Seller has obtained such
information and such Seller or representative of such Seller has had the
opportunity to obtain additional information necessary to verify the accuracy
of all information so obtained.
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer hereby
represents and warrants to Lamar and the Sellers as follows:
(a) AUTHORITY. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York. The
Buyer has all requisite corporate power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. All corporate acts and other proceedings
required to be taken by the Buyer to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and properly taken. This Agreement has
been duly executed and delivered by the Buyer and constitutes a legal, valid
and binding obligation of the Buyer, enforceable against the Buyer in
accordance with its terms.
(b) NO CONFLICTS; CONSENTS. The execution and delivery of this
Agreement by the Buyer do not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, conflict
with, or result in any violation of or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material
benefit under, or result in the creation of any lien, charge or encumbrance
of any kind upon any of the properties or assets of the Buyer or any
subsidiary of the Buyer under, any provision of (i) the Restated and Amended
Certificate of Incorporation or By-laws of the Buyer or the comparable
governing instruments of any subsidiary of the Buyer, (ii) any material note,
bond, mortgage, indenture, deed of trust, license, lease, contract,
commitment, agreement or arrangement to which the Buyer or any subsidiary of
the Buyer is a party or by which any of them or any of their respective
properties or assets is bound or (iii) any judgment, order or decree, or
statute, law, ordinance, rule or regulation, applicable to the Buyer or any
subsidiary of the Buyer or any of their respective properties or assets. No
consent, approval, license, permit, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required
to be obtained or made by or with respect to the Buyer or any of its
subsidiaries or any of their respective affiliates in connection with the
execution, delivery and performance of this Agreement or the consummation of
the transactions contemplated hereby, other than (A) compliance with and
filings under Section 13(a) or 15(d), as the case may be, of the Exchange
Act, (B) filings with the SEC, the American Stock Exchange and the state
securities or "blue sky" commission or similar body.
(c) SECURITIES ACT. It is the Buyer's present intention to purchase
the Shares for its own account or the account of a wholly-owned Subsidiary of
the Buyer and the Buyer or such Subsidiary will be the sole beneficial owner
thereof, and the Shares are being and will be purchased by the Buyer or such
Subsidiary for the purpose of investment and not with a view to distribution
or resale thereof except pursuant to registration under the Securities Act or
any similar law of any non-U.S. jurisdiction or exemption therefrom. The
purchase by the Buyer of the Shares shall constitute a confirmation of this
representation by the Buyer. The Buyer is purchasing with its own funds and
not with the funds of any pension or employee benefit plan. Further, the
Buyer understands and agrees that, until registered under the Securities Act
or any similar law of any non-U.S. jurisdiction or transferred pursuant to
the provisions of Rule 144 or Rule 144A as promulgated by the SEC or similar
law or rule in any non-U.S. jurisdiction, all certificates evidencing any of
the Shares, whether upon initial issuance or upon any transfer thereof, shall
bear a legend, prominently stamped or printed thereon, reading substantially
as follows:
"The securities represented by this certificate have not been registered
under the U.S. Securities Act of 1933, as amended or applicable state
securities laws or applicable securities laws of the State of Israel. These
securities have been acquired for investment and not with a view to
distribution or resale. These securities may not be offered for sale, sold,
delivered after sale, transferred, pledged or hypothecated in the absence of
an effective registration statement covering such shares under such
securities laws, or the availability, in the opinion of counsel satisfactory
to the issuer of these securities, of an exemption from registration
thereunder."
(d) TRANSFER RESTRICTIONS IMPOSED BY SECURITIES LAWS. The Buyer
understands that:
(i) no state or governmental authority has made any finding or
determination relating to the fairness of the terms of the purchase of the
Shares proposed hereunder and the Shares have not been registered under any
securities laws, and, therefore, cannot be resold unless they are
subsequently registered under applicable securities laws or unless an
exemption from such registration is available;
(ii) the Buyer is and must be purchasing the Shares for investment
for the account of the Buyer and not for the account or benefit of others,
and not with any present view toward resale or other distribution thereof,
except that the Buyer may assign its rights under this Agreement to a
wholly-owned subsidiary of the Buyer;
(iii) the Buyer agrees not to resell or otherwise dispose of all or any
part of the Shares purchased by it, except as permitted by law, including,
without limitation, any regulations under any applicable securities laws.
(e) SEC DOCUMENTS. The Buyer has filed all required reports,
schedules, forms, statements and other documents with the SEC (the "SEC
Documents"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(f) ACCESS TO INFORMATION. The Buyer has had the opportunity to ask
questions and receive answers from the officers and other employees of Lamar
regarding the terms and conditions of this Agreement, the transactions
contemplated hereby (including, without limitation, its purchase of the
Shares), as well as the affairs of Lamar and related matters, and it has
obtained such information and has had the opportunity to obtain additional
information necessary to verify the accuracy of all information so obtained.
6. COVENANTS OF THE SELLERS AND LAMAR. The Sellers and Lamar jointly and
severally covenant and agree as follows:
(a) ACCESS. Prior to the Closing, the Sellers shall cause Lamar to
give, and Lamar shall give, the Buyer and its officers, employees,
representatives, counsel and accountants full access, during normal business
hours and upon reasonable notice, to the personnel, properties, financial
statements, contracts, books, records, working papers and other relevant
information pertaining thereto of Lamar. Prior to the Closing, the Sellers
shall cause the officers and employees of Lamar to furnish, and such officers
and employees of Lamar shall furnish, to the Buyer and its officers,
employees, representatives, counsel and accountants such financial and
operating data and other information with respect to the business, properties
and assets of Lamar as the Buyer or any such person shall from time to time
reasonably request, and shall cause Lamar and its directors, officers and
employees to cooperate with, and such directors, officers and employees shall
cooperate with, and Lamar shall request its independent public accountants
and independent legal counsel to cooperate with, the Buyer and its officers,
employees, representatives, counsel and accountants so as to enable the Buyer
to become fully informed with respect to the business, assets, condition
(financial or otherwise), results of operations and prospects of Lamar.
(b) ORDINARY CONDUCT. Except as set forth in Schedule 6(b) or
otherwise expressly permitted by the terms of this Agreement, from the date
hereof to the Closing, the Sellers shall cause Lamar to conduct, and Lamar
shall conduct, the business of Lamar in the ordinary course in substantially
the same manner as presently conducted and shall make all reasonable efforts
consistent with past practices to preserve its relationships with customers
and others with whom Lamar deals. The Sellers shall not, and shall not
permit Lamar to, take any action that would, or that could reasonably be
expected to, result in (i) any of the representations and warranties of any
Seller set forth in this Agreement that are qualified as to materiality
becoming untrue or incorrect, (ii) any of such representations and warranties
that are not so qualified becoming untrue or incorrect in any material
respect or (iii) any of the conditions to the purchase and sale of the Shares
set forth in Section 9 not being satisfied. In addition, except as set forth
in Schedule 6(b) or otherwise expressly permitted by the terms of this
Agreement, the Sellers shall not permit Lamar to, and Lamar shall not, do any
of the following without the prior written consent of the Buyer:
(i) amend any of the Lamar Constituent Documents or similar
documents;
(ii) declare or pay any dividend or make any other distribution to
its stockholders whether or not upon or in respect of any shares of its
capital stock;
(iii) redeem or otherwise acquire any shares of its capital stock,
or authorize or issue, or obligate itself to issue, any additional shares or
capital stock of Lamar of any class (including any options, warrants or other
rights relating thereto or any securities convertible into or exchangeable
for any shares of capital stock);
(iv) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire any assets that are material,
individually or in the aggregate, to Lamar;
(v) incur, create, or assume any indebtedness other than trade debt
or make or incur any capital expenditure or enter into any agreements,
contracts or other arrangements (or series of related agreements, contracts
or other arrangements) to which Lamar is a party or by which it or any of its
properties or assets is bound, all of which in the aggregate exceeds or has a
current or future liability or receivable to or from any person in excess of
$50,000;
(vi) transfer, sell, dispose of, encumber, pledge, grant a lien on
or security interest in, assign, lease, license or donate any ownership or
interest in, or material rights relating to, any of its material assets or
technology, or other Intellectual Property to any person or entity;
(vii) enter into any transaction, including, without limitation,
any loans or extensions of credit or other agreements with any employee,
consultant, officer, director or shareholder of Lamar, or any member of their
respective immediate families or any corporation or other entity directly or
indirectly controlled by one or more of such employees, consultants,
officers, directors or shareholders, or members of their immediate families;
(viii) assume, guarantee, endorse or otherwise become directly or
contingently liable on (including, without limitation, liability by way of
agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor or otherwise to
assure the creditor against loss) any indebtedness of any other person; or
(ix) agree, whether in writing or otherwise, to do any of the
foregoing.
(c) CONFIDENTIALITY. The Sellers shall, and shall cause Lamar to,
and
shall instruct its directors, officers, employees and representatives to,
keep confidential all information relating to Lamar and its business, except
as required by law or administrative process and except for information which
is available to the public on the Closing Date or thereafter becomes
available to the public other than as a result of a breach of this Section
6(c) or of Section 8(b). The covenant set forth in this Section 6(c) shall
terminate five (5) years after the Closing Date.
(d) OTHER TRANSACTIONS. From the date of execution and delivery of
this Agreement to the Closing, none of the Sellers or Lamar shall, nor shall
they permit any of their respective directors, officers, shareholders or
representatives to, directly or indirectly, encourage, solicit, initiate or
participate in discussions or negotiations with, or provide any information
or assistance to, any person or group (other than the Buyer and its
representatives) concerning any merger, sale of securities, sale of
substantial assets, license or similar transaction involving Lamar. Without
limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by any director, officer,
shareholder or representative of any Seller or Lamar, whether or not such
person is purporting to act on behalf of any Seller or Lamar or otherwise,
shall be deemed to be a breach of this Section 6(d) by Lamar and the Sellers.
In the event that any Seller or Lamar receives a proposal relating to any
such transaction, the Sellers shall promptly notify the Buyer of such
proposal.
(e) SUPPLEMENTAL DISCLOSURE. Lamar and the Sellers shall give prompt
notice to the Buyer of (i) any representation or warranty made by Lamar and
the Sellers contained in this Agreement that is qualified as to materiality
becoming untrue or inaccurate or any such representation or warranty that is
not so qualified becoming untrue or inaccurate in any material respect or
(ii) the failure by any Seller to comply with or satisfy in any material
respect any covenant, agreement or condition to be complied with or satisfied
by it under this Agreement; provided, however, that no such notification
shall affect the representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties under this
Agreement.
(f) AGREEMENTS OF OFFICERS AND EMPLOYEES. The Sellers shall cause
Lamar, and shall use best efforts to cause each person named in Schedule 6(f)
hereto (the "Executives"), to execute and deliver on the Closing Date an
employment agreement (collectively, the "Employment Agreements") in the form
in Schedule 6(f) hereto providing for, among other things, annual cash and
other consideration for each Executive therein. The Sellers and/or Lamar
shall cause each employee of Lamar now or hereafter employed to execute and
deliver a Nondisclosure and Assignment of Inventions Agreement and, in
addition, cause each Key Employee of Lamar now or hereafter employed to
execute and deliver a Non-Competition Agreement, and use its best efforts to
cause all consultants of Lamar involved in the design, review, evaluation or
development of inventions or Intellectual Property to execute and deliver a
Nondisclosure and Assignment of Inventions Agreement. Lamar shall not amend
or waive any of the material provisions of such Agreements.
(g) CORPORATE NAME. The Sellers shall not use, or permit or suffer
any other person (other than Lamar and any person authorized by Lamar) to
use, the name "Lamar Signal Processing Ltd." or any variation thereof using
the word "Lamar" for any purpose whatsoever.
(h) TRANSITION. The Sellers shall use their best efforts to assure
an orderly transition in connection with the acquisition of Lamar by the
Buyer, including using their best efforts to ensure that such transactions do
not adversely affect employee morale.
(i) SHARE CONSIDERATION TRADING RESTRICTION. Subject to the
provisions of Section 2(d), each of the Sellers shall not directly or
indirectly sell, offer, pledge, contract to sell or grant any option to
purchase or otherwise dispose of or transfer any Andrea Shares comprising the
Share Consideration until such Andrea Shares shall be released from the Share
Consideration Trading Restriction in accordance with Section 2(d). Each of
the Sellers agrees and consents to the entry of stop transfer instructions
with the transfer agent for the Andrea Shares against any transfer of Andrea
Shares by it in contravention of the restrictions set forth in Section 2(d)
and this Section 6(i). Each Seller acknowledges that the Buyer is relying
on, among other things, the provisions contained in Section 2(d) and this
Section 6(i) in entering into this Agreement and the transactions
contemplated hereby.
(j) PROHIBITED ACTIVITIES. Each of the Sellers shall not, for a
period
of three years from the date of the Closing, directly or indirectly:
(i) engage in activities or businesses which are substantially in
competition with Lamar ("Competitive Activities" ), including, without
limitation (A) engaging in activities or businesses engaged in by Lamar
(including selling goods or services of the type sold by Lamar), (B)
soliciting any customer or prospective customer of Lamar to purchase any
goods or services sold by Lamar and (C) assisting any person or entity in any
way to do, or attempt to do, anything prohibited by the immediately preceding
clauses (A) and (B);
(ii) perform any action, activity or course of conduct that is
substantially detrimental to the business of Lamar or business reputation
("Detrimental Activities") including, without limitation, (A) soliciting,
recruiting or hiring any employees of Lamar or persons who have worked for
Lamar, or (B) soliciting or encouraging any employee of Lamar to leave the
employment of Lamar; or (C) establish any new business that engages in
Competitive Activities.
Notwithstanding anything to the contrary contained in this Section
6(j), the Buyer hereby agrees that the foregoing covenant shall not be deemed
breached as a result of the ownership by such Seller of less than an
aggregate of 1% of any class of stock of a corporation engaged, directly or
indirectly, in Competitive Activities; provided that such stock is listed on
a national securities exchange or is quoted on the NASDAQ National Market
System.
The Sellers declare that the foregoing time limitations are
reasonable and properly required for the adequate protection of the business
and the goodwill of Lamar. In the event any such time limitation is deemed
to be unreasonable by any court of competent jurisdiction, the Sellers agree
to the reduction of such time limitation to such period which such court
shall deem reasonable.
In the event that a Seller breaches any of the promises contained in
this Section 6(j), the Seller acknowledges that the Buyer's remedy at law for
damages will be inadequate and that the Buyer will be entitled to a temporary
restraining order or preliminary injunction to prevent the Seller's
prospective or continuing breach and to maintain the status quo.
(k) TERMINATION OF RIGHTS. On the Closing Date, each of the Sellers
agrees that any and all rights of such Seller under any agreement with Lamar
shall terminate and be of no further force or effect, provided, however, that
the obligation of Lamar to repay to Royal Miles Ltd. and Lamar Investment
Partners an aggregate of $50,000, pursuant to that certain short term loan
made to Lamar on March 1, 1998, shall continue notwithstanding this Section
6(k).
