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Exhibit 99.1
LERNOUT & HAUSPIE SPEECH PRODUCTS
(the "Company")
1994 DRAGON ROLLOVER STOCK OPTION PLAN
adopted by the board of directors of Dragon on July 6, 1994
adopted by the board of directors of the Company on June 7, 2000
Set out below are the terms and conditions of the 1994 Dragon Rollover Stock
Option Plan (the "Plan") of the company formerly known as Dragon Systems, Inc.,
a Delaware corporation ("Dragon"). On June 7, 2000 Dragon was merged with and
into L&H Holdings USA, Inc., a 100% subsidiary of the Company. Under this merger
all outstanding options of Dragon were to be rolled over to the Company. On June
7, 2000, the Company adopted the Plan and issued 852,405 options to purchase
Common Stock of the Company (the "Substitute Options") substituting the
2,588,771 outstanding options (the "Initial Options") of Dragon under the Plan.
In accordance with Section 8.c, the Substitute Options shall, for all purposes
of the Plan, be treated as having been acquired under the same terms and
conditions as the Initial Options.
1. Purpose.
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The purpose of this plan (the "Plan") is to secure for the Company and its
shareholders the benefits arising from capital stock ownership by employees,
officers and directors of, and consultants or advisors to, the Company and its
parent and subsidiary corporations who are expected to contribute to the
Company's future growth and success. Except where the context otherwise
requires, the term "Company" shall include the parent and all present and future
subsidiaries of the Company as defined in Sections 424(e) and 424(f) of the
Internal Revenue Code of 1986, as amended or replaced from time to time (the
"Code"). Those provisions of the Plan which make express reference to Section
422 shall apply only to Incentive Stock Options (as that term is defined in the
Plan).
2. Type of Options and Administration.
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(a) Types of Options. Substitute Options granted pursuant to the Plan
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shall be authorized by action of the Board of Directors of the Company (or a
Committee designated by the Board of Directors) and may be either incentive
stock options ("Incentive Stock Options") meeting the requirements of Section
422 of the Code or non-statutory options which are not intended to meet the
requirements of Section 422 of the Code.
(b) Administration. The Plan will be administered by the Board of
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Directors of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. The Board of Directors may
in its sole discretion grant options to purchase shares of the Company's Common
Stock ("Common Stock") and issue shares upon exercise of such options as
provided in the Plan. The Board shall have authority, subject to the express
provisions of the Plan, to construe the respective option agreements and the
Plan, to prescribe,
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amend and rescind rules and regulations relating to the Plan, to determine the
terms and provisions of the respective option agreements, which need not be
identical, and to make all other determinations in the judgment of the Board of
Directors necessary or desirable for the administration of the Plan. The Board
of Directors may correct any defect or supply any omission of reconcile any
inconsistency in the Plan or in any option agreement in the manner and to the
extent it shall deem expedient to carry the Plan into effect and it shall be the
sole and final judge of such expediency. No director or person acting pursuant
to authority delegated by the Board of Directors shall be liable for any action
or determination under the Plan made in good faith. The Board of Directors may,
to the full extent permitted by or consistent with 2 applicable laws or
regulations (including, without limitation, applicable state law and Rule 16b-3
promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), or
any successor role ("Rule 16b-3")), delegate any or all of its powers under the
Plan to a committee (the "Committee") appointed by the Board of Directors, and
if the Committee is so appointed all references to the Board of Directors in the
Plan shall mean and relate to such Committee.
(c) Applicability to Rule 16b-3. Those provisions of the Plan which make
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express reference to Rule 16b-3 shall apply only to such persons as are required
to file reports under Section 16 (a) of the Exchange Act (a "Reporting Person").
3. Eligibility.
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Substitute Options will be granted to persons who have been granted Initial
Options in proportion to the number of Initial Options held by such Participant,
adjusted to take account of the merger ratio used for exchanging Dragon common
stock into Company common stock and rounded upward or downward to the nearest
whole number.
