EXHIBIT H
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT (the "Agreement") is made as of the 17th day
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of July, 1998.
AMONG: LEHA, a Netherlands Foundation ("LEHA"), duly represented by Jo
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Lernout and ▇▇▇ ▇▇▇▇▇▇▇, jointly and severally, Oldco N.V., a Belgian
corporation ("Oldco"), duly represented by Jo Lernout and ▇▇▇ ▇▇▇▇▇▇▇,
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jointly and severally, L&H Holding III S.A. ("Holding"), a Luxembourg
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cooperation, duly represented by Jo Lernout, and Jo Lernout and ▇▇▇
▇▇▇▇▇▇▇,;
AND: GE Capital Equity Investments, Ltd (the "Purchaser" together with its
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permitted successors and assigns).
WHEREAS;
(A) Each of Oldco and Holding (each, an "Initial Pledgor") owns, directly or
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indirectly, certain shares of common stock of Lernout & Hauspie Speech
Products N.V. ("LHSP"). Such shares of common stock may, in accordance
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with the terms of Article 6 hereof, be transferred to LEHA ("Subsequent
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Pledgor") and, together with the Initial Pledgors, ▇▇▇ Lernout and Pol
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Hauspie the "Pledgors").
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(B) Pursuant to the Securities Purchase Agreement of even date herewith
("Purchase Agreement"), by and among the Purchaser and the Pledgors, the
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Purchaser has agreed to purchase and Pledgors have agreed to sell a number
of shares of common stock of LHSP as determined pursuant to the terms of
the Purchase Agreement.
(C) The Pledgors, in order to fulfill certain of the conditions of the Purchase
Agreement and to secure their obligations thereunder, have agreed to pledge
the Pledged Collateral (as defined below) to the Purchaser as provided in
this Agreement.
THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
meanings set out below:
"Additional Property" shall have the meaning set out in Section 2.1(b).
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"Purchase Documents" means this Agreement, the Purchase Agreement, the
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Registration Rights Agreement, the Escrow Agreement and certificates,
instruments and other related documents delivered in connection therewith.
"Pledged Collateral" shall have the meaning set out in Section 2.1(c).
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"Pledged Shares" means all the shares of the common stock of LHSP held by
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each Pledgor which are pledged hereunder, as specified on Exhibit A hereto.
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"Secured Obligations" means all present and future obligations of the
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Pledgors (whether actual or contingent and whether owed jointly or severally or
in any other capacity whatsoever) under the Purchase Documents to which any of
the Pledgors are a party, including any obligation to pay damages as a result of
any breach of the Secured Obligations or any other liability of the Pledgors
arising out of an "Event of Default" under Section 4.1.
All capitalized terms used but not defined herein shall have the meanings
given to those terms in the Purchase Agreement.
2. GRANT OF SECURITY INTEREST
2.1. Pledge. Each of the Pledgors hereby grants, pledges and collaterally
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assigns, and the Subsequent Pledgor agrees to grant, pledge and collaterally
assign upon the transfer of the Pledged Collateral in accordance with Article 6
hereof, to the Purchaser as security for the due and punctual satisfaction and
discharge of all the Secured Obligations, a continuing security interest and
first priority pledge upon, whether now owned or hereafter acquired, and
howsoever its interest therein may appear:
(a) the Pledged Shares;
(b) all rights, interests and property relating to or arising out of
the Pledged Shares, or to which the Pledgors may become entitled, which the
Pledgors may be offered or which may accrue to the Pledgors in connection with
their interest in any of the Pledged Shares, other than the rights, interests
and property relating to or arising out of the Pledged Shares to which the
Purchaser is entitled and are actually distributed to the Purchaser pursuant to
Section 4.6 and 5.4 of the Purchase Agreement (the "Additional Property"). The
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Additional Property shall include, without limitation:
(i) any shares of stock issued as a result of a stock split or
any stock dividends of any stock fully fungible with the Common Shares, the
exercise of any right or option, or otherwise,
(ii) any right, interest or property received from time to time
in exchange for, in consideration for or as a result of the transfer of Pledged
Shares or any of the foregoing; and
(c) all proceeds and products of any of the above (the Pledged
Shares, the Additional Property, the rights and property described in Section
2.2 below, and all proceeds thereof being collectively referred to as the
"Pledged Collateral").