7. COVENANT OF THE BUYER. The Buyer covenants and agrees that the Buyer
shall give prompt notice to the Sellers of (i) any representation or warranty
made by it contained in this Agreement that is qualified as to materiality
becoming untrue or inaccurate or any such representation or warranty that is
not so qualified becoming untrue or inaccurate in any material respect or
(ii) the failure by it to comply with or satisfy in any material respect any
covenant, agreement or condition to be complied with or satisfied by it under
this Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
8. MUTUAL COVENANTS.
(a) CONSUMMATION OF THE TRANSACTIONS. Subject to the terms and
conditions of this Agreement, each party shall use its reasonable efforts to
cause the Closing to occur. The Sellers jointly and severally shall cause
Lamar to cooperate with the Buyer, and the Buyer shall cooperate with the
Sellers and Lamar in filing any necessary applications, reports or other
documents with, giving any notices to, and seeking any consents from, all
Governmental Entities and all third parties as may be required in connection
with the consummation of the transactions contemplated by this Agreement and
the performance by Lamar of its business after such consummation, and in
seeking necessary consultation with and prompt favorable action by any such
Governmental Entity or third party.
(b) PUBLICITY. The Sellers, Lamar and the Buyer agree that, from the
date of the execution and delivery of this Agreement through the Closing, no
public release or announcement concerning the transactions contemplated
hereby shall be issued by any party hereto without the prior consent of (i)
the Buyer in the case of a release or an announcement by a Seller or Lamar or
(ii) Lamar in the case of a release or an announcement by the Buyer (in each
case which consent shall not be unreasonably withheld), except as such
release or announcement may be required by law or the rules or regulations of
any United States or foreign securities exchange, in which case the party
required to make the release or announcement shall, if practicable, allow the
Buyer or Lamar, as the case may be, reasonable time to comment on such
release or announcement in advance of such issuance. The Sellers shall not
make any comments or statements with respect to the transactions contemplated
hereby to any third party (including without limitation members of the news
media, securities analysts and employees of Lamar) without the prior consent
of the Buyer.
(c) REPRESENTATION. Each of the Sellers agree and acknowledge that
each has engaged competent professional assistance in determining the tax
consequences applicable to such Seller resulting from each of the
transactions contemplated in this Agreement and that each is solely
responsible for the tax consequences of the transactions contemplated hereby
as they apply to that Seller.
(d) NON-DISCLOSURE AGREEMENT. The terms of that certain Mutual
Non-Disclosure Agreement, dated January 20, 1998 between the Buyer and Lamar,
shall continue in effect.
(e) RECORDS. On the Closing Date, the Sellers shall deliver or cause
to be delivered to the Buyer all agreements, documents, books, records and
files, including records and files stored on computer disks or tapes or any
other storage medium (collectively, "Records"), if any, in the possession of
the Sellers relating to the business and operations of Lamar, subject to the
following exceptions:
(i) the Sellers may retain all Records prepared in connection
with the sale of the Shares; and
(ii) the Sellers may retain any Tax Returns and supporting work
papers, and the Buyer shall be provided with copies of such Tax Returns only
to the extent that they relate to Lamar's separate returns or separate Tax
liability. The Sellers may have reasonable access to the records of Lamar
for tax purposes.
9. CONDITIONS TO CLOSING.
(a) EACH PARTY'S OBLIGATION. The respective obligation of each party
hereto to effect the transactions contemplated hereby is subject to the
satisfaction or waiver that, as of the Closing, no statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order shall have been enacted, entered,
promulgated, enforced or issued by any Governmental Entity and no other legal
restraint or prohibition preventing the purchase and sale of the Shares or
any of the other transactions contemplated by this Agreement shall be in
effect.
(b) THE SELLERS' OBLIGATION. The obligation of the Sellers to sell and
deliver the Shares to the Buyer is subject to the satisfaction of all of the
following conditions prior to or simultaneous with the Closing:
(i) The representations and warranties of the Buyer made in this
Agreement qualified as to materiality shall be true and correct, and those
not so qualified shall be true and correct in all material respects, as of
the date hereof and as of the time of the Closing as though made as of such
time, except to the extent such representations and warranties expressly
relate to an earlier date (in which case such representations and warranties
qualified as to materiality shall be true and correct, and those not so
qualified shall be true and correct in all material respects, on and as of
such earlier date). The Buyer shall have duly performed, complied with and
satisfied in all material respects all covenants, agreements and conditions
required by this Agreement to be performed, complied with or satisfied by the
Buyer by the time of the Closing. The Buyer shall have made or taken all
corporate and other action and governmental filings necessary to effectuate
the terms of this Agreement, the issuance of the Share Consideration and the
other agreements and instruments executed and delivered in connection
herewith. The Buyer shall have delivered to the Sellers a certificate dated
the Closing Date and signed by an officer of the Buyer confirming the
foregoing and in form and substance reasonably satisfactory to the Sellers
and their counsel.
(ii) The Sellers and Lamar shall have received a certificate of
the Secretary of State of the State of New York as to the due incorporation
and good standing of the Buyer under the laws of the State of New York.
(iii) The Sellers and Lamar shall have received an opinion dated
the Closing Date of Brown & Wood LLP, counsel to the Buyer, substantially in
the form of Schedule 9(b)(iii) hereto.
(iv) The Buyer shall have executed and delivered the Registration
Rights Agreement substantially in the form attached as Schedule 9(b)(iv)
hereto, and no amendment or termination thereof shall have occurred.
(v) There shall not be pending or threatened against the Buyer or
any of its directors, officers or shareholders any suit, action or proceeding
by any Governmental Entity (or any suit, action or proceeding by any other
person that has a reasonable likelihood of success), (A) challenging or
seeking to restrain or prohibit the purchase and sale of the Shares or any of
the other transactions contemplated by this Agreement or seeking to obtain
from the Sellers and Lamar in connection with the purchase and sale of the
Shares any damages, or (B) seeking to impose limitations on the ability of
the Sellers to acquire or hold, or exercise full rights of ownership of, the
Andrea Shares, including the right to vote the Andrea Shares on all matters
properly presented to the stockholders of Andrea.
(c) THE BUYER'S OBLIGATION. The obligation of the Buyer to purchase
the Shares from the Sellers is subject to the satisfaction of all of the
following conditions prior to or simultaneous with the Closing:
(i) The representations and warranties of the Sellers and Lamar
made in this Agreement qualified as to materiality shall be true and correct,
and those not so qualified shall be true and correct in all material
respects, as of the date hereof and as of the time of the Closing as though
made as of such time, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties qualified as to materiality shall be true and
correct, and those not so qualified shall be true and correct in all material
respects, on and as of such earlier date). The Sellers and Lamar shall have
duly performed, complied with and satisfied in all material respects all
covenants, agreements and conditions required by this Agreement to be
performed, complied with or satisfied by the Sellers by the time of the
Closing. The Sellers and Lamar shall have made or taken all corporate and
other action and governmental filings necessary to effectuate the terms of
this Agreement, the sale and transfer of the Shares and the other agreements
and instruments executed and delivered in connection herewith. Each Seller
and Lamar shall have delivered to the Buyer a certificate dated the Closing
Date and signed by such Seller or an officer of Lamar, as the case may be,
confirming the foregoing and in form and substance reasonably satisfactory to
the Sellers and their counsel.
(ii) The Buyer shall have received a Certificate of the Registrar of
Companies of the State of Israel as to the due incorporation and good
standing of Lamar.
(iii) The Buyer shall have received an opinion dated the Closing
Date of Cohen, Dovrat Bar-El & Co., counsel to the Sellers and Lamar,
substantially in the form of Schedule 9(c)(iii) hereto.
(iv) The Buyer shall have received on or prior to the Closing Date
an opinion from its U.S. financial advisor as to the fairness of the purchase
and sale of the Shares from a financial perspective.
(v) There shall not be pending or threatened against the Sellers or
Lamar or any of their directors, officers or shareholders any suit,
action or proceeding by any Governmental Entity (or any suit, action or
proceeding by any other person that has a reasonable likelihood of success),
(A) challenging or seeking to restrain or prohibit the purchase and sale of
the Shares or any of the other transactions contemplated by this Agreement or
seeking to obtain from the Buyer or any of its subsidiaries in connection
with the purchase and sale of the Shares any damages, (B) seeking to prohibit
or limit the ownership or operation of Lamar by the Buyer or to compel the
Buyer, its subsidiaries or Lamar to dispose of or hold separate any material
portion of the business or assets of the Buyer, its subsidiaries or Lamar, in
each case as a result of the purchase and sale of the Shares or any of the
other transactions contemplated by this Agreement, (C) seeking to impose
limitations on the ability of the Buyer to acquire or hold, or exercise full
rights of ownership of, the Shares, including the right to vote the Shares on
all matters properly presented to the stockholders of
Lamar, or (D) seeking to prohibit the Buyer or any of its subsidiaries from
effectively controlling in any respect the business or operations of Lamar.
(vi) The Sellers and Lamar shall have filed all necessary
applications, reports or other documents, given all notices and received all
consents and approvals described in Section 8(a) and such consents and
approvals shall be in full force and effect at the Closing.
(vii) No Seller shall have defaulted in its obligation to sell
or deliver such Seller's Shares to the Buyer.
(viii) Lamar and the Executives shall have executed and delivered
the Employment Agreements, and no amendment or termination thereof shall have
occurred, each of the employees shall have entered into the Nondisclosure and
Assignment of Inventions Agreement and each of the Key Employees shall have
additionally entered into the NonCompetition Agreement and copies thereof
shall have been delivered to counsel for the Buyer.
(ix) The Sellers shall have executed and delivered the Escrow
Agreement substantially in the form attached as Schedule 2(e) hereto, and no
amendment or termination thereof shall have occurred.
(x) The Buyer shall have received a resignation from each person
serving as a director of Lamar immediately prior to the Closing Date.
(d) FRUSTRATION OF CLOSING CONDITIONS. Neither any Seller nor the
Buyer may rely on the failure of any condition set forth in Section 9(a),
Section 9(b) or Section 9(c), respectively, to be satisfied if such failure
was caused by such party's failure to act in good faith or to use its
reasonable efforts to cause the Closing to occur as required by Section 8(a).
10. FURTHER ASSURANCES. From time to time, as and when requested by another
party hereto, a party hereto shall execute and deliver, or cause to be
executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all such further or other actions as such other party may
reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
11. INDEMNIFICATION.
(a) TAX INDEMNIFICATION. The Sellers, jointly and severally, shall
indemnify the Buyer and its affiliates (including Lamar) and each of their
respective directors, officers, employees, stockholders, agents and other
representatives against and hold them harmless from (i) any liability for
Taxes of Lamar for any Pre-Closing Tax Period, (ii) any liability for Taxes
of the Sellers or any other person (other than Lamar) which is or has ever
been affiliated with Lamar including any Israeli Taxes recognized as a result
of the transactions contemplated by this Agreement, (iii) any liability for
Taxes resulting from a characterization of Lamar as a controlled foreign
corporation under Section 957(a) of the Code or treatment of Lamar as engaged
in a U.S. trade or business under the Code and (iv) any liability for
reasonable legal, accounting, appraisal, consulting or similar fees and
expenses for any item attributable to any item in clause (i), (ii) or (iii)
above; provided, that the Buyer has used commercially reasonable efforts to
materially comply with its obligations under Section 11(g). The Buyer shall,
and after the Closing shall cause Lamar to, indemnify each Seller and its
affiliates and each of their respective employees, agents and representatives
against and hold them harmless from any liability for Taxes of Lamar for any
taxable period ending after the Closing Date (except to the extent such
taxable period began before the Closing Date, in which case the Buyer's
indemnity will cover only that portion of any such Taxes that are not for the
Pre-Closing Tax Period or relates to actions that took place in the Pre-
Closing Tax Period that involved income taxable in Israel during the period
that ends after the Closing Date). In the case of any taxable period that
includes (but does not end on) the Closing Date (a "Straddle Period"):
(i) real, personal and intangible property Taxes ("Property Taxes")
of Lamar for any Pre-Closing Tax Period (other than Taxes imposed in
connection with the sale of the Shares or otherwise in connection with this
Agreement or the transactions contemplated hereby) shall be equal to the
amount of such Property Taxes for the entire Straddle Period multiplied by a
fraction, the numerator of which is the number of days during the Straddle
Period that are in the Pre-Closing Tax Period and the denominator of which is
the number of days in the Straddle Period; and
(ii) the Taxes of Lamar (other than Property Taxes) for the Pre-
Closing Tax Period (other than Taxes imposed in connection with the sale of
the Shares or otherwise in connection with this Agreement or the transactions
contemplated hereby) shall be computed as if such taxable period ended as of
the close of business on the Closing Date. The indemnity obligations of the
Sellers in respect of Taxes for a Straddle Period shall equal the excess of
(x) such Taxes for the Pre-Closing Tax Period over (y) the sum of (i) the
amount of such Taxes for the Pre-Closing Tax Period paid by the Sellers or
any of its affiliates (other than Lamar) at any time and (ii) the amount of
such Taxes paid by Lamar on or prior to the Closing Date. The Sellers,
jointly and severally, shall initially pay such excess to the Buyer five days
prior to the date on which the Tax Return (including any Tax Return with
respect to estimated Taxes) with respect to the liability for such Taxes is
required to be filed (and if no such Tax Return is required to be filed, five
days prior to the date satisfaction of the Tax liability is required by the
relevant taxing authority). The payments to be made pursuant to this
paragraph by the Sellers with respect to a Straddle Period shall be
appropriately adjusted to reflect any final determination with respect to
Taxes for the Straddle Period.
(b) OTHER INDEMNIFICATION BY THE SELLERS. The Sellers jointly and
severally shall indemnify the Buyer and its affiliates (including Lamar) and
each of their respective directors, officers, employees, stockholders, agents
and representatives against and hold them harmless from any loss, liability,
claim, damage or expense (including reasonable legal fees and expenses)
suffered or incurred by any such indemnified party (other than any relating
to Taxes, for which indemnification provisions are set forth in Section
11(a)) arising from, relating to or otherwise in respect of (i) any failure
of any representation or warranty of any Seller contained in this Agreement
or in any certificate delivered pursuant hereto to be true and correct and
(ii) any breach of any covenant of any Seller contained in this Agreement.
In addition to the foregoing, the Sellers acknowledge and agree that the
Buyer shall be entitled to seek injunctive relief or other equitable remedies
for any breach of any covenant in this Agreement by any Seller.
(c) OTHER INDEMNIFICATION BY THE BUYER. The Buyer shall indemnify
each Seller, its affiliates and each of their respective employees, agents
and representatives against and hold them harmless from any loss, liability,
claim, damage or expense (including reasonable legal fees and expenses)
suffered or incurred by any such indemnified party (other than any relating
to Taxes, for which indemnification provisions are set forth in Section
11(a)) arising from, relating to or otherwise in respect of (i) any failure
of any representation or warranty of the Buyer contained in this Agreement or
in any certificate delivered pursuant hereto to be true and correct and (ii)
any breach of any covenant of the Buyer contained in this Agreement. In
addition to the foregoing, the Buyer acknowledges and agrees that the Sellers
shall be entitled to seek injunctive relief or other equitable remedies for
any breach of any covenant in this Agreement by the Buyer.