4. Stock Subject to Plan.
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Subject to adjustment as provided in Section 15 below, the maximum number
of shares of Common Stock which may be issued and sold under the Plan is 852,405
shares. If a Substitute Option granted under the Plan expires or is terminated,
surrendered or cancelled without having been fully exercised or is forfeited in
whole or in part or results in any Common Stock not being issued, the unused
Common Stock covered by such option shall again be available for the grant of
options under the Plan, subject, however, in the case of Incentive Stock
Options, to any limitation required by the Code.
4A. Restricted Stock
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(a) Grants. The Board may grant awards entitling such recipients as are
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also eligible to be granted options under this Plan pursuant to Section 3(a)
hereof, to acquire shares of Common Stock, subject to the right of the Company
to require forfeiture of such options in the event that conditions specified by
the Board in the applicable award are not satisfied prior to the end of the
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applicable restriction period or periods established by the Board for such Award
(a "Restricted Stock Award" and each such recipient, an "Award Recipient").
(b) Terms and Conditions. The Board shall determine the terms and
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conditions of any such Restricted Stock Award, including the conditions for
forfeiture and the issue price, if any. Any stock certificates issued in
respect of a Restricted Stock Award shall be registered in the name of the Award
Recipient thereof and, unless otherwise determined by the Board, deposited by
said Award Recipient, with the Company (or its designee). At the expiration of
the applicable restriction periods, the Company (or such designee) shall deliver
the certificates no longer subject to such restrictions to the Award Recipient
or if the Award Recipient has died, to the beneficiary designated, in a manner
determined by the Board, by said Award Recipient to receive amounts due or
exercise rights of the Award Recipient in the event of the Award Recipient's
death (the "Designated Beneficiary"). In the absence of an effective
designation by an Award Recipient, Designated Beneficiary shall mean the Award
Recipient's estate.
(c) Other Stock-Based Awards. The provisions of this Section shall not be
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construed to give the Board the right to grant other awards based upon the
Common Stock, including the grant of securities convertible into Common Stock
and the grant of stock appreciation rights.
5. Forms of Option Agreements.
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At the time of the grant of the Initial Options each recipient of a
Substitute option has executed an option agreement in such form not inconsistent
with the Plan and approved by the Board of Directors. Such option agreements
will remain in force and apply mutatis mutandis to the Substitute Options.
6. Purchase Price.
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(a) General. The purchase price per share of stock deliverable upon the
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exercise of a Substitute Option shall be determined by the Board of Directors,
provided, however, that in the case of an Incentive Stock Option, the exercise
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price shall not be less than 100% of the fair market value of such stock, as
determined by the Board of Directors, at the time of grant of such option, or
less than 110% of such fair market value in the case of options described in
Section 11 (b). In accordance with Section 16 (c), the Substitute Options will
be deemed to have been granted on the date on which the Initial Options were
granted, as specified in the applicable option agreement.
(b) Payment of Purchase Price. Common Stock purchased upon the exercise of
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a Substitute Option granted under the Plan shall be paid for as follows: (i) in
cash or by check, payable to the order of the Company, (ii) except as the Board
may otherwise provide in an option agreement, by delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly to the
Company sufficient funds to pay the exercise price, or delivery by the
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optionee to the Company of a copy of irrevocable and unconditional instructions
to a creditworthy broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price, or delivery of shares of Common Stock
owned by the optionee valued at their fair market value as determined by the
Board in good faith, which Common Stock was owned by the optionee for at least
six months prior to such delivery, (iii) to the extent permitted by the Board
and explicitly provided in the option agreement, by delivery of a promissory
note of the optionee to the Company on terms determined by the Board, or payment
of such other lawful consideration as the Board may determine, or (iv) any
combination of the above permitted forms of payment."
7. Option Period.
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Each Substitute Option and all rights thereunder shall expire on such date
as shall be set forth in the applicable option agreement relating to the Initial
Options, except that, in the case of an Incentive Stock Option, such date shall
not be later than ten years after the date on which the Initial Option was
granted and, in all cases, Substitute Options shall be subject to earlier
termination as provided in the Plan.