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2.2. Additional Shares. If the Pledgors acquire additional shares or other
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securities in LHSP or any other entity in exchange for any of the Pledged
Shares, the Pledgors shall, to the extent not already pledged hereunder,
immediately grant to the Purchaser a first priority pledge and security
interest, on terms no more onerous than those herein, over such shares or other
securities (which shall immediately become Pledged Collateral hereunder).
2.3. Inscription.
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(a) Each Pledgor and the Purchaser shall at or prior to closing sign
each shareholders' register of LHSP under the following notation in English in
the shareholders' register maintained in the United States, and in both English
and in Dutch in the shareholders' register maintained in Belgium:
800,000 shares are sold (subject to certain limitations) to GE
Capital Equity Investments, Ltd. ("Purchaser") under a Securities Purchase
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Agreement among Purchaser and LEHA, a Netherlands Foundation, Oldco N.V., a
Belgian corporation, L&H Holding III S.A., a Luxembourg corporation, Jo Lernout
and ▇▇▇ ▇▇▇▇▇▇▇ ("Sellers") dated July 17, 1998 ("Purchase Agreement") and are
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pledged in favor of the Purchaser under a Pledge and Security Agreement dated
July __, 1998, as attached hereto, to secure, among other things, the
obligations of Sellers under the Purchase Agreement. The address of record for
all notices and payments made in respect of the shares identified in the
foregoing sentence shall hereafter be GE Capital Equity Investments, Ltd., c/o
GE Capital Limited, Clarges House, ▇-▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
attn. Director and Risk Manager. Any modification or removal of the foregoing
legend will require the consent of the Purchaser.
(b) Each Pledgor hereby appoints ▇▇▇▇▇ Dessers, a lawyer with an
address at ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, as its attorney-in-fact
with power of substitution, to inscribe LHSP's shareholders' register in Belgium
as set out above, and each Pledgor hereby appoints ▇▇▇ Tinto, with an address at
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, Connecticut, as its attorney-
in-fact with power of substitution, to inscribe LHSP's shareholders' register in
the United States, as set out above, in each case to execute documents or
instruments and generally to do anything necessary or desirable to create and
perfect the pledge of the Pledged Collateral as set forth in this Agreement.
2.4. Notice. Pledgors will prevent any third party (other than the
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Purchaser or in connection with a foreclosure sale of the Pledged Collateral)
from taking title, possession or control over the Pledged Collateral and shall
give immediate notice to the Purchaser of any third party attempting to acquire
such title, possession or control.
2.5. No Transfer. The Pledgors shall not, without the prior written
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consent of the Purchaser, sell, assign, transfer, or grant any option or other
right with respect to, the Pledged Collateral or create or permit to exist any
interest, lien or other encumbrance with respect to any of the Pledged
Collateral other than the security interests granted herein. The Pledgors will
cooperate with the Purchaser in any defense of its rights in the Pledged
Collateral against claims of third parties.
2.6. Shares; Articles The Pledgors shall ensure that LHSP maintains the
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Pledged Shares as registered shares, and that any additional shares or
securities which become Pledged Collateral pursuant to Section 2.2 shall be and
remain registered shares and, other than as permitted under the Purchase
Agreement, the Pledgors shall ensure that the Articles of LHSP shall not be
modified in any way which could adversely affect the security interests granted
herein, without the prior written consent of the Purchaser.
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2.7. Continuing Security. The security interests granted herein over the
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Pledged Collateral shall be continuing and will extend to the ultimate balance
of the Secured Obligations, regardless of any intermediate payment, discharge or
satisfaction in part.
3. VOTING RIGHTS
3.1. Before Event of Default. The voting rights in respect of the Pledged
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Shares and any other Pledged Collateral shall be exercised by the Pledgors until
the occurrence of an Event of Default (as defined below); provided that the
Pledgors shall not vote in any manner which could reasonably be expected to
materially impair the security interests granted herein.
3.2. After Event of Default. Each of the Pledgors hereby irrevocably
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appoint the Purchaser as their attorney-in-fact to vote the Pledgors' shares at
any time after the first to occur of (i) the Determination Date or (ii) an Event
of Default with respect to the following decisions involving LHSP:
i) increase or reduction of capital
ii) amendment of Articles (statuten);
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iii) modification of rights attached to shares;
iv) declaration of dividends; and
v) merger, rescission, liquidation, bankruptcy and other similar
matters.