(d) LOSSES NET OF INSURANCE, AND THE LIKE. The amount of any loss,
liability, claim, damage, expense or Tax for which indemnification is
provided under this Section 11 shall be net of any amounts actually recovered
by the indemnified party under insurance policies with respect to such loss,
liability, claim, damage, expense or Tax (collectively, a "Loss") and shall
be (i) increased to take account of any net Tax cost incurred by the
indemnified party arising from the receipt of indemnity payments hereunder
(grossed up for such increase) and (ii) reduced to take account of any net
Tax benefit realized by the indemnified party arising from the incurrence or
payment of any such Loss. In computing the amount of any such Tax cost or
Tax benefit, the indemnified party shall be deemed to recognize all other
items of income, gain, loss, deduction or credit before recognizing any item
arising from the receipt of any indemnity payment hereunder or the incurrence
or payment of any indemnified Loss. Any indemnity payment under this
Agreement shall be treated as an adjustment to the Consideration for Tax
purposes, unless a final determination with respect to the indemnified party
or any of its affiliates causes any such payment not to be treated as an
adjustment to the Consideration for United States federal income tax
purposes.
(e) PROCEDURES RELATING TO INDEMNIFICATION (OTHER THAN UNDER SECTION
11(A)). In order for a party (the "indemnified party") to be entitled to any
indemnification provided for under this Agreement (other than under Section
11(a)) in respect of, arising out of or involving a claim or demand made by
any person against the indemnified party (a "Third Party Claim"), such
indemnified party must notify the indemnifying party in writing, and in
reasonable detail, of the Third Party Claim within ten (10) business days
after receipt by such indemnified party of written notice of the Third Party
Claim; provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
indemnifying party shall have been actually prejudiced as a result of such
failure (except that the indemnifying party shall not be liable for any
expenses incurred during the period in which the indemnified party failed to
give such notice). Thereafter, the indemnified party shall deliver to the
indemnifying party, within five (5) business days after the indemnified
party's receipt thereof, copies of all notices and documents (including court
papers) received by the indemnified party relating to the Third Party Claim.
If a Third Party Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense thereof
and, if it so chooses and acknowledges its obligation to indemnify the
indemnified party therefor, to assume the defense thereof with counsel
selected by the indemnifying party; provided that such counsel is not
reasonably objected to by the indemnified party. Should the indemnifying
party so elect to assume the defense of a Third Party Claim, the indemnifying
party shall not be liable to the indemnified party for legal expenses
subsequently incurred by the indemnified party in connection with the defense
thereof. If the indemnifying party assumes such defense, the indemnified
party shall have the right to participate in the defense thereof and to
employ counsel, at its own expense, separate from the counsel employed by the
indemnifying party, it being understood that the indemnifying party shall
control such defense. The indemnifying party shall be liable for the fees
and expenses of counsel employed by the indemnified party for any period
during which the indemnifying party has failed to assume the defense thereof
(other than during the period prior to the time the indemnified party shall
have given notice of the Third Party Claim as provided above).
If the indemnifying party so elects to assume the defense of any
Third Party Claim, all of the indemnified parties shall cooperate with the
indemnifying party in the defense or prosecution thereof. Such cooperation
shall include the retention and (upon the indemnifying party's request) the
provision to the indemnifying party of records and information which are
reasonably relevant to such Third Party Claim, and making employees available
on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Whether or not the
indemnifying party shall have assumed the defense of a Third Party Claim, the
indemnified party shall not admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the indemnifying
party's prior written consent (which consent shall not be unreasonably
withheld). If the indemnifying party shall have assumed the defense of a
Third Party Claim, the indemnified party shall agree to any settlement,
compromise or discharge of a Third Party Claim which the indemnifying party
may recommend and which by its terms obligates the indemnifying party to pay
the full amount of the liability in connection with such Third Party Claim,
which releases the indemnifying party completely in connection with such
Third Party Claim and which would not otherwise adversely affect the
indemnified party.
Notwithstanding the foregoing, the indemnifying party shall not be
entitled to assume the defense of any Third Party Claim (and shall be liable
for the reasonable fees and expenses of counsel incurred by the indemnified
party in defending such Third Party Claim) if the Third Party Claim seeks an
order, injunction or other equitable relief or relief for other than money
damages against the indemnified party which the indemnified party reasonably
determines, after conferring with its outside counsel, cannot be separated
from any related claim for money damages. If such equitable relief or other
relief portion of the Third Party Claim can be so separated from that for
money damages, the indemnifying party shall be entitled to assume the defense
of the portion relating to money damages. The indemnification required by
Section 11(b) and 11(c) shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills
are received or loss, liability, claim, damage or expense is incurred. All
claims under Section 11(b) or 11(c) other than Third Party Claims shall be
governed by Section 11(f). All Tax Claims (as defined in Section 11(g))
shall be governed by Section 11(g).
(f) OTHER CLAIMS. In the event any indemnified party should have a
claim against any indemnifying party under Section 11(b) or 11(c) that does
not involve a Third Party Claim being asserted against or sought to be
collected from such indemnified party, the indemnified party shall deliver
notice of such claim with reasonable promptness to the indemnifying party.
The failure by any indemnified party so to notify the indemnifying party
shall not relieve the indemnifying party from any liability which it may have
to such indemnified party under Section 11(b) or 11(c), except to the extent
that the indemnifying party demonstrates that it has been materially
prejudiced by such failure. If the indemnifying party does not notify the
indemnified party within 45 calendar days following its receipt of such
notice that the indemnifying party disputes its liability to the indemnified
party under Section 11(b) or 11(c), such claim specified by the indemnified
party in such notice shall be conclusively deemed a liability of the
indemnifying party under Section 11(b) or 11(c) and the indemnifying party
shall pay the amount of such liability to the indemnified party on demand or,
in the case of any notice in which the amount of the claim (or any portion
thereof) is estimated, on such later date when the amount of such claim (or
such portion thereof) becomes finally determined. If the indemnifying party
has timely disputed its liability with respect to such claim, as provided
above, the indemnifying party and the indemnified party shall proceed in good
faith to negotiate a resolution of such dispute and, if not resolved through
negotiations, such dispute shall be resolved by litigation in an appropriate
court of competent jurisdiction.
(g) PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS. If a
communication shall be received by the Buyer from any taxing authority, the
subject matter of which, if successfully asserted as a claim against the
Buyer (a "Tax Claim"), might result in an indemnity payment to the Buyer, one
of its affiliates or any of their respective directors, officers, employees,
stockholders, agents or representatives pursuant to Section 11(a), then the
Buyer shall give prompt notice to the person designated by the Sellers to
serve as their representative for such purpose (the "Sellers'
Representative") in writing of such communication and of any counterclaim the
Buyer proposes to assert in the event the subject matter of such
communication is asserted as a Tax Claim; provided, however, that the failure
to give such notice shall not affect the indemnification provided hereunder
except to the extent the Sellers have been actually and materially prejudiced
as a result of such failure; and further, provided, however, that the receipt
of any such communication by a Seller who at the time of such receipt is an
employee of the Buyer or Lamar shall constitute provision of such notice to
the Sellers' Representative for purposes of this Section 11(g).
With respect to any Tax Claim relating to a taxable period ending on
or prior to the Closing Date, the Sellers shall control all proceedings and
may make all decisions taken in connection with such Tax Claim (including
selection of counsel and other representatives) and, without limiting the
foregoing, may in their sole discretion pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with any taxing
authority with respect thereto, and may, in their sole discretion, either pay
the Tax claimed and sue for a refund where applicable law permits such refund
suits or contest the Tax Claim in any permissible manner, and the Buyer will
otherwise use commercially reasonable efforts to cooperate with the Sellers'
Representative acting on behalf of the Sellers to the extent reasonably
necessary to enable the Sellers' Representative to represent the Sellers in
the proceedings arising in connection with such Tax Claim; provided, however,
that the Sellers must first consult in good faith with the Buyer before
taking any significant action with respect to the conduct of a Tax Claim.
Notwithstanding the foregoing, (i) the Sellers shall not settle any Tax Claim
without the prior written consent of the Buyer, which consent shall not be
unreasonably withheld, (ii) the Buyer, and counsel of its own choosing, shall
have the right to participate in the defense of such Tax Claim, (iii) the
Sellers shall inform the Buyer, reasonably promptly in advance, of the date,
time and place of all administrative and judicial meetings, conferences,
hearings and other proceedings relating to such Tax Claim, (iv) the Buyer
shall be entitled to have its representatives (including counsel, accountants
and consultants) attend and participate in any such administrative and
judicial meetings, conferences, hearings and other proceedings relating to
such Tax Claim and (v) the Sellers shall provide to the Buyer all
information, document requests and responses, proposed notices of deficiency,
notices of deficiency, revene agent's reports, protests, petitions and any
other documents relating to such Tax Claim promptly upon receipt from, or in
advance of submission to (as the case may be), the relevant taxing authority.
The Sellers and the Buyer shall jointly control and participate in all
proceedings taken in connection with any Tax Claim relating to Taxes of Lamar
for a Straddle Period. Neither the Sellers nor the Buyer shall settle any
such Tax Claim without the prior written consent of the other.
The Buyer shall control all proceedings with respect to any Tax Claim
relating to a taxable period beginning after the Closing Date. None of the
Sellers shall have any right to participate in the conduct of any such
proceeding except to the extent that such participation is reasonably
necessary in order to provide assurance to the Sellers that the Buyer remains
in compliance with the provisions of this Section 11.
The Buyer shall, and shall cause Lamar and each of its affiliates, on
the one hand, to, and each Seller and its affiliates, on the other hand,
shall, reasonably cooperate in contesting any Tax Claim, which cooperation
shall include the retention and, upon request, the provision to the
requesting person of records and information which are reasonably relevant to
such Tax Claim, and making employees available on a mutually convenient basis
to provide additional information or explanation of any material provided
hereunder or to testify at proceedings relating to such Tax Claim.
Neither the Buyer nor any of the Sellers nor the Sellers' Representative
acting on behalf of the Sellers shall take or omit to take any action as a
result of which the assertion of a tax liability subject to indemnification
under Section 11(a) is substituted by a taxing authority for the withdrawal
of or other omission to assert a tax liability not subject to indemnification
under Section 11(a), or vice versa, in either event for the purpose of either
avoiding or obtaining the payment of an indemnity under this Section 11.
12. TAX MATTERS.
(a) (i) The Buyer may timely make an election under Section 338 of the
Code (and any comparable election under state or local Tax law) with respect
to Lamar and (ii) if the Buyer chooses to make a Section 338 election, the
Buyer and the Sellers shall cooperate (to the extent necessary) in the
completion and timely filing of such election (the "Election") in accordance
with the provisions of applicable Treasury Regulations. To the extent the
Buyer chooses to make an Election, the Buyer and the Sellers shall report the
purchase by the Buyer of the Shares pursuant to this Agreement consistent
with the Election (and any comparable election under state or local tax laws)
and shall take no position inconsistent therewith in any Tax Return, any
proceeding before any taxing authority or otherwise. The Buyer and the
Sellers agree that the fair market value of the assets of Lamar will be
determined and allocated following the Closing. The Buyer and the Sellers
shall (i) be bound by such determination and allocation for purposes of
determining any Taxes, (ii) prepare and file their Tax Returns on a basis
consistent with such determination and allocation and (iii) take no position
inconsistent with such determination and allocation on any applicable Tax
Return, in any proceeding before any taxing authority or otherwise. In the
event that any such determination or allocation is disputed by any taxing
authority, the party receiving notice of the dispute shall promptly notify
the other party hereto concerning resolution of the dispute.
(b) For any taxable period of Lamar that includes (but does not end
on) the Closing Date, the Buyer shall cause Lamar to timely prepare and file
with the appropriate taxing authorities all Tax Returns required to be filed
and shall pay all Taxes due with respect to such Returns; provided that the
Sellers shall reimburse the Buyer (in accordance with the procedures set
forth in Section 11(a)) for any amount owed by the Sellers pursuant to 11(a)
with respect to the taxable periods covered by such Tax Returns. For any
taxable period of Lamar that ends on or before the Closing Date, the Sellers
shall timely prepare and file with the appropriate taxing authorities all Tax
Returns required to be filed, and shall pay all Taxes due with respect to
such Tax Returns; provided, however, that no such Tax Return shall be filed
without the prior written consent of the Buyer. The Buyer and the Sellers
agree to cause Lamar to file all Tax Returns for the taxable period including
the Closing Date on the basis that the relevant taxable period ended as of
the close of business on the Closing Date, unless the relevant taxing
authority will not accept a Tax Return filed on that basis.
(c) The Sellers shall, and shall cause their respective affiliates,
officers, employees, agents, auditors and other representatives reasonably to
cooperate, in preparing and filing all Tax Returns and in resolving all
disputes and audits with respect to all taxable periods relating to Taxes,
including by maintaining and making available to Buyer and Lamar all records
necessary in connection with Taxes. The Buyer and the Sellers recognize that
the Sellers and their affiliates will need access, from time to time, after
the Closing Date, to certain accounting and Tax records and information held
by Lamar to the extent such records and information pertain to events
occurring prior to the Closing Date; therefore, the Buyer agrees, and agrees
after the Closing to cause Lamar, to allow the Sellers and their agents and
other representatives, at times and dates mutually acceptable to the parties,
reasonable access to such records from time to time, during normal business
hours and at the Sellers' expense.
(d) The amount or economic benefit of any refunds, credits or offsets
of Taxes of Lamar for any taxable period ending on or before the Closing Date
shall be for the account of the Sellers, except for the amount or economic
benefit of any NOLs which shall be solely for the account of the Buyer.
Notwithstanding the foregoing, (i) any such refunds, credits or offsets of
Taxes shall be for the account of the Buyer to the extent such refunds,
credits or offsets of Taxes are attributable (determined on a marginal basis)
to the carryback from a taxable period beginning after the Closing Date (or
the portion of a Straddle Period that begins on the day after the Closing
Date) of items of loss, deduction or credit, or other tax items, of Lamar (or
any of its affiliates, including the Buyer) and (ii) to the extent the Buyer
or Lamar pays after the Closing Date any amount with respect to Taxes for any
such taxable period, refunds of such Taxes (determined on a first-in,
first-out basis) shall be for the account of the Buyer. The amount or
economic benefit of any refunds, credits or offsets of Taxes of Lamar for any
taxable period beginning after the Closing Date shall be for the account of
the Buyer. The amount or economic benefit of any refunds, credits or offsets
of Taxes of Lamar for any Straddle Period shall be equitably apportioned
between the Sellers on the one hand, and the Buyer, on the other hand. Each
party shall forward, and shall cause its affiliates to forward, to the party
entitled pursuant to this Section 12(d) to receive the amount or economic
benefit of a refund, credit or offset to Tax the amount of such refund, or
the economic benefit of such credit or offset to Tax, within 30 days after
such refund is received or after such credit or offset is allowed or applied
against other Tax liability, as the case may be; provided, however, that any
such amounts payable pursuant to this Section 12(d) shall be net of any Tax
cost or Tax benefit to the party making payment pursuant to this Section
12(d) and its affiliates attributable to the receipt of such refund, credit
or offset to Tax and/or the payment of such amounts pursuant to this Section
12(d). The Buyer and the Sellers shall treat any amounts payable pursuant to
this Section 12(d) as an adjustment to the Consideration unless a final
determination causes any such payment not to be treated as an adjustment to
the Consideration for United States federal income tax purposes.