8. Exercise of Substitute Options.
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Each Substitute Option granted under the Plan shall be exercisable either
in full or in installments at such time or times and during such period as shall
be set forth in the applicable option agreement relating to the Initial Options,
subject to the provisions of the Plan.
9. Transferability of Substitute Options.
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Except as the Board may otherwise determine or provide, Substitute Options
shall not be sold, assigned, transferred, pledged or otherwise encumbered by the
person to whom they are granted, either voluntarily or by operation of law,
except by will or the laws and descent and distribution, and, during the
lifetime of the person to whom the Substitute Option was granted, shall be
exercisable only by such person. References to an optionee or to the person to
whom a Substitute Option was granted, to the extent relevant in the context,
shall include references to authorized transferees.
10. Effect of Termination of Employment or Other Relationship.
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Except as provided in Section 11(d) with respect to Incentive Stock
Options, and subject to the provisions of the Plan, the Board of Directors shall
determine the period of time during which an optionee may exercise an option
following (i) the termination of the optionee's employment or other relationship
with the Company or (ii) the death or disability of the optionee. Such periods
shall be set forth in the applicable option agreement relating to the Initial
Options.
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11. Incentive Stock Options.
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Substitute Options granted under the Plan which are intended to be
Incentive Stock Options shall be subject to the following additional terms and
conditions:
(a) Express Designation. All Incentive Stock Options granted under the
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Plan shall, at the time of grant, be specifically designated as such in the
Option agreement covering such Incentive Stock Options.
(b) Intentionally ommitted.
(c) Dollar Limitation. For so long as the Code shall so provide, options
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granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first time on any one calendar year
for shares of Common Stock with an aggregate fair market value (determined as of
the respective date or dates of grant) of more than $100,000.
(d) Termination of Employment, Death or Disability. No Incentive Stock
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Option may be exercised unless, at the time of such exercise, the optionee is,
and has been continuously since the date of grant of his or her option, employed
by the Company, except that:
(i) an Incentive Stock Option may be exercised within the
period of three months after the date the optionee ceases
to be an employee of the Company 4 5 (or within such lesser
period as maybe specified in the applicable option
agreement), provided, that the agreement with respect to
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such option may designate a longer exercise period and that
the exercise after such three-month period shall be treated
as the exercise of a non-statutory option under the Plan;
(ii) if the optionee dies while in the employ of the Company, or
within three months after the optionee ceases to be such
and employee, the Incentive Stock Option may be exercised
by the person to whom it is transferred by will or the laws
of descent and distribution within the period of one year
after the date of death (or within such lesser period as
may be specified in the applicable option agreement); and
(iii) if the optionee becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provision
thereto) while in the employ of the Company, the Incentive
Stock Option may be exercised within the period of one year
after the date the optionee ceases to be such an employee
because of such disability (or within such lesser period as
may be specified in the applicable option
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agreement). For all purposes of the Plan and any option
granted hereunder, "employment" shall be defined in
accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations).
Notwithstanding the foregoing provisions, no Incentive
Stock option may be exercised after its expiration date.
12. Additional Provisions.
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(a) Additional Substitute Option Provisions. The Board of Directors may,
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in its sole discretion, include additional provisions in option agreements
covering Substitute Options granted under the Plan, including without limitation
restrictions on transfer, repurchase rights, commitments to pay cash bonuses, to
make, arrange for or guaranty loans or to transfer other property to optionees
upon exercise of options, or such other provisions as shall be determined by the
Board of Directors; provided that such additional provisions shall not be
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inconsistent with any other term or condition of the Plan and such additional
provisions shall not cause any Incentive Stock Option granted under the Plan to
fail to qualify as an Incentive Stock Option within the meaning of Section 422
of the Code.
(b) Acceleration, Extension, Etc. The Board of Directors may, in its sole
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discretion, (i) accelerate the date or dates on which all or any Substitute
Options granted under the Plan may be exercised or (ii) extend the dates during
which all, or any particular, option or options granted under the Plan may be
exercised; provided, however, that no such extension shall be permitted if it
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would cause the Plan to fail to comply with Section 422 of the Code or with Rule
16b-3.