4. ENFORCEMENT
4.1. Events of Default. The occurrence of any of the following events
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(each, an Event of Default), whatever the reason for such Event of Default, and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body shall entitle the
Purchaser to exercise any and all of its rights and remedies hereunder or at
law:
(a) the occurrence (whether by a result of acts or omissions by
Pledgors or any other person) of the Determination Date pursuant to the Purchase
Agreement, and the failure of any Seller thereunder to deliver all of the Common
Shares (as defined in the Purchase Agreement) to be delivered by such Seller
thereunder on the Share Transfer Date as required by Section 3.2 of the Purchase
Agreement.
(b) the failure on the part of any Pledgor to observe or perform any
covenant contained in this Agreement or the other Purchase Documents on its part
to be observed or performed which could reasonably be expected to materially
affect (i) the Seller's obligations under the Purchase Agreement to deliver
Common Shares in accordance with the terms thereof, (ii) the rights of Purchaser
or the lien of the Purchaser on the Pledged Collateral hereunder, and, in each
case, such failure shall continue unremediated for a period of five (5) Business
Days after such Pledgor becomes aware thereof or receives written notice thereof
from the Purchaser; or
(c) any representation or warranty of any Pledgor contained in this
Agreement shall contain an untrue or misleading statement of a material fact or
shall fail to state a material fact necessary to make the statements therein not
misleading as of the date made, where the
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event or circumstance to which such misleading statement relates could
reasonably be expected to materially adversely affect (i) the Seller's
obligations under the Purchase Agreement to deliver Common Shares in accordance
with the terms thereof, (ii) the rights of Purchaser or the security interest of
the Purchaser on the Pledged Collateral hereunder, and, in each case, such
failure shall continue unremedied for a period of five (5) Business Days after
such Pledgor becomes aware thereof or receives written notice thereof from the
Purchaser.
4.2. Remedies. Upon the occurrence and during the continuation of an
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Event of Default, the Purchaser shall become entitled to exercise all rights and
remedies of a pledgee under the laws of Belgium (including in particular the Law
of 5th May 1872).
4.3. Waivers; No exclusivity. (a) For purposes only of enforcement of the
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security, the Pledgors hereby waive all forms of notice with respect to the
Event of Default, and all other notices to which the Pledgors may otherwise be
entitled, except as otherwise expressly provided herein or in the Purchase
Agreement, and except for such notices as may be required under Belgian Law.
(b) Failure by the Purchaser to exercise, or delay in exercising, any
right or remedy in connection with this Agreement shall not constitute a waiver
thereof, nor shall partial exercise of any right or remedy prevent any further
or other exercise thereof or the exercise of any other right or remedy. The
rights and remedies provided for in this Agreement are cumulative and not
exclusive of any rights or remedies provided by law.
5. REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Pledgors. The Pledgors hereby
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jointly and severally represent and warrant to the Purchaser as follows:
(a) each Initial Pledgor is and, until transfer of the Pledged Shares
to the Subsequent Pledgor is effected in accordance with the terms of Article 6,
will at all times be the exclusive legal and beneficial owner of, and have valid
title to, the Pledged Shares reflected on Exhibit A as being owned by it. The
Subsequent Pledgor will, upon receipt of shares in accordance with the terms of
Article 6, at all times be the exclusive legal and beneficial owner of, and have
valid title to, the Pledged Shares reflected on Exhibit A as being owned by it.
The Initial Pledgors own, collectively, and upon receipt of shares in accordance
with the terms of Article 6, Subsequent Pledgor shall own, and have (or shall
have) the right to pledge, not less than 800,000 Common Shares of LHSP, subject
to adjustment for Stock Events as provided in the Purchase Agreement;
(b) all the Pledged Shares are in registered form, duly issued and
fully paid, and free and clear of all liens, pledges, security interest,
charges, encumbrances, options and any other rights of third parties;
(c) the Purchaser has a first priority, validly perfected security
interest in the Pledged Shares and the other Pledged Collateral; and
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(d) each Pledgor makes, for the benefit of the Purchaser, each of the
representations and warranties set forth in Article III of the Purchase
Agreement, which Article III is incorporated herein by this reference, mutatis
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mutandis.