(e) The Sellers shall file any amended consolidated, combined or
unitary Tax Returns of Lamar for taxable years ending on or prior to the
Closing Date which are required as a result of examination adjustments made
by the IRS or by the applicable state, municipal, provincial, local or non-
U.S. taxing authorities for such taxable years as finally determined;
provided, however, that no such Return shall be filed without the prior
written consent of the Buyer, which consent shall not be unreasonably
withheld.
(f) For those jurisdictions in which separate Tax Returns are filed
by Lamar, any required amended returns resulting from such examination
adjustments, as finally determined, shall be prepared by the Sellers and
furnished to Lamar for approval, signature and filing at least thirty (30)
days prior to the due date for filing such Tax Returns.
(g) All transfer, documentary, sales, use, registration and other
such Taxes (including all applicable real estate transfer or gains Taxes and
stock transfer Taxes) and related fees (including any penalties, interest and
additions to Tax) incurred in connection with the sale of the Shares or
otherwise in connection with this Agreement and the transactions contemplated
hereby shall be paid by the Sellers, and the Sellers and the Buyer shall
cooperate in timely preparing and filing all Tax Returns as may be required
to comply with the provisions of such Tax laws.
(h) The Sellers shall notify the Buyer of any notification the
Sellers receive, and the Buyer shall notify the Sellers of any notification
the Buyer receives, after the Closing Date of any examination or audit of a
Tax Return relating to Lamar for any Pre-Closing Tax Period, or of any
proposed adjustment to any item included in any such Tax Return, promptly
after receipt thereof.
13. ASSIGNMENT. This Agreement and the rights and obligations hereunder
shall not be assignable or transferable by any Seller or the Buyer without
the prior written consent of the Buyer or the Sellers, as the case may be;
provided, however, that the Buyer may assign its right to purchase the Shares
hereunder to an affiliate of the Buyer without the prior written consent of
any Seller; provided further, however, that no assignment shall limit or
affect the assignor's obligations hereunder. Any attempted assignment in
violation of this Section 13 shall be void.
14. NO THIRD-PARTY SELLERS. Except as provided in Section 11, 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.
15. TERMINATION.
(a) Anything contained herein to the contrary notwithstanding, this
Agreement may be terminated and the transactions contemplated hereby
abandoned at any time prior to the Closing Date:
(i) by mutual written consent of each of the Sellers and the Buyer;
(ii) by the Sellers if any of the conditions set forth in Sections
9(a) or 9(b) shall have become incapable of fulfillment, and shall not have
been waived by the Sellers; provided, however, that the right to terminate
this Agreement pursuant to this Section 15(a)(ii) shall not be available to
the Sellers if any Seller has failed to perform any of its obligations under
this Agreement and such failure results in such conditions becoming incapable
of fulfillment;
(iii) by the Buyer if any of the conditions set forth in Sections
9(a) or 9(c) shall have become incapable of fulfillment, and shall not have
been waived by the Buyer; provided, however, that the right to terminate this
Agreement pursuant to this Section 15(a)(iii) shall not be available to the
Buyer if it has failed to perform any of its obligations under this Agreement
and such failure results in such conditions becoming incapable of
fulfillment;
(iv) by the Sellers or the Buyer, if the Closing does not occur on
or prior to May 3, 1998; provided, however, that the right to terminate this
Agreement pursuant to this Section 15(a)(iv) shall not be available to the
Sellers or the Buyer, as the case may be, if it has failed to perform any of
its obligations under this Agreement; or
(v) if any Governmental Entity shall have issued a judgment, order
or decree or taken any other action permanently enjoining, restraining or
otherwise prohibiting the purchase of the Shares or any of the other
transactions contemplated by this Agreement, and such judgment, order or
decree or other action shall have become final and nonappealable.
(b) In the event of termination by the Sellers or the Buyer pursuant to
this Section 15, written notice thereof setting forth the reasons therefore
shall forthwith be given to the other parties and the transactions
contemplated by this Agreement shall be terminated, without further action by
any party. If the transactions contemplated by this Agreement are terminated
as provided herein:
(i) the Buyer shall return all documents and other materials
received from the Sellers or Lamar relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the
Sellers; and
(ii) all confidential information received by the Buyer with respect
to Lamar and all confidential information received by Lamar and the Sellers
with respect to the Buyer shall be treated in accordance with the Mutual
Non-Disclosure Agreement, dated January 20, 1998, which shall remain in full
force and effect notwithstanding the termination of this Agreement.
(c) If this Agreement is terminated and the transactions contemplated
hereby are abandoned as described in this Section 15, this Agreement shall
become void and of no further force or effect, except for the provisions of
(i) Section 6(c) relating to the obligation of the Sellers and Lamar to keep
confidential certain information and data obtained by it, (ii) Section 8(b)
relating to publicity, (iii) this Section 15 and (iv) Section 17 relating to
certain expenses. Nothing in this Section 15 shall be deemed to release any
party from any liability for any breach by such party of the terms and
provisions of this Agreement or to impair the right of any party to compel
specific performance by any other party of its obligations under this
Agreement.
16. SURVIVAL OF REPRESENTATIONS. All representations and warranties made in
this Agreement or any other instrument or document delivered in connection
herewith or therewith, shall survive the execution and delivery hereof and
thereof and shall terminate at the close of business on the date that is two
(2) years after the Closing Date, except as follows: (i) in the case of Third
Party Claims, such representations and warranties shall terminate at the
close of business on the date that is three (3) years after the Closing Date;
(ii) in the case of Sections 4(k), 4(q) and 23, such representations and
warranties shall terminate when the applicable statute of limitations has
run; and (iii) in the case of Sections 4(a), 4(b), 4(d), 4(e) and 5(a), such
representations and warranties shall not terminate.
17. EXPENSES. Whether or not the transactions contemplated hereby are
consummated, and except as otherwise specifically provided in this Agreement,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
costs or expenses.
18. AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement shall be effective unless it shall be in writing and signed by the
Buyer, Lamar and each of the Sellers.
19. 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 (promptly followed by hardcopy in
accordance with this Section 19) 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, three days after mailing (one business day in the case of express
mail or overnight courier service), as follows:
(i) if to the Sellers,
Lamar Signal Processing Ltd.
P.O. Box 273
Yoqneam Ilit 20692, Israel
Telecopy No: 972-4-993-7064
Attention: Mr. Joseph Marash, President; and
(ii) if to the Buyer,
Andrea Electronics Corporation
11-40 45th Road
Long Island City, New York 11101
Telecopy No: 718-784-8457
Attention: Mr. John N. Andrea, Co-President
or such other address as any party may from time to time specify by written
notice to the other parties hereto.
20. INTERPRETATION; SCHEDULES. The headings contained in this Agreement and
in any Schedule hereto are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. All Schedules
annexed hereto or referred to herein are hereby incorporated in and made a
part of this Agreement as if set forth in full herein. Any capitalized terms
used in any Schedule but not otherwise defined therein, shall have the
meaning as defined in this Agreement. This Agreement is gender neutral. Any
word in this Agreement that refers to a particular gender shall also refer to
all other genders, including masculine, feminine and neuter.
21. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which taken
together shall constitute one and the same instrument, and each party hereto
may execute this Agreement by signing any such counterpart.
22. ENTIRE AGREEMENT. This Agreement and the Mutual Non-Disclosure
Agreement, dated January 20, 1998 and incorporated by reference herein,
contain the entire agreement and understanding between the parties hereto
with respect to the subject matter hereof and supersede all prior agreements
and understandings relating to such subject matter. The parties hereto shall
not be liable or bound to any other party in any manner by any
representations, warranties or covenants relating to such subject matter
except as specifically set forth herein or in the Mutual Non-Disclosure
Agreement.
23. BROKERS. Except as set forth in Schedule 23, each party hereto hereby
represents and warrants that no brokers or finders that have acted for such
party in connection with this Agreement.
24. 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.
25. CONSENT TO JURISDICTION. The Buyer and the Sellers irrevocably submit
to the exclusive jurisdiction of (a) the Supreme Court of the State of New
York, New York County and (b) the United States District Court for the
Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated
hereby. The Buyer and the Sellers agree to commence any action, suit or
proceeding relating hereto either in the United States District Court for the
Southern District of New York or if such suit, action or other proceeding may
not be brought in such court for jurisdictional reasons, in the Supreme Court
of the State of New York, New York County. The Buyer and the Sellers further
agree that service of any process, summons, notice or document by U.S.
registered mail to such party's respective address set forth above 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 25. The Buyer and the Sellers irrevocably and unconditionally waive
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)
the Supreme Court of the State of New York, New York County or (ii) the
United States District Court for the Southern District 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.
26. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with the laws of the State of New York as applied to agreements
made and to be performed entirely within the State of New York and without
giving effect to principles of conflicts of law.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first written above.
ANDREA ELECTRONICS CORPORATION LAMAR SIGNAL PROCESSING, LTD.
By ______________________________ By ______________________________
Name: Name:
Title: Title:
JOSEPH MARASH REMANO B.V.
______________________________ By _____________________________
Name:
Title:
VENTNOR LLC MORE CAPITAL SERVICES, INC.
By _____________________________ By _____________________________
Name: Name:
Title: Title:
CHERRY HILL LLC ZE'EV STEINER
By _____________________________ _____________________________
Name:
Title:
MARLA LLC BARUCH BERDUGO
By _____________________________ _____________________________
Name:
Title:
KNIGHTHAWK INVESTMENT LLC HAIM ZITMAN
By _____________________________ _____________________________
Name:
Title:
<PAGE>
SCHEDULE 2(e)
ESCROW AGREEMENT
This ESCROW AGREEMENT, dated as of May 5, 1998, by and among JOSEPH
MARASH, REMANO B.V., VENTNOR LLC, MORE CAPITAL SERVICES, INC., CHERRY HILL
LLC, MARLA LLC, KNIGHTHAWK INVESTMENT LLC, ZE'EV STEINER, BARUCH BERDUGO and
HAIM ZITMAN (each a "Seller"; together the "Sellers"), and ANDREA ELECTRONICS
CORPORATION, a New York Corporation ("Andrea"), and LaSalle National Bank, a
national banking association (the "Escrow Agent"). Capitalized terms used
but not defined herein shall have the meanings set forth in the within
defined Stock Purchase Agreement.
RECITALS
WHEREAS, pursuant to that certain Stock Purchase Agreement dated as
of April 6, 1998, as amended by Amendment No. 1 to the Stock Purchase
Agreement dated May 5, 1998 (collectively, the "Stock Purchase Agreement"),
by and among Andrea, Lamar Signal Processing Ltd., an Israeli corporation
("Lamar"), and the Sellers, Andrea has agreed to purchase from the Sellers,
and the Sellers have agreed to sell, transfer and deliver to Andrea, all of
the outstanding capital stock of Lamar (the "Shares") on the terms and
subject to the conditions specified in the Stock Purchase Agreement;
WHEREAS, under the terms of the Stock Purchase Agreement the Sellers
have agreed to certain obligations, including, without limitation, certain
indemnification of Andrea; and
WHEREAS, the parties hereto are entering into this Escrow Agreement
as required by Section 2(e) and Section 9(c)(ix) of the Stock Purchase
Agreement in order to secure such obligations of the Sellers under the Stock
Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual covenants set forth herein and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, the Parties hereby
agree as follows:
1. APPOINTMENT AND AGREEMENT OF ESCROW AGENT. The Sellers and Andrea
hereby appoint LaSalle National Bank, as, and LaSalle National Bank hereby
agrees to perform the duties of, the Escrow Agent under this Escrow
Agreement. This Escrow Agreement shall be administered, and the Escrowed
Property (as defined in Section 2 hereof) shall be held, in Chicago,
Illinois, by the Escrow Agent, currently located at 135 South LaSalle Street,
Chicago, Illinois 60603.
2. DEPOSIT OF ESCROWED PROPERTY. As soon as practicable on or immediately
after the date hereof, Andrea will deposit with the Escrow Agent a portion of
the Share Consideration, which such portion of the Share Consideration shall
initially consist of 450,000 shares of common stock, par value $.50 per share
(the "Common Stock") of Andrea, as determined pursuant to Section 2(e) of the
Stock Purchase Agreement (the "Escrow Amount"). The Escrow Amount and any
other securities or assets held by the Escrow Agent in the Escrow Account
from time to time are collectively referred to herein as the "Escrowed
Property".
3. OBLIGATIONS COVERED. This Agreement has been executed and the deposit
of the Escrow Amount hereunder has been made only for the purpose of
securing, to the extent of the Escrowed Property, the indemnity obligations
of the Sellers under the Stock Purchase Agreement.
4. HOLDING THE ESCROWED PROPERTY.
(a) The Escrow Agent shall hold and safeguard the Escrowed Property
during the term of this Agreement in accordance with the terms hereof.
(b) Notwithstanding the escrow of the Escrowed Property, dividends
and other distributions declared and paid on such shares held in escrow shall
continue to be paid by Andrea to the respective Sellers and all voting rights
with respect to such shares shall inure to the benefit of and be enjoyed by
the respective Sellers and such Sellers shall be the legal and beneficial
owners of such shares for all purposes subject to the terms of this
Agreement; provided that the parties agree (i) that Andrea shall deposit with
the Escrow Agent any securities issued to the Sellers in respect of any
Escrow Property held in escrow as a result of a stock split or combination of
shares of Common Stock, payment of a stock dividend or other stock
distribution in or on Common Stock or otherwise, (ii) if Andrea takes an
action requiring the vote of stockholders of Andrea, Andrea will forward or
cause to be forwarded all materials regarding such vote directly to each of
the Sellers and (iii) that such securities shall be held by the Escrow Agent
as, and shall be included within the definition of, Escrowed Property, as the
case may be; provided, however, notwithstanding the foregoing proviso, to the
extent that any such distribution of securities is properly taxable as a
dividend for federal income tax purposes, Andrea shall distribute such
securities to the respective Selling Parties.
(c) The Escrowed Property shall be considered to be the property of
the Sellers, subject to the Stock Purchase Agreement and this Agreement,
unless and until delivered to Andrea as provided in Section 5 hereof.