13. General Restrictions.
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(a) Investment Representations. The Company may require any person to whom
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a Substitute Option is granted, as a condition of exercising such option, to
give written assurances in substance and form satisfactory to the Company to the
effect that such person is acquiring the Common Stock subject to the Substitute
Option for his or her own account for investment and not with any present
intention of selling or otherwise distributing the 5 6 same, and to such other
effects as the Company deems necessary or appropriate in order to comply with
federal and applicable state securities laws, or with covenants or
representations made by the Company in connection with any public offering of
its Common Stock.
(b) Compliance with Securities Laws. Each Substitute Option shall be
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subject to the requirement that if, at any time, counsel to the Company shall
determine that the listing, registration or qualification of the shares subject
to such option upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental or regulatory body, or that the
disclosure of non-public information or the satisfaction of any other condition
is necessary as a condition of, or in connection with, the issuance of purchase
of shares thereunder, such option may not be exercised, in whole or in part,
unless such listing, registration,
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qualification, consent or approval, or satisfaction of such condition shall have
been effected or obtained on conditions acceptable to the Board of Directors.
Nothing herein shall be deemed to require the Company to apply for or to obtain
such listing, registration or qualification, or to satisfy such condition.
14. Rights as a Shareholder.
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The holder of a Substitute Option shall have no rights as a shareholder
with respect to any shares covered by the option (including, without limitation,
any rights to receive dividends or non-cash distributions with respect to such
shares) until the date of issue of a stock certificate to him or her for such
shares. No adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
15. Adjustment Provisions for Recapitalizations and Related Transactions.
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(a) General. If, through or as a result of any merger, consolidation, sale of
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all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, (i) the outstanding shares of Common Stock
are increased, decreased or exchanged for a different number or kind of shares
or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment may be made in (x) the maximum number
and kind of shares reserved for issuance under the Plan, (y) the number and kind
of shares or other securities subject to any then outstanding options under the
Plan, and (z) the price for each share subject to any then outstanding
Substitute Options under the Plan, without changing the aggregate purchase price
as to which such Substitute Options remain exercisable. Notwithstanding the
foregoing, no adjustment shall be made pursuant to this Section 15 if such
adjustment would cause the Plan to fail to comply with Section 422 of the Code
or with Rule 16b-3.
(b) Board Authority to Make Adjustments. Any adjustments under this Section 15
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will be made by the Board of Directors, whose determination as to what
adjustments, 6 7 if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
16. Adjustments for Changes in Common Stock and Certain Other Events
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(a) Changes in Capitalization. In the event of any stock split, reverse
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stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-Participant limit set forth in Section 3(b), (iii) the number and
class of securities and exercise price per share subject to each outstanding
Substitute Option, and (iv) the repurchase
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price per share subject to each outstanding Restricted Stock Award shall be
appropriately adjusted by the Company (or substituted Restricted Stock Awards
may be made, if applicable) to the extent the Board shall determine, in good
faith, that such an adjustment (or substitution) is necessary and appropriate.
If this Section 16(a) applies and Section 16(c) also applies to any event,
Section 16(c) shall be applicable to such event, and this Section 16(a) shall
not be applicable.
(b) Liquidation or Dissolution. In the event of a proposed liquidation or
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dissolution of the Company, the Board shall upon written notice to participants
under this Plan provide that all then unexercised Substitute Options will (i)
become exercisable in full as of a specified time at least 10 business days
prior to the effective date of such liquidation or dissolution and (ii)
terminate effective upon such liquidation or dissolution, except to the extent
exercised before such effective date. The Board may specify the effect of a
liquidation or dissolution on any Restricted Stock Award under the Plan at the
time of the grant of such Award.
(c) Acquisition Events
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(i) Definition. An "Acquisition Event" shall mean: (a) any
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merger or consolidation of the Company with or into another entity as a result
of which the Common Stock is converted into or exchanged for the right to
receive cash, securities or other property or (b) any exchange of shares of the
Company for cash, securities or other property pursuant to a statutory share
exchange transaction.
(ii) Consequences of an Acquisition Event on Substitute Options.