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6. ASSIGNMENT
If the Purchaser assigns and transfers any of its respective rights and
obligations hereunder to a transferee, in accordance with the terms of the
Purchase Agreement, then such transferee shall have the rights of the Purchaser
under this Agreement. Upon any such assignment, the assigning Purchaser shall
notify the Pledgors in writing thereof, and upon such assignment and transfer
taking effect, the parties shall inscribe the shareholders' register of LHSP to
indicate the replacement Purchaser. The Initial Pledgors are hereby authorized
to sell, transfer and assign their rights and interest in the Pledged Collateral
to the Subsequent Pledgor, provided that the Pledged Collateral shall remain
continuing security for the Secured Obligations and that, prior to such sale,
transfer and assignment the Subsequent Pledgor shall have reaffirmed the
effectiveness of this agreement and security interest granted hereunder with
respect to such assigned Pledged Collateral.
7. TERM
This Agreement shall, subject to any prior reduction or release of the
Pledgors' obligations hereunder granted expressly by the Purchaser, remain in
effect until full discharge of all of the Secured Obligations, including without
limitation the transfer to the Purchaser of all of the Common Shares to be
delivered pursuant to the Purchase Agreement. The parties to this agreement
agree to be bound by the provisions of Section 5.2 of the Purchase Agreement
attached hereto.
8. ADDITIONAL PLEDGOR COVENANTS
Each Pledgor agrees that it will not (i) sell, assign (by operation of law
or otherwise) or otherwise dispose of, or grant any option with respect to, or
hypothecate, encumber or grant any lien or security interest with respect to,
any of the Pledged Collateral (except to Subsequent Pledgor as permitted
herein), or (ii) enter into any agreement which could reasonably be expected to
restrict or inhibit Purchaser's rights or ability to sell or otherwise dispose
of the Pledged Collateral or any part thereof after the occurrence and during
the continuation of an Event of Default. Each Pledgor agrees that it will (x)
not cause or permit LHSP to issue to Pledgor any stock or other securities
(including any warrants, options, subscriptions or other contractual
arrangements for the purchase of stock or securities convertible into stock) in
substitution for the Pledged Collateral except subject to the pledge and
security interest effected hereunder in accordance with the terms hereof, and
(y) deliver hereunder, immediately upon acquisition thereof, any and all
writings evidencing any additional Pledged Collateral in accordance with Section
2.1. and Section 2.2. Each Pledgor hereby authorizes the Purchaser to modify
this Agreement by unilaterally amending Exhibit A to include additional Pledged
Collateral.
9. GENERAL
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9.1. Purchaser. The Purchaser shall not be liable for any loss, cost,
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damage or expense suffered by any person, except that resulting from its own
fraud, willful misconduct or gross negligence.
9.2. Governing Law; Jurisdiction. This Agreement shall be governed by and
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construed in accordance with the laws of Belgium. The parties hereto agree that
a final non-appealable judgment in any suit or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on such judgment or in any
other lawful manner. The parties hereto irrevocably waive any right to trial by
jury under applicable law.
9.3. Counterparts. This Agreement may be executed in two or more
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counterparts, including, without limitation, by facsimile transmission, all of
which counterparts shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered
to the other party. In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall promptly cause
additional original executed signature pages to be delivered to the other
parties.
9.4. Headings. The headings of this Agreement are for convenience of
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reference and shall not form part of, or affect the interpretation of, this
Agreement.
9.5. Severability. If any provision of this Agreement shall be invalid or
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unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
9.6. Entire Agreement; Amendments. This Agreement and the instruments and
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other documents referenced herein contain the entire understanding of the
parties with respect to the matters covered herein. No provision of this
Agreement may be waived other than by an instrument in writing signed by the
party to be charged with enforcement and no provision of this Agreement may be
amended other than by an instrument in writing signed by the Initial Pledgors or
the Subsequent Pledgor (as the case may be) and the Purchaser.