5. DELIVERY OF ESCROWED PROPERTY TO THE COMPANY. Whenever there shall be
delivered to the Escrow Agent either:
(a) a certificate signed by Andrea and each Seller, or a duly
authorized representative thereof, in the form attached hereto as Annex A, or
(b) a certified copy of a final, non-appealable judgment of a court
of competent jurisdiction, in either case stating that an amount is due from
the Sellers to Andrea pursuant to the Sellers' obligation to indemnify Andrea
under the Stock Purchase Agreement, then the Escrow Agent shall, to the
extent that the amount of Escrowed Property then held by it shall be
sufficient for the purpose, deliver to Andrea such number of shares as
determined pursuant to Section 2(e) of the Stock Purchase Agreement of such
Escrowed Property equal to the amount so specified in such certificate or
judgment, as the case may be.
6. TERMINATION OF ESCROW.
(a) Subject to Section 7 of this Escrow Agreement, on the date that is
twenty-four (24) months from the Closing Date in accordance with Section 3(a)
of the Stock Purchase Agreement (the "Termination Date"), Andrea, by delivery
of written notice to such effect to the Escrow Agent shall authorize the
Escrow Agent to deliver an amount of the Escrowed Property then on deposit in
the Escrow Account to the Sellers entitled thereto equal to the excess (if
any) of (i) the aggregate value of Escrowed Property (based on the Exchange
Price) on deposit in the Escrow Account over (ii) the aggregate Retained
Amount (as defined below); provided, however, that in the event that prior to
the date that is twenty-four months (24) months from the Closing Date, Andrea
receives evidence reasonably satisfactory to Andrea that Andrea will not have
a withholding obligation to any taxing authority in Israel in connection with
the payment of the Consideration to the Sellers pursuant to the Stock
Purchase Agreement, then Andrea, by delivery of written notice to such effect
to the Escrow Agent shall authorize the Escrow Agent to deliver an amount of
the Escrowed Property then on deposit in the Escrow Account to the Sellers
entitled thereto equal to the lesser of (i) 90,000 shares of Common Stock of
Andrea and (ii) that number of shares of Common Stock of Andrea equal to the
excess (if any) of (A) the aggregate value of Escrowed Property (based on the
Exchange Price) then on deposit in the Escrow Account over (B) the aggregate
Retained Amount. The term "Exchange Price" as used herein shall mean that
amount which is equal to the average closing price of common stock, par value
$.50 per share, of Andrea as traded on the American Stock Exchange on the ten
(10) trading days immediately prior to the Termination Date.
(b) Notwithstanding anything above to the contrary, this Escrow
Agreement shall automatically terminate if and when all the Escrowed Property
shall have been distributed by the Escrow Agent in accordance with the terms
of this Escrow Agreement.
7. RETENTION OF SHARES IN THE ESCROW ACCOUNT FOLLOWING ANY INTERIM
DISTRIBUTION DATE OR THE TERMINATION DATE. In the event that at any time
prior to the Termination Date a claim for indemnification shall have been
made by Andrea against any Seller pursuant to the Stock Purchase Agreement,
then Andrea may in good faith notify the Escrow Agent to such effect in
writing on or prior to the Termination Date. Such written notice shall
describe briefly the nature of each such claim, the facts and circumstances
which give rise to each such claim, the estimated amount of each such claim
and the provisions of the Stock Purchase Agreement on which each such claim
is based. Andrea shall promptly deliver to the Sellers a copy of such
written notice. The aggregate of the amounts set forth in all such written
notices with respect to the claim or claims described therein shall be,
notwithstanding any distribution pursuant to Section 6(a) hereof or any
termination of this Escrow Agreement pursuant to Section 6(a) hereof, set
aside and retained (to the extent available in the remaining Escrowed
Property) by the Escrow Agent as a reserve to cover such claim or claims
(such amount so set aside and retained, as reduced from time to time pursuant
to Section 5 hereof and this Section 7, is referred to herein as the
"Retained Amount"). On the Termination Date, the remainder of the Escrowed
Property shall be paid to the Sellers in accordance with Section 6(a) of this
Escrow Agreement. Payment of the Retained Amount or any portion thereof to
Andrea shall not be made except pursuant to instructions received by the
Escrow Agent in accordance with Section 5 hereof (notwithstanding the
termination of this Escrow Agreement). After the Termination Date any
portion of the Retained Amount not paid to Andrea upon resolution of such
claim or claims shall be immediately paid to the Sellers in accordance with
Section 6(b).
8. NO TRANSFER OF ESCROWED PROPERTY. While any Escrowed Property shall
continue to be held by the Escrow Agent, the Sellers shall not (other than by
death or operation of law) transfer, sell, create a security interest in or
otherwise in any way dispose of or encumber its right to any distributions
with respect to the Escrowed Property.
9. NOTICES AND DISTRIBUTIONS. 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 (promptly followed by
hardcopy in accordance with this Section 9) 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, three days after mailing (one business day in the
case of express mail or overnight courier service), as follows:
(i) if to the Sellers,
Lamar Signal Processing Ltd.
P.O. Box 273
Yoqneam Ilit 20692, Israel
Telecopy No: 972-4-993-7064
Attention: Mr. Joseph Marash, President; and
(ii) if to Andrea,
Andrea Electronics Corporation
11-40 45th Road
Long Island City, New York 11101
Telecopy No: 718-784-8457
Attention: Mr. John N. Andrea, Co-President
(iii) if to the Escrow Agent:
LaSalle National Bank
135 South LaSalle Street Chicago, Illinois 60603
Telecopy No: 312-904-2236
Attention: Ms. Margaret Muir, Assistant Vice-President
or such other address as may from time to time be specified by written notice
to the other parties hereto.
10. LIABILITY AND INDEMNIFICATION OF THE ESCROW AGENT.
(a) The Escrow Agent's duties and responsibilities shall be limited
to those expressly set forth herein. Except for references to items defined
in the Stock Purchase Agreement, the Escrow Agent shall not be subject to,
nor obliged to recognize, any other agreement between the parties hereto even
though reference thereto may be made herein. This Escrow Agreement is for
the exclusive benefit of the parties hereto and their respective successors
hereunder, and shall not be deemed to give any legal or equitable right,
remedy, or claim to any other entity or person whatsoever. If any Escrowed
Property is at any time attached, garnished or levied upon, or in case the
transfer or delivery of any such Escrowed Property shall be stayed or
enjoined, or in case of any other legal process or judicial order affecting
such Escrowed Property (any of the foregoing an "order"), then the Escrow
Agent is authorized to comply with any such order in any reasonable and good
faith manner, as determined by the Escrow Agent upon advice of its counsel;
provided that if the Escrow Agent so complies with any such order, it shall
not be liable to any of the parties hereto or to any other person or entity
even though such order may be subsequently modified or vacated. The Escrow
Agent shall not be obligated to take any legal action hereunder that might in
its judgment involve any expense or liability unless it has been furnished
with reasonable indemnity.
(b) Neither the Escrow Agent nor any of its controlling persons,
directors, officers, agents or employees, shall be liable for any action
taken or omitted to be taken by it or them hereunder or in connection
herewith in good faith and believed by it to be within the purview of this
Escrow Agreement, except for its or their own gross negligence or willful
misconduct. In no event shall the Escrow Agent or its controlling persons,
directors, officers, agents and employees be held liable for any special,
indirect or consequential damages resulting from any action taken or omitted
to be taken by it or them hereunder or in connection herewith even if advised
of the possibility of such damages, except in the case of its or their own
gross negligence or willful misconduct. The Escrow Agent shall be fully
protected in relying upon any instruction, notice, demand, certificate or
document which it in good faith believes to be genuine and to be signed or
presented by the proper person.
(c) The Sellers and Andrea and their respective successors and
assigns, each agree, jointly and severally, to indemnify and hold the Escrow
Agent and its controlling persons, directors, officers, agents and employees
harmless against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever, including reasonable attorney's fees, that may be
imposed on, incurred by or asserted against it or them in any action taken or
not taken by it or them hereunder unless such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements were imposed on, incurred by or asserted against the Escrow
Agent because of the breach by the Escrow Agent of its obligations hereunder,
which breach was caused by gross negligence, lack of good faith or willful
misconduct on the part of the Escrow Agent or any of its controlling persons,
directors, officers, agents or employees. The foregoing indemnification
shall survive any termination of this Escrow Agreement and the resignation or
removal of the Escrow Agent. Subject to applicable law, the Escrow Agent
shall have a first lien on, and right of setoff against, the Escrowed
Property held under this Escrow Agreement to the extent that any party hereto
shall not have performed their respective obligations as set forth above.
11. ADVICE OF COUNSEL. In the performance of its duties hereunder, the
Escrow Agent may consult with counsel with respect to any matter relating to
this Escrow Agreement and shall not be liable for any action taken or omitted
in good faith in accordance with the advice of such counsel.
12. TAXES. Each party hereto shall provide the Escrow Agent with their Tax
Identification Number (TIN) as assigned by the Internal Revenue Service.
13. THE ESCROW AGENT'S FEES. The reasonable fees and expenses of the
Escrow Agent shall be borne equally by the Sellers, on the one hand, and
Andrea, on the other hand. Subject to applicable law, the Escrow Agent shall
have a first lien on, and right of setoff against, the Escrowed Property held
under this Escrow Agreement to the extent that any party hereto shall not
have performed their respective obligations as set forth in this Section 13.
14. SUCCESSORS. The obligations imposed and the rights conferred by this
Escrow Agreement shall be binding upon and inure to the benefit of the
Sellers, Andrea, the Escrow Agent and their respective successors and
assigns.
15. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with the laws of the State of New York as applied to agreements
made and to be performed entirely within the State of New York and without
giving effect to principles of conflicts of law.
16. ENTIRE AGREEMENT. This Escrow Agreement, and the other documents
referred to herein or therein, collectively contain the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings relating to such
subject matter. This Escrow Agreement and the deposit of the Escrowed
Property are without prejudice to, and do not limit, any obligations of the
Sellers to Andrea in respect of any of the covenants, representations or
warranties of the Sellers contained in the Stock Purchase Agreement. In
addition, except as set forth in the Stock Purchase Agreement, in no event
shall Andrea's remedy and the Sellers' obligations under the Stock Purchase
Agreement be limited to the Escrowed Property, and any distribution of
Escrowed Property, whether to Andrea pursuant to Section 5(a) hereof or to
the Sellers pursuant to Section 6 hereof, shall in no way limit such remedy
or obligation.
17. AMENDMENT. No amendment, modification or waiver in respect of this
Escrow Agreement shall be effective unless it shall be in writing and signed
by Andrea, the Sellers and the Escrow Agent.
18. RESIGNATION OF THE ESCROW AGENT. The Escrow Agent may resign and be
discharged from its duties and obligations hereunder by giving notice in
writing of such resignation to the Sellers and Andrea specifying a date not
less than 45 days after the date of the notice in writing when such
resignation shall be effective. In the event of such resignation, a
successor Escrow Agent shall be agreed upon between the Sellers and Andrea
and shall be a bank having trust powers, the main office of which is located
in New York, New York. If the parties are unable to agree upon an acceptable
Escrow Agent, then application shall be made to the Supreme Court of the
State of New York for the appointment of such successor. The Escrow Agent's
resignation shall not be effective until such appointment is made, the
Escrowed Property is delivered to the successor and the successor's
acceptance of this Escrow Agreement and receipt for the Escrowed Property is
obtained from the successor the Escrow Agent and copies thereof are mailed
via registered mail to the Sellers and Andrea.
19. COUNTERPARTS. This Escrow Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which taken
together shall constitute one and the same instrument, and each party hereto
may execute this Escrow Agreement by signing any such counterpart.
20. CONSENT TO JURISDICTION. Each party hereto irrevocably submits to the
exclusive jurisdiction of (a) the Supreme Court of the State of New York, New
York County, and (b) the United States District Court for the Southern
District of New York, for the purposes of any suit, action or other
proceeding arising out of this Escrow Agreement or any transaction
contemplated hereby. Each party hereto agrees to commence any action, suit
or proceeding relating hereto either in the United States District Court for
the Southern District of New York or if such suit, action or other proceeding
may not be brought in such court for jurisdictional reasons, in the Supreme
Court of the State of New York, New York County. Each party hereto further
agrees that service of any process, summons, notice or document by U.S.
registered mail to such party's respective address set forth above 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 20. Each party hereto irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising
out of this Escrow Agreement or the transactions contemplated hereby in (i)
the Supreme Court of the State of New York, New York County or (ii) the
United States District Court for the Southern District 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.
21. SEVERABILITY. If any provision of this Escrow 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Escrow Agreement to be duly executed as of the date first above written.
ANDREA ELECTRONICS CORPORATION
By ______________________________
Name:
Title:
LASALLE NATIONAL BANK
By: ______________________________
Name: Margaret Muir
Title: Assistant Vice-President
JOSEPH MARASH REMANO B.V.
______________________________ By______________________________
Name:
Title:
VENTNOR LLC MORE CAPITAL SERVICES, INC.
By ______________________________ By______________________________
Name: Name:
Title: Title:
CHERRY HILL LLC ZE'EV STEINER
By ______________________________ ______________________________
Name:
Title:
MARLA LLC BARUCH BERDUGO
By ______________________________ ______________________________
Name:
Title:
KNIGHTHAWK INVESTMENT LLC HAIM ZITMAN
By ______________________________ ______________________________
Name:
Title:
<PAGE>
Annex A to Escrow Agreement
Dear Sirs:
Reference is made to the Escrow Agreement, dated as of May
4, 1998 (the "Escrow Agreement"), by and among Joseph Marash, Remano B.V.,
Ventnor LLC, More Capital Services, Inc., Cherry Hill LLC, Marla LLC,
Knighthawk Investment LLC, Ze'ev Steiner, Baruch Berdugo and Haim Zitman
(each a "Seller"; together the "Sellers"), and Andrea Electronics
Corporation, a New York Corporation ("Andrea"), and LaSalle National Bank, a
national banking association (the "Escrow Agent"). Capitalized terms used
but not defined herein shall have the meanings set forth in the Escrow
Agreement.
Pursuant to Section 5(i) of the Escrow Agreement, we hereby
deliver to you this certificate stating that ___________ shares of Andrea
common stock (the "Certified Amount") are due from the Sellers to Andrea
pursuant to the Sellers' obligations to indemnify Andrea under the Stock
Purchase Agreement.
You are accordingly hereby instructed to deliver to Andrea,
to the extent of Escrowed Property held by you under the Escrow Agreement, an
amount of such Escrowed Property equal to the Certified Amount.
The terms and conditions (including, without limitation,
those contained in Sections 5(b) and (10) of the Escrow Agreement apply in
toto to this certificate.
<PAGE>
ANDREA ELECTRONICS CORPORATION
By ______________________________
Name:
Title:
JOSEPH MARASH MORE CAPITAL SERVICES, INC.
______________________________ By______________________________
Name:
Title:
ZE'EV STEINER
______________________________ KNIGHTHAWK INVESTMENT LLC
BARUCH BERDUGO By______________________________
Name:
Title:
______________________________
HAIM ZITMAN MARLA LLC
______________________________ By_____________________________
Name:
Title:
VENTNOR LLC
By ____________________________
Name:
Title:
REMANO B.V.
By______________________________
Name:
Title:
CHERRY HILL LLC
By _____________________________
Name:
Title:
<PAGE>
SCHEDULE 3(b)(i)(B)
PROMISSORY NOTE
---------------
$(___________________) April (____),
1998
New York, New
York
FOR VALUE RECEIVED, Andrea Electronics Corporation, a New York
corporation (the "Company"), hereby promises to pay to the order of
(________________) (the "Lender"), at his offices located at
(_________________________________) or at such other location as the Lender
shall specify to the Company from time to time, in immediately available
funds, the sum of (___________________) UNITED STATES DOLLARS
(US$(_________)), payable in accordance with the following schedule:
(i) (___________________) United States dollars (US$(_________)) upon the six
month anniversary of the date hereof; (ii) (___________________) United
States dollars (US$(_________)) upon the twelve month anniversary of the date
hereof; (iii) (___________________) United States dollars (US$(_________))
upon the twenty-four month anniversary of the date hereof; and
(iv) (___________________) United States dollars (US$(_________)) upon the
thirty-six month anniversary of the date hereof.
The outstanding principal amount of this Promissory Note may be paid in
advance in whole at any time without premium or penalty.
In the event that the Company fails to pay any amounts due under this
Promissory Note in accordance with the terms hereof, the Company shall be
required to pay interest at the rate of
(___________) percent ((____)%) per annum from the date such amount is due to
the date of payment.
If either of the events specified in clauses (i) and (ii) below occurs,
the unpaid principal of this Promissory Note shall ipso facto become and be
immediately due and payable without any declaration or other act on the part
of the Lender:
(i) A court having jurisdiction in the premises shall have entered
a decree or order for relief in respect of the Company in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Company or for
all or any substantial part of the property of the Company, or ordering the
winding-up or liquidation of the affairs of the Company, and such decree or
order shall have remained unstayed and in effect for a period of thirty (30)
consecutive days; or
(ii) The Company shall have commenced a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall have consented to the entry of an order for relief in an
involuntary case under any such law, or shall have consented to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or similar official) of the Company or for
all or any substantial part of either of the properties, or shall have made
an assignment for the benefit of creditors, or shall have failed generally to
pay its debts as they become due or shall have taken any corporate action in
furtherance of any of the foregoing.
The Company agrees to pay on demand all reasonable costs and expenses,
including, without limitation, the reasonable fees and out-of-pocket expenses
of counsel to the Lender in connection with the enforcement, collection,
protection or preservation (whether through negotiations, legal proceedings
or otherwise) of any of its rights under this Promissory Note.
This Promissory Note shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that
the Company shall not assign any of its rights or delegate any of its duties
hereunder without the prior written consent of the Lender. The Company
hereby waives demand, presentment for payment, notice of extensions,
nonpayment and protest, and agrees that any extensions or renewals hereof
shall not affect its liability, whether it has notice of such extensions or
renewals or not.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND INTERPRETED UNDER, THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICT OF LAWS.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed as of the date first written above.
ANDREA ELECTRONICS CORPORATION
By: ____________________________
Name:
Title:
<PAGE>
SCHEDULE 4(e)
Sellers
NAME SHARES
- ---- ------
Joseph Marash 6,589
Remano B.V. 6,589
Cherry Hill LLC 1,860
Marla LLC 1,859
More Capital Services, Inc. 1,374
Knighthawk Investment LLC 1,271
Ventnor LLC 1,193
Baruch Berdugo 1,145
Ze'ev Steiner 562
Haim Zitman 458
------
22,900
<PAGE>
SCHEDULE 9(b)(iv)
REGISTRATION RIGHTS AGREEMENT
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THIS AGREEMENT is made as of May 5, 1998, by and among Andrea
Electronics Corporation, a New York corporation (the "Company"), each of the
persons listed on Schedule A hereto and each of the other persons who becomes
a party to this Agreement after the date hereof pursuant to Sections 12(d) or
12(f) below (each a "Holder" and together the "Holders").
RECITALS
WHEREAS, the Company and the Holders are parties to a Stock Purchase
Agreement dated as of April 6, 1998, as amended by Amendment No. 1 to the
Stock Purchase Agreement dated May 5, 1998 (collectively, the "Purchase
Agreement"), pursuant to which the Company has agreed to acquire from the
Holders all of the issued and outstanding shares of capital stock (the "Lamar
Shares"), of Lamar Signal Processing Ltd., an Israeli company ("Lamar") owned
by such Holders, so that Lamar becomes a wholly owned subsidiary of Andrea;
WHEREAS, as part of the consideration to be paid pursuant to the
Purchase Agreement, the Company shall issue to the Holders certain shares of
the Company's common stock, par value $.50 per share (the "Common Stock"),
which such part of the consideration is defined therein and herein as the
"Share Consideration" and which such shares are defined herein and therein as
the "Andrea Shares";
WHEREAS, the Andrea Shares are subject to that certain Share
Consideration Trading Restriction set forth in the Purchase Agreement (the
"Share Consideration Trading Restriction") which provides for the Andrea
Shares comprising the Share Consideration to become freely tradeable, subject
to applicable securities laws, in three equal tranches in accordance with the
schedule set forth in the Purchase Agreement (each being a "Share
Consideration Tranche");
WHEREAS, the Company has agreed under the Purchase Agreement to grant
certain registration rights to each Share Consideration Tranche upon the
release of such Share Consideration Tranche from the Share Consideration
Trading Restriction;
WHEREAS, the Company and the Holders desire to set forth herein the
terms and conditions under which each Share Consideration Tranche shall
become registrable upon the release of such Share Consideration Tranche from
the Share Consideration Trading Restriction; and
WHEREAS, the execution and delivery of this Agreement is a condition to
the consummation of the purchase and sale of the Shares under the Purchase
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties to this Agreement intending to
be legally bound, hereby agree as follows:
1. DEMAND REGISTRATIONS
(a) REQUESTS. From and after the date that the Andrea Shares
comprising each Share Consideration Tranche is released from the Share
Consideration Trading Restriction, the Holders of at least twenty percent
(20%) of such Andrea Shares comprising such Share Consideration Tranche may
at any time request registration under the Securities Act of 1933, as amended
(the "Securities Act") of all or any portion of such Andrea Shares comprising
such Share Consideration Tranche. Any such registration shall be on such
form under the Securities Act as the Company shall reasonably deem
appropriate. From and after the time that any Andrea Shares comprising the
Share Consideration becomes so eligible to be included in a request for
registration under the Securities Act in accordance with this Agreement, such
Andrea Shares shall be deemed for the purposes of this Agreement to become
"Holder Registrable Securities". Each request for registration of Holder
Registrable Securities under this Section 1 (each a "Demand Registration")
shall specify the approximate number of Holder Registrable Securities
requested to be registered and the anticipated plan of distribution for the
offering of such Holder Registrable Securities covered by such Demand
Registration. Within ten (10) days after receipt of any such request, the
Company shall give written notice of such requested registration to all other
Holders of Holder Registrable Securities and shall include in such
registration all Holder Registrable Securities with respect to which the
Company has received written requests for inclusion therein within fifteen
(15) days after the receipt of the Company's notice.
(b) NUMBER AND EXPENSES. The Holders of Holder Registrable Securities
shall be entitled to request two Demand Registrations with respect to each
Share Consideration Tranche. The Company shall pay all Registration Expenses
(as defined in Section 5(a) hereof) for such Demand Registrations. Except as
otherwise provided in this Section 1(b), (i) a registration shall not count
as one of the permitted Demand Registrations until it has become effective
and the Holders of Holder Registrable Securities are able to register and
sell at least ninety percent (90%) of the Holder Registrable Securities
requested to be included in such registration; and (ii) the Company shall pay
all Registration Expenses in connection with any registration initiated as a
Demand Registration whether or not it has become effective and whether or not
such registration counted as one of the permitted Demand Registrations;
provided, however, that the Holders of Holder Registrable Securities may,
before a Demand Registration becomes effective, withdraw their Holder
Registrable Securities from inclusion therein, should the terms of sale not
be satisfactory to such Holders, and should all such Holders so withdraw,
such Demand Registration shall be deemed to have been declared effective,
unless such Holders of Holder Registrable Securities pay within thirty (30)
days after any such withdrawal, their pro rata share of all of the
out-of-pocket expenses of the Company incurred in connection with such
registration; and further provided, however, that notwithstanding anything
herein to the contrary, any right to Demand Registration with respect to any
Holder Registrable Securities shall terminate and cease to have any effect
from an after the time such Holder Registrable Securities shall become
eligible for sale under Rule 144(k) under the Securities Act.
(c) UNDERWRITTEN OFFERINGS. If so requested by the Holders of at least
a majority of the Holder Registrable Securities included in a Demand
Registration, the public offering or distribution of Holder Registrable
Securities under this Agreement shall be pursuant to a firm commitment
underwriting, the managing underwriter of which shall be an investment
banking firm nationally recognized in the United States and selected and
engaged by the Company and approved by the Holders of at least a majority of
the Holder Registrable Securities included in such Demand Registration (which
approval shall not be unreasonably withheld). The Company shall enter into
the same underwriting agreement as entered into by the Holders of Holder
Registrable Securities, which shall contain representations, warranties,
indemnities and agreements not substantially different from those customarily
made by an issuer in underwriting agreements with respect to secondary
distributions. The Company, as a condition to fulfilling its obligations
under this Agreement, may require that such underwriting agreement contain
customary provisions indemnifying the Company against any losses that arise
out of or are based upon an untrue statement, an alleged untrue statement, an
omission or an alleged omission in any registration statement or prospectus
made in reliance upon and in conformity with written information furnished to
the Company by the underwriters or the Holders of Holder Registrable
Securities specifically for use in the preparation of such registration
statement or prospectus.
(d) PRIORITY. If a Demand Registration is an underwritten offering and
the managing underwriter advises the Company in writing that in its opinion
the number of Holder Registrable Securities and, if permitted hereunder,
other securities requested to be included in such offering by parties other
than Holders who have the right to request the inclusion of such other
securities in such Demand Registration ("Other Registrable Securities")
exceeds the number of Holder Registrable Securities and such Other
Registrable Securities, if any, that can be sold without adversely affecting
the marketability of the offering, the Company shall include in such
registration a prorated number of Holder Registrable Securities and a
prorated number of such Other Registrable Securities, where such prorated
numbers shall be determined on the basis of the proportion that the amount of
such Holder Registrable Securities owned by each such Holder and originally
requested for inclusion in such registration bears to the aggregate number of
Holder Registrable Securities and such Other Registrable Securities
originally requested for inclusion in such registration.
(e) RESTRICTIONS. The Company shall not be obligated to effect any
Demand Registration within one hundred eighty (180) days after the effective
date of a previous Demand Registration or a previous registration in which
the Holders of Holder Registrable Securities were given piggyback rights
pursuant to Section 2 hereof and in which there was no reduction in the
number of Holder Registrable Securities requested to be included. The
Company shall be entitled to postpone, for a reasonable period of time not in
excess of ninety (90) days after its receipt of an initial request for a
Demand Registration pursuant to this Agreement, the filing of any
registration statement if at the time it received a request therefor, the
Company determines, in its reasonable business judgment, that such
registration and offering could interfere with or otherwise adversely affect
any financing, acquisition, corporate reorganization or other material
transaction or development involving the Company or any of its subsidiaries
or affiliates; provided that the Company shall only be entitled to one
postponement in any three hundred sixty-five (365) day period. The Company
shall give the Holders of Holder Registrable Securities making such request
written notice of such determination. In the event of such postponement, the
Company shall file such registration statement as soon as practicable after
it shall determine, in its reasonable business judgment, that such
registration and offering will not interfere with the matters described in
the first sentence of this Section 1(e) or, if later, at the end of such
ninety (90) day period. If the Company shall postpone the filing of any
registration statement, the Holders of Holder Registrable Securities shall
have the right to withdraw their request for such registration by giving
notice to the Company within 15 days of the notice of postponement; provided,
however, that in the event that the Holders of Holder Registrable Securities
withdraw their request in the foregoing manner, such request shall not be
counted for purposes of determining the number of registrations to which the
Holders of Holder Registrable Securities are entitled pursuant to Section
1(a) above.
2. PIGGYBACK REGISTRATIONS
(a) RIGHT TO PIGGYBACK REGISTRATIONS. Whenever the Company proposes to
register any of its securities under the Securities Act (other than pursuant
to a Demand Registration) and the registration form to be used may be used
for the registration of Holder Registrable Securities (a "Piggyback
Registration"), the Company shall give prompt written notice to all Holders
of Holder Registrable Securities of its intention to effect such a
registration and shall include in such registration all Holder Registrable
Securities with respect to which the Company has received written requests
for inclusion therein within fifteen (15) days after the receipt of the
Company's notice; provided, however, that notwithstanding anything herein to
the contrary, any right to Piggyback Registration with respect to any Holder
Registrable Securities shall terminate and cease to have any effect from and
after the time such Holder Registrable Securities shall become eligible for
sale under Rule 144(k) under the Securities Act.
(b) EXPENSES. The Registration Expenses of the Holders of Holder
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) PRIORITY ON PIGGYBACK REGISTRATIONS. If a Piggyback Registration
includes an underwritten primary offering of securities on behalf of the
Company, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold without adversely affecting
the marketability of the offering, the Company shall include in such
registration (i) first, the securities the Company proposes to sell, and
(ii) second, a prorated number of Holder Registrable Securities and a
prorated number of such Other Registrable Securities, where such prorated
numbers shall be determined on the basis of the proportion that the amount of
such Holder Registrable Securities owned by each such holder and originally
requested for inclusion in such registration bears to the aggregate number of
Holder Registrable Securities and such Other Registrable Securities
originally requested for inclusion in such registration.
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration
only includes the underwritten secondary offering of securities on behalf of
holders of the Company's securities, and the managing underwriters advise the
Company in writing that in their opinion the number of securities requested
to be included in such registration exceeds the number which can be sold
without adversely affecting the marketability of the offering, the Company
shall include in such registration a prorated number of Holder Registrable
Securities and a prorated number of such Other Registrable Securities, where
such prorated numbers shall be determined on the basis of the proportion that
the amount of such Holder Registrable Securities owned by each such holder
and originally requested for inclusion in such registration bears to the
aggregate number of Holder Registrable Securities and such Other Registrable
Securities originally requested for inclusion in such registration.
(e) SELECTION OF UNDERWRITERS. If any Piggyback Registration includes
an underwritten offering of securities by the Company, the selection of
investment banker(s) and manager(s) for the offering shall be within the sole
discretion of the Company.
(f) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Holder Registrable Securities pursuant
to Section 1 or pursuant to this Section 2, and if such previous registration
has not been withdrawn or abandoned, the Company shall not file or cause to
be effected any other registration of any of its equity securities or
securities convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (except on Form S-8 or any successor
form), whether on its own behalf or at the request of any holder or holders
of such securities, until a period of at least one hundred eighty (180) days
has elapsed from the effective date of such previous registration.