9.7. Notices. Any notice required or permitted to be given shall be in
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writing and may be personally served or delivered by nationally-recognized
overnight courier or by facsimile machine confirmed telecopy, and shall be
deemed delivered at the time and date of receipt (which shall include telephone
line facsimile transmission) or, if the date of such receipt is not a day on
which banks in New York, New York, the United Kingdom and Brussels, Belgium are
permitted or required by law to be closed (a "Business Day"), then on the next
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succeeding Business Day. The addresses for such communications shall be:
If to the Pledgors:
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Foundation LEHA
Oldco N.V.
L&H Holding III
Jo Lernout
▇▇▇ ▇▇▇▇▇▇▇
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c/o Lernout & Hauspie Speech Products
▇ ▇▇▇▇ - ▇▇▇▇▇▇▇▇▇▇▇▇▇▇,
▇-▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇-▇-▇▇▇-▇▇▇▇
Telecopy: 011-32-5-720-8489
Attention: Messrs. ▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
with a copy to:
Loeff ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇
▇-▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇-▇-▇▇▇-▇▇▇▇
Telecopy: 011-32-2-778-2457
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Brown, Rudnick, Freed & Gesmer
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Purchaser
GE Capital Equity Investments, Ltd.
c/o GE Capital Limited
Clarges House
▇-▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇
Attention: Director and Risk Manager
Account reference 2329
Telephone: (44) (▇▇▇) ▇▇▇.▇▇.▇▇
Telecopy: (44) (▇▇▇) ▇▇▇.▇▇.▇▇
with a copy to
Weil, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
One ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telephone: (44) (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (44) (171) 903-0990
Each party shall provide notice to the other party of any change in address.
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9.8. Third Party Beneficiaries. This Agreement is intended for the
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benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof been
enforced by, any other person. This Agreement shall be binding on and inure to
the benefit of the parties and their permitted successors and assigns.
9.9. Survival. The representations and warranties of the Pledgors and the
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agreements and covenants set forth herein shall survive the closing hereunder
notwithstanding any due diligence investigation conducted by or on behalf of the
Purchaser.
Each Pledgor agrees to indemnify and hold harmless the Purchaser as the case may
be and the Purchaser's officers, directors, employees, partners, agents and
affiliates for loss or damage or expenses (including reasonable attorney's fees)
arising as a result of or related to any breach or alleged breach by any Pledgor
of any of its representations or covenants set forth herein, including
advancement of expenses as they are incurred.
9.10. Further Assurances. Each party shall do and perform, or cause to be
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done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
9.11. Remedies. No provision of this Agreement providing for any remedy
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to the Purchaser shall limit any remedy which would otherwise be available to
such Purchaser at law or in equity. Nothing in this Agreement shall impair the
rights of the Purchaser to pursue the remedies provided to the Purchaser under
the Purchase Agreement. Nothing in this Agreement shall limit any rights the
Purchaser may have under any applicable federal or state securities laws with
respect to the investment contemplated by the Purchase Documents. Each Pledgor
acknowledges that a breach by it of its respective obligations hereunder will
cause irreparable harm to the Purchaser. Accordingly, each Pledgor acknowledges
that the remedy at law for a material breach of its respective obligations under
this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by a Pledgor of the provisions of this Agreement, that the
Purchaser shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate compliance, without
the necessity of showing economic loss and without any bond or other security
being required.
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IN WITNESS WHEREOF the Pledgors and the Purchaser have executed this Agreement
as of July 17, 1998, each acknowledging receipt of a signed original.
LEHA
/s/ Jo Lernout /s/ ▇▇▇ ▇▇▇▇▇▇▇
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Jo Lernout ▇▇▇ ▇▇▇▇▇▇▇
OLDCO N.V.
/s/ Jo Lernout /s/ ▇▇▇ ▇▇▇▇▇▇▇
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Jo Lernout ▇▇▇ ▇▇▇▇▇▇▇
L&H HOLDING III S.A.
/s/ Jo Lernout
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Jo Lernout
JO LERNOUT AND ▇▇▇ ▇▇▇▇▇▇▇
/s/ Jo Lernout /s/ ▇▇▇ ▇▇▇▇▇▇▇
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Jo Lernout ▇▇▇ ▇▇▇▇▇▇▇
GE CAPITAL EQUITY INVESTMENT, LTC.
/s/ ▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇
Attorney-in-Fact Attorney-in-Fact
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