3. HOLDBACK AGREEMENTS
Each Holder of Holder Registrable Securities shall not effect any public
sale or distribution (including sales pursuant to Rule 144 under the
Securities Act) of equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities, during
the ten (10) days prior to and the one hundred eighty (180) day period
beginning on the effective date of any underwritten Demand Registration or
any underwritten Piggyback Holder Registration in which Holder Registrable
Securities are included (except as part of such underwritten registration),
unless the underwriters managing the registered public offering otherwise
agree.
4. REGISTRATION PROCEDURES
Whenever the Holders of Holder Registrable Securities have requested that any
Holder Registrable Securities be registered pursuant to this Agreement, the
Company shall use its reasonable efforts to effect the registration of such
Holder Registrable Securities in accordance with the
terms and conditions of this Agreement, and pursuant thereto the Company
shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission (the
"SEC") a registration statement with respect to such Holder Registrable
Securities and use its reasonable efforts to cause such registration
statement to become effective (provided that before filing a registration
statement or prospectus or any amendments or supplements thereto, the Company
shall furnish to the counsel selected by the Holders of a majority of the
Holder Registrable Securities covered by such registration statement copies
of all such documents proposed to be filed, which documents shall be subject
to the reasonable review and comment of such counsel);
(b) notify each Holder of Holder Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary
to keep such registration statement effective for a period of not less than
one hundred eighty (180) days and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such registration statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement;
(c) furnish to each seller of Holder Registrable Securities such number
of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including
each preliminary prospectus) and such other documents as such seller may
reasonably request in order to facilitate the disposition of the Holder
Registrable Securities owned by such seller;
(d) use its reasonable efforts to register or qualify such Holder
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such
seller to consummate the disposition in such jurisdictions of the Holder
Registrable Securities owned by such seller (provided that the Company shall
not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this subsection,
(ii) subject itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction);
(e) notify each seller of such Holder Registrable Securities, at
anytime 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 contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller,
the Company shall prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Holder Registrable
Securities, such prospectus shall not contain an untrue statement of a
material fact or omit to state any fact necessary to make the statements
therein not misleading; in the event of the happening of any event of which,
in the judgment of the Company, it is advisable to suspend use of any
prospectus for a discrete period of time due to pending material corporate
developments or similar material events that have not yet been publicly
disclosed and as to which the Company believes public disclosure will be
prejudicial to the Company (the "Deferral Period"), the Company shall deliver
a certificate in writing, signed by an authorized executive officer of the
Company, to the Holders of Holder Registrable Securities the offering of
which is then covered by a registration statement, counsel for such Holders
and any managing Underwriters, to the effect of the foregoing and, upon
receipt of such certificate, each such Holder shall not sell any Holder
Registrable Securities and shall not use the prospectus until such Holder's
receipt of copies of a supplemented or amended prospectus or until such
Holder is advised in writing by the Company that the prospectus may be used
and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such prospectus; the
Company will use reasonable efforts to ensure that the use of the prospectus
may be resumed, and sales of Holder Registrable Securities ca commence, as
soon as practicable and, in the case of a pending development or event that
resulted in such Deferral Period, as soon as the earlier of (i) public
disclosure of such pending material corporate development or similar material
event or (ii) a determination by the Company that public disclosure of such
material corporate development or similar material event would not be
prejudicial to the Company;
(f) cause all such Holder Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are
then listed;
(g) provide a transfer agent and registrar for all such Holder
Registrable Securities and a CUSIP number for all such Holder Registrable
Securities not later than the effective date of the registration statement
covering such Holder Registrable Securities;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the Holders
of a majority of the Holder Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Holder Registrable Securities (including effecting a
stock split or a combination of shares);
(i) make available for inspection during the Company's normal business
hours and on reasonable prior written notice by any seller of Holder
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with such
registration statement, subject to the execution by any such person of a
confidentiality agreement in form and substance reasonably satisfactory to
the Company;
(j) otherwise use its reasonable efforts to comply with all applicable
rules and regulations of the SEC, and make available to the Holders of Holder
Registrable Securities, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months beginning with the
first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(k) permit any Holder of Holder Registrable Securities which Holder, in
its sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable
judgment of such Holder and its counsel should be included;
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification
of any Holder Registrable Securities included in such registration statement
for sale in any jurisdiction, use its reasonable efforts promptly to obtain
the withdrawal of such order;
(m) use its reasonable efforts to cause such Holder Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the sellers thereof to consummate the disposition of such
Holder Registrable Securities;
(n) obtain a comfort letter from the Company's independent public
accountants in customary form and covering such matters of the type
customarily covered by comfort letters as the Holders of a majority of the
Holder Registrable Securities being sold reasonably request (provided that
such Holder Registrable Securities constitute at least 10% of the securities
covered by such registration statement);
(o) use reasonable efforts to cause certificates for the Holder
Registrable Securities covered by such registration statement to be delivered
by the Holders thereof to the underwriters in such denominations and
registered in such names as the underwriters may request; and
(p) cause the Holder Registrable Securities covered by the registration
statement to be listed on each securities exchange or quoted on each
automated quotation system on which any of the Andrea Shares is then listed
or quoted no later than the date the registration statement is declared
effective and, in connection therewith, to the extent applicable, to make
such filings under the Exchange Act (such as the filing of a registration
statement on Form 8-A) and to have such filings declared effective
thereunder.
5. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement, including, without limitation, all registration and
filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and
disbursements of custodians, fees and disbursements of counsel for the
Company and fees and disbursements of all independent certified public
accountants, underwriters (excluding discounts and commissions) and other
persons retained by the Company (all such expenses being herein called
"Registration Expenses"), shall be borne as provided in this Agreement,
except that the Company shall, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit or quarterly review of the Company's financial statements, the expense
of any liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which similar
securities issued by the Company are then listed. As used in this Agreement,
the term "Registration Expenses" shall not include the fees and disbursements
of any counsel for the Holders of Holder Registrable Securities.
(b) To the extent Registration Expenses and other expenses incident to
the registration of Holder Registrable Securities (including, without
limitation, the fees and disbursements of any counsel for the Holders of
Holder Registrable Securities) are not required to be paid by the Company,
each Holder of Holder Registrable Securities included in any registration
hereunder shall pay those Registration Expenses and other expenses allocable
to the registration of such Holder's Holder Registrable Securities so
included, and any Registration Expenses and other expenses not so allocable
shall be borne by all Holders of Holder Registrable Securities included in
such registration in proportion to the aggregate selling price of the Holder
Registrable Securities to be so registered.
6. INDEMNIFICATION
(a) The Company agrees to indemnify, to the extent permitted by law,
each Holder of Holder Registrable Securities, its officers, directors and
partners, legal counsel, accountants and each person who controls such Holder
(within the meaning of the Securities Act) against all losses, claims,
damages, liabilities and expenses (including investigation costs and costs of
defending same) caused by ((i)) any untrue or alleged untrue statement of
material fact contained in any registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
the same are caused by or contained in any information furnished in writing
to the Company by such Holder expressly for use therein or by such Holder's
failure to deliver a copy of the registration statement or prospectus or any
amendments or supplements thereto after the Company has furnished such Holder
with a sufficient number of copies of the same or any violation of federal or
state securities laws, rules or regulations relating to actions or in actions
required by such Holder, its officers, directors or partners or any person
who controls such Holder (within the meaning of the Securities Act) in
connection with any such registration or qualification( or (ii) any violation
by the Company under the Securities Act or any regulation thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or
compliance). In connection with an underwritten offering, the Company shall
indemnify such underwriters, their officers and directors and each person who
controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the
Holders of Holder Registrable Securities.
(b) In connection with any registration statement in which a Holder of
Holder Registrable Securities is participating, each such Holder shall
furnish to the Company in writing such information and affidavits as the
Company reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, shall indemnify
the Company, officers, directors and partners, and each person who controls
the Company (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities and expenses (including investigations and cost
of defending same) resulting from any untrue or alleged untrue statement of
material fact contained in the registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, but only to the
extent that such untrue statement or omission is contained in any information
or affidavit so furnished in writing by such Holder and stated to be
specifically for use therein; provided that the obligation to indemnify shall
be individual, not joint and several, for each Holder and shall be limited to
the net amount of proceeds received by such Holder from the sale of Holder
Registrable Securities pursuant to such registration statement.
(c) Any person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt
notice shall not impair any person's right to indemnification hereunder to
the extent such failure has not prejudiced the indemnifying party) and (ii)
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist with respect to
such claim, permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified party. If such
defense is assumed, the indemnifying party shall not be subject to any
liability for any settlement made by the indemnified party without its
consent (but such consent shall not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the
defense of a claim shall not be obligated to pay the fees and expenses of
more than one counsel for all parties indemnified by such indemnifying party
with respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such claim.
(d) The indemnity, contribution and expense reimbursement obligations
of each party hereunder shall be in addition to any liability that such party
may otherwise have hereunder, under any underwriting agreement or otherwise.
The indemnification provided for under this
Agreement shall remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer,
director, legal counsel, accountant, partner or controlling person of such
indemnified party and shall survive the transfer of any Andrea Shares by a
Holder.
(e) If the indemnification provided for in this Section 6 is held by a
court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such loss, liability, claim, damage,
or expense (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and
the indemnified party or parties on the other hand or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative benefits received by any party shall be deemed
to be equal to the total net proceeds from the sale of any Andrea Shares
covered by the registration statement that covers such sale. The relative
fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission. Notwithstanding this paragraph, an indemnifying party shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Andrea Shares sold by such indemnifying party and
distributed to the public were offered to the public eceeds the amount of any
damages which such indemnifying party has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No person may participate in any registration hereunder which is
underwritten unless such person (i) agrees to sell such person's securities
on the basis provided in any underwriting arrangements approved by the person
or persons entitled hereunder to approve such arrangements and (ii) completes
and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements; provided that no Holder of Holder Registrable
Securities included in any underwritten registration shall be required to
make any representations or warranties to the Company or the underwriters
(other than representations and warranties regarding such Holder and such
Holder's intended method of distribution) or to undertake any indemnification
obligations to the Company or the underwriters with respect thereto, except
as otherwise provided in Section 6 hereof. The Company's obligations under
this Agreement with respect to each seller of Holder Registrable Securities
shall be conditioned upon such seller's compliance with the following:
(a) such seller shall cooperate with the Company in connection with the
preparation of the registration statement, and for so long as the Company is
obligated to keep the registration statement effective, shall provide to the
Company, in writing, for use in the registration statement, all information
reasonably requested by the Company regarding such seller and such other
information relating to such seller as may be necessary to enable the Company
to prepare the registration statement and prospectus covering the Holder
Registrable Securities, to maintain the currency and effectiveness thereof,
and to otherwise comply with all applicable requirements of law in connection
therewith;
(b) during such time as such seller may be engaged in a distribution of
Holder Registrable Securities, such seller will comply with all applicable
laws, including, without limitation, Regulation M promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
pursuant to such applicable laws will, among other things: (A) not engage in
any stabilization activity in connection with the securities of the Company
in contravention of such rules; (B) distribute the Holder Registrable
Securities owned by such seller solely in the manner described in the
registration statement; (C) cause to be furnished to each underwriter, agent
or broker-dealer to and through whom the Holder Registrable Securities owned
by such seller may be offered, or to the offeree if an offer is made directly
by such seller, such copies of the prospectus (as amended and supplemented to
such date) and documents incorporated by reference therein as may be required
by such underwriter, agent, broker-dealer or offeree; and (D) not bid for or
purchase any securities of the Company or attempt to induce any person to
purchase any securities of the Company other than as permitted under the
Exchange Act and the rules and regulations thereunder; and
(c) on notice from the Company of the happening of any of the events
specified in Section 4(e) above, if it requires the suspension by such seller
of the distribution of any of the Holder Registrable Securities, then such
seller shall cease offering or distributing the Holder Registrable Securities
until such time as the Company notifies such seller that the offering and
distribution of the Holder Registrable Securities may recommence (which in
any event shall be no later than immediately after the filing of the
supplemented or amended prospectus contemplated by Section 4(e)).
8. RULE 144 REPORTING AND OTHER MATTERS
With a view to making available the benefits of certain rules and
regulations of the SEC that may permit the sale of Holder Registrable
Securities to the public without registration, the Company agrees to use its
reasonable efforts to:
(a) make and keep public information regarding the Company available as
those terms are understood and defined in Rule 144 under the Securities Act;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act at any time after it has become subject to such reporting requirements;
(c) so long as a Holder owns any Holder Registrable Securities, furnish
to the Holder forthwith upon written request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144
under the Securities Act, and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed as a Holder may reasonably request in
availing itself of any rule or regulation of the SEC allowing a Holder to
sell any such securities without registration;
(d) upon written request and the furnishing to the Company of
appropriate representations and warranties and an opinion of the Holders'
counsel to the effect that the Holder Registrable Securities may be sold
without registration under the Securities Act, instruct the transfer agent to
remove the restricted transfer legend and terminate the stop transfer
instructions covering the Holder Registrable Securities and cause the
Company's counsel to deliver an opinion to the transfer agent to the effect
that removal of the restricted legend and termination of the stop transfer
instructions is in compliance with Rule 144 under the Securities Act; and
(e) to effect an offering in or about September 1998, covered by a
registration statement under the Securities Act, of at least one million
(1,000,000) shares of the Company's common stock, par value $.50 per share,
with gross proceeds of at least thirty-five million United States dollars
(US$35,000,000), which such offering shall include three hundred sixty
thousand (360,000) Andrea Shares of the Holders.
9. DEFINITIONS
"Affiliate" shall mean a person that, directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the person specified.
"Person" or "person" means an individual, corporation, partnership,
joint venture, trust, university, or unincorporated organization, or a
government or any agency or political subdivision thereof.
10. FURTHER ASSURANCES
Each of the parties hereto shall use all reasonable efforts to take, or
cause to be taken, all appropriate action, do or cause to be done all things
reasonably necessary, proper or advisable under applicable law, and execute
and deliver such documents and other papers, as may be required to carry out
the provisions of this Agreement and the other documents contemplated hereby
and consummate and make effective the transactions contemplated hereby.
11. TERMINATION
This Agreement and the obligations of the parties hereunder shall
terminate with respect to any portion of the Andrea Shares comprising a Share
Consideration Tranche upon the earlier to occur of the end of the period of
effectiveness of the registration statement covering the offering of such
Andrea Shares and the time at which such Andrea Shares may be sold by the
holder thereof in accordance with Rule 144(k) under the Securities Act,
except for any liabilities or obligations under Sections 3, 5 or 6 hereof,
each of which shall remain in effect in accordance with their terms.
12. MISCELLANEOUS
(a) REMEDIES. Any person having rights under any provision of this
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach
of the provisions of this Agreement and that any party may in its sole
discretion apply to any court of law or equity of competent jurisdiction
(without posting any bond or other security) for specific performance and for
other injunctive relief in order to enforce or prevent violation of the
provisions of this Agreement.
(b) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Holders unless such modification,
amendment or waiver is approved in writing by the Company and the Holders of
at least a majority of the Andrea Shares then in existence which are either
then Holder Registrable Securities or which will become Holder Registrable
Securities with the passage of time; provided that no such amendment or
action which materially adversely affects any one such Holder, as such,
visa-vis the other such Holders, as such, shall be effective against such
Holder without the prior written consent of such Holder. The failure of any
party to enforce any of the provisions of this Agreement shall in no way be
construed as a waiver of such provisions and shall not affect the right of
such party thereafter to enforce each and every provision of this Agreement
in accordance with its terms.
(c) 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 (promptly followed by hardcopy in
accordance with this paragraph) 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, three days after mailing (one business day in the case of express
mail or overnight courier service), as follows: if to any Holder, at the
address indicated on the books and records of the Company, and if to the
Company at its principal executive office (to the attention of the Company's
president) or to such other address or to the attention of such other person
as the recipient party has specified by prior written notice to the sending
party.
(d) SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express
assignment has been made, the provisions of this Agreement which are for the
benefit of the purchasers or Holders of Holder Registrable Securities or
Andrea Shares that will become Holder Registrable Securities with the passage
of time are also for the benefit of, and enforceable by, any subsequent
Holder of such Holder Registrable Securities or Andrea Shares.
Notwithstanding the foregoing, (i) in order to obtain the benefit of this
Agreement, any subsequent Holder of Holder Registrable Securities or Andrea
Shares that will become Holder Registrable Securities with the passage of
time must execute a counterpart to this Agreement, thereby agreeing to be
bound by the terms hereof and (ii) the right to request registration of any
Holder Registrable Securities under this Agreement is not assignable unless
the person holding such right explicitly assigns such right to the assignee
or transferee of all or a portion of its Holder Registrable Securities or
Andrea Shares that will become Holder Registrable Securities with the passage
of time.
(e) 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.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which taken
together shall constitute one and the same instrument, and each party hereto
may execute this Agreement by signing any such counterpart.
(g) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(h) CONSENT TO JURISDICTION. The Holders irrevocably submit to the
exclusive jurisdiction of (i) the Supreme Court of the State of New York, New
York County and (ii) the United States District Court for the Southern
District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated
hereby. The Company and each Holder agree to commence any action, suit or
proceeding relating hereto either in the United States District Court for the
Southern District of New York or if such suit, action or other proceeding may
not be brought in such court for jurisdictional reasons, in the Supreme Court
of the State of New York, New York County. The Company and each Holder
further agree that service of any process, summons, notice or document by
U.S. registered mail to such party's respective address as specified above
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 paragraph. The Company and each Holder irrevocably and
unconditionally waive 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) the Supreme Court of the State of New York, New
York County or (ii) the United States District Court for the Southern
District 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.
(i) GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with the laws of the State of New York as applied to contracts
made and to be performed entirely within the State of New York and without
giving effect to principles of conflicts of law.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first written above.
ANDREA ELECTRONICS CORPORATION
By ______________________________
Name:
Title:
LAMAR SIGNAL PROCESSING, LTD.
By ______________________________
Name:
Title:
JOSEPH MARASH REMANO B.V.
______________________________ By______________________________
Name:
Title:
VENTNOR LLC MORE CAPITAL SERVICES, INC.
By ______________________________ By______________________________
Name: Name:
Title: Title:
CHERRY HILL LLC ZE'EV STEINER
By ______________________________ ______________________________
Name:
Title:
MARLA LLC BARUCH BERDUGO
By ______________________________ ______________________________
Name:
Title:
KNIGHTHAWK INVESTMENT LLC HAIM ZITMAN
By ______________________________ ______________________________
Name:
Title:
<PAGE> SCHEDULE A
(List of Holders)
JOSEPH MARASH
VENTNOR LLC
CHERRY HILL LLC
MARLA LLC
KNIGHTHAWK INVESTMENT LLC
REMANO B.V.
MORE CAPITAL SERVICES, INC.
ZE'EV STEINER
BARUCH BERDUGO
HAIM ZITMAN
<PAGE>
EXHIBIT 2.2
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
This AMENDMENT, dated as of May 5, 1998, to that certain STOCK
PURCHASE AGREEMENT, dated as of April 6, 1998, as amended (the "Stock
Purchase Agreement"), by and among THE SELLING SHAREHOLDERS SPECIFIED THEREIN
(the "Sellers") and LAMAR SIGNAL PROCESSING, LTD., an Israeli corporation
("Lamar"), on the one hand, and ANDREA ELECTRONICS CORPORATION, a New York
Corporation (the "Buyer"), on the other hand.
RECITALS
WHEREAS, each of the Sellers, Lamar and Andrea desire to amend the
Stock Purchase Agreement in accordance with the terms and conditions of this
Amendment; and
WHEREAS, each of the Sellers, Lamar and Andrea desire that the
Stock Purchase Agreement, as amended by this Amendment, continue in full
force and effect; and
NOW, THEREFORE, in consideration of the mutual covenants set forth herein and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, the Parties hereby
agree as follows:
1. DEFINITIONS.
To the extent not otherwise defined in this Amendment, all
capitalized terms shall have the meanings ascribed thereto in the Stock
Purchase Agreement.
2. PURCHASE AND SALE OF THE SHARES.
Section 2(d)(i) of the Stock Purchase Agreement shall hereby be
amended and restated in its entirety to read as follows:
"(i) Subject to Section 2(e) hereof, of the Andrea Shares comprising the
Share Consideration, one-third (1/3) shall become freely transferable by the
holders thereof upon the first anniversary of the Closing, and an additional
one-third (1/3) shall become freely transferable on each of the second and
third anniversaries of the Closing, respectively. Prior to such times that
such portions of the Andrea Shares comprising the aggregate Share
Consideration become freely transferable in accordance with the immediately
preceding sentence, such Andrea Shares shall not be transferable by any
holder thereof (such restriction on transfer being the "Share Consideration
Trading Restriction") unless the respective transferees thereof agree in
writing to be bound by the Share Consideration Trading Restriction set forth
in this Section 2(d) and Section 6(i) in respect of such transferred Andrea
Shares and such transfer would not involve an offering or distribution of
such Andrea Shares requiring registration under or otherwise in violation of
the Securities Act or other applicable law; provided, however, Andrea Shares
comprising the Share Consideration may be pledged as collateral to secure any
borrowing provided that any pledgee agrees in writing to be bound by the
Share Consideration Trading Restriction."
Section 2(d)(iii) of the Stock Purchase Agreement shall be amended and
restated in its entirety to read as follows:
"(iii) In the event of a public offering by Buyer of Andrea Shares
prior to the first anniversary of the Closing, such number of Andrea Shares
set forth in accordance with Schedule 2(d)(iii) hereto included within the
Share Consideration that would have otherwise become freely transferable upon
the first anniversary of the Closing shall be included by Buyer in such
offering."
3. CLOSING.
Section 3(a) of the Stock Purchase Agreement shall hereby be amended and
restated in its entirety to read as follows:
"(a) TIME AND PLACE. The closing (the "Closing") of the purchase and
sale of the Shares shall be held at a mutually agreed upon location at 10:00
a.m. on the later of (i) May 5, 1998 and (ii) the next U.S. business day,
that is not a banking holiday, following the satisfaction of all of the
conditions to the Closing set forth in Section 9. The date on which the
Closing shall occur is hereinafter referred to as the "Closing Date"."
4. PROHIBITED ACTIVITIES
Section 6(j) of the Stock Purchase Agreement shall hereby be amended by
replacing the number "1%" appearing in the second full paragraph thereof with
the number "10%", and by adding the following proviso to the end of such
paragraph: "; and provided further that such Seller's investment in such
stock is of a passive nature, and such Seller is not an officer, director,
employee, consultant, agent or acting in any other similar capacity on behalf
of such corporation or having any other contractual or similar relationship
with such corporation".
5. SCHEDULES
Schedule 4(f) to the Stock Purchase Agreement is hereby amended by
adding thereto the following: "100% of the outstanding capital stock of
Lamar Signal Processing Inc., a New Jersey corporation, which is currently
inactive, and has no liabilities (contingent or otherwise) or assets in
excess of US $1,000.00."
Schedule 4(t) to the Stock Purchase Agreement is hereby amended by
replacing the amount "$50,000" with the amount "$40,000" and by adding to the
end thereof the following: ", which amount shall be repaid within 30 days of
the Closing."
6. TERMINATION.
Section 15(a)(iv) of the Stock Purchase Agreement shall hereby be
amended and restated in its entirety to read as follows:
"(iv) by the Sellers or the Buyer, if the Closing does not occur on or
prior to May 27, 1998; provided, however, that the right to terminate this
Agreement pursuant to this Section 15(a)(iv) shall not be available to any
Seller or the Buyer, as the case may be, if such party has failed to perform
any of its obligations under this Agreement; or"
7. AMENDMENT TO REGISTRATION RIGHTS AGREEMENT.
The form of Registration Rights Agreement attached as Schedule 9(b)(iv)
to the Stock Purchase Agreement shall hereby be amended by (i) replacing the
word "five" in the third Recital thereof with the word "three" and (ii)
deleting clause (e) of Section 8 thereof in its entirety.
8. AMENDMENT TO ESCROW AGREEMENT.
Section 13 of the form of Escrow Agreement attached as Schedule 2(e) to
the Stock Purchase Agreement is hereby amended by adding the following
sentence at the end thereof: "The parties agree that the payment by the
respective Sellers of amounts owing to the Escrow Agent hereunder shall be
paid for their account by Andrea by the setting-off of payments to become due
and owing by Andrea to such Sellers under the Promissory Notes executed by
Andrea and delivered to the respective Sellers as of this date in accordance
with the provisions of the Stock Purchase Agreement."
9. EFFECT OF AMENDMENTS.
Except as specifically set forth in this Amendment, the provisions of
the Stock Purchase Agreement, the Registration Rights Agreement and the
Escrow Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first written above.
ANDREA ELECTRONICS CORPORATION LAMAR SIGNAL PROCESSING, LTD.
By ______________________________ By _____________________________
Name: Name:
Title: Title:
JOSEPH MARASH REMANO B.V.
______________________________ By _____________________________
Name:
Title:
VENTNOR LLC MORE CAPITAL SERVICES, INC.
By _____________________________ By ______________________________
Name: Name:
Title: Title:
CHERRY HILL LLC ZE'EV STEINER
By _____________________________ ________________________________
Name:
Title:
MARLA LLC BARUCH BERDUGO
By _____________________________ _________________________________
Name:
Title:
KNIGHTHAWK INVESTMENT LLC HAIM ZITMAN
By _____________________________ _________________________________
Name:
Title:
<PAGE>
SCHEDULE 2(d)(iii)
SHARE RELEASE SCHEDULE UPON PUBLIC OFFERING OF ANDREA SHARES
Aggregate Amount Public Offering Aggregate Amount of
of Shares Offered Price per Share Andrea Shares
Released
- ----------------- ---------------
- ----------------------
1,000,000 shares $35/share or more 360,000 shares
1,000,000 shares $30-$35/share 253,333 shares
1,000,000 shares $25-$30/share 104,000 shares
<PAGE>
EXHIBIT 99.1
Andrea Electronics Corporation Completes Acquisition of
Lamar Signal Processing, Ltd.
LONG ISLAND CITY, N.Y., May 6 /PRNewswire/ -- Andrea Electronics
Corporation (Amex: AND) announced today that it has completed the acquisition
of Lamar Signal Processing, Ltd., an Israeli developer of enabling digital
signal processing (DSP) noise cancellation microphone solutions for voice-
driven interfaces covering a wide range of audio and acoustic applications.
Andrea Electronics acquired all outstanding shares of Lamar in exchange for
1.8 million restricted shares of Andrea Electronics' common stock and
$3 million in cash.
Andrea Electronics believes that products incorporating Lamar's patent-
pending Digital Super Directional Array (DSDA(TM)) technology will provide
the optimal far-field microphone performance required for widespread growth
of applications in the areas of automobile PCs, hand-held devices,
audio/video and "whiteboard" teleconferencing, office and home automation
systems, cellular phones, camcorders and hearing aids. Andrea Electronics
expects that its first far-field DSP/DSDA products for computing applications
will be released in the fourth quarter of 1998.
Commenting on the significance of the acquisition to the Company, Andrea
Electronics Co-president John N. Andrea said, "Lamar's expertise in far-field
DSP microphone technology broadens Andrea's exposure to consumer electronics
and professional audio markets and positions us at the leading edge in the
development and commercialization of emerging natural language human-machine
interfaces. This acquisition will strongly enhance our existing product
lines and, consequently, expand our target markets to include those requiring
exceptional microphone performance in the far-field domain."
In April, Andrea Electronics Corporation announced that it established a
wholly-owned subsidiary, Andrea Digital Technologies Inc., in the Utah
Valley, to further the Company's leadership position as a microphone
technology innovator. Andrea Digital intends to work closely with Lamar
Signal Processing, Ltd. to bring Lamar's DSDA(TM) technology, as well as
other digital signal processing (DSP) technology to market in the form of
products that address next-generation digital needs. As such, Andrea Digital
will focus on marketing efforts to customer and distribution channels on the
West Coast with the intent to reduce product time to market in these areas.
Andrea Electronics Corporation designs, develops and manufacturers audio
technologies and products for applications incorporating natural language
voice interfaces. The Company's patented Active Noise Cancellation (ANC)
microphone and Active Noise Reduction (ANR) earphone technologies have been
incorporated into the Company's product lines. These product lines include
headsets, handsets and microphones, marketed under the Andrea
VoiceSolutions(TM), QuietWare(TM) and Andrea Anti-Noise(R) trademarks, that
eliminate background noise and ensure voice clarity to enhance the
performance of speech-driven computer applications. Applications for the
Company's technologies include: speech recognition programs, Internet
telephony, video/audio conferencing and interactive gaming. Key OEM and
software publisher customers and strategic partners of Andrea Electronics
include: Microsoft Corporation, IBM Corporation, Lernout & Hauspie Speech
Products, Dragon Systems, NEC, Mpath, Mulitude, IDT Corporation,
HyperGraphics and ILINC.
This press release contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties or
other factors that could cause actual results, performance or achievements of
the Company to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed under the heading "Cautionary Statement Regarding
Forward-Looking Statements" included in the Management's Discussion and
Analysis of Financial Condition and Results of Operations in the Company's
Annual Report on Form 10-K and in the Company's Annual Report to
Stockholders, and in documents subsequently filed by the Company with the
Securities and Exchange Commission.
"Andrea Anti-Noise" is a registered trademark, and "Andrea VoiceSolutions"
and "Andrea QuietWare" are trademarks of Andrea Electronics Corporation.
"DSDA" is a trademark of Lamar Signal Processing, Ltd.
SOURCE Andrea Electronics Corporation
CONTACT: Patrick D. Pilch, EVP, or Molly M. Jahncke and Carolynne
O'Grady, Corp. Communications, all of Andrea Electronics
Corporation, 800-442-7787; or Paula Schwartz, General Info, Joel
Herskovitz, Analyst Info, or Judith Sylk-Siegel, Media Info,
212-661-8030, all of The Financial Relations Board
Web Site: http://www.andreaelectronics.com