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Upon the occurrence of an Acquisition Event, or the execution by the Company of
any agreement with respect to an Acquisition Event, the Board shall provide that
all outstanding Substitute Options shall be assumed, or equivalent options shall
be substituted, by the acquiring or succeeding corporation (or an affiliate
thereof). For purposes hereof, an Substitute Option shall be considered to be
assumed if, following consummation of the Acquisition Event, the Substitute
Option confers the right to purchase, for each share of Common Stock subject to
the Substitute Option immediately prior to the consummation of the Acquisition
Event, the consideration (whether cash, securities or other property) received
as a result of the Acquisition Event by holders of Common Stock for each share
of Common Stock held immediately prior to the consummation of the Acquisition
Event (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares of
Common Stock); provided, however, that if the consideration received as a result
of the Acquisition Event is not solely common stock of the acquiring or
succeeding corporation (or an affiliate thereof), the Company may, with the
consent of the acquiring or succeeding corporation, provide for the
consideration to be received upon the exercise of Substitute Options to consist
solely of common stock of the acquiring or succeeding corporation (or an
affiliate thereof) equivalent in fair market value to the per share
consideration received by holders of outstanding shares of Common Stock as a
result of the Acquisition Event.
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Notwithstanding the foregoing, if the acquiring or succeeding
corporation (or an affiliate thereof) does not agree to assume, or substitute
for, such Substitute Options, then the Board shall, upon written notice to the
Participants, provide that all then unexercised Substitute Options will become
exercisable in full as of a specified time prior to the Acquisition Event and
will terminate immediately prior to the consummation of such Acquisition Event,
except to the extent exercised by the Participants before the consummation of
such Acquisition Event; provided, however, that in the event of an Acquisition
Event under the terms of which holders of Common Stock will receive upon
consummation thereof a cash payment for each share of Common Stock surrendered
pursuant to such Acquisition Event (the "Acquisition Price"), then the Board may
instead provide that all outstanding Substitute Options shall terminate upon
consummation of such Acquisition Event and that each Participant shall receive,
in exchange therefor, a cash payment equal to the amount (if any) by which (A)
the Acquisition Price multiplied by the number of shares of Common Stock subject
to such outstanding Options (whether or not then exercisable), exceeds (B) the
aggregate exercise price of such Substitute Options.
(iii) Consequences of an Acquisition Event on Restricted Stock
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Awards. Upon the occurrence of an Acquisition Event, the repurchase and other
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rights of the Company under each outstanding Restricted Stock Award shall inure
to the benefit of the Company's successor and shall apply to the cash,
securities or other property which the Common Stock was converted into or
exchanged for pursuant to such Acquisition Event in the same manner and to the
same extent as they applied to the Common Stock subject to such Restricted Stock
Award.
(iv) Consequences of an Acquisition Event on Other Awards. The Board
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shall specify the effect of an Acquisition Event on any other Award granted
under the Plan at the time of the grant of such Award.
17. No Special Employment Rights.
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Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation of the
optionee.
18. Other Employee Benefits.
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Except as to plans which by their terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profitsharing, life insurance or
salary continuation plan except as otherwise specifically determined by the
Board of Directors.
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19. Amendment of the Plan.
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The Board of Directors may at any time, and from time to time, modify or
amend the Plan in any respect, provided, however, that neither the Board of
Directors nor the Committee may amend or modify the definition of optionees,
materially increase the benefits accruing to optionees, increase the number of
shares issuable for purposes of this Plan, extend the term of this Plan,
materially modify the requirements to be an optionee in this Plan, or otherwise
modify this Plan in any way or manner requiring the approval of the Company's
stockholders under: (i) the Code, or rules and regulations thereunder; (ii)
Section 16, if applicable to the Company; (iii) applicable Belgian law; or (iv)
if applicable, the listing requirements of the Nasdaq National Market or any
other securities exchange on which the Company's securities may be listed,
without stockholder approval and compliance with any such applicable law, rules,
or regulations. Except as provided herein, no amendment, suspension or
termination of this Plan may affect the rights of an optionees to a Substitute
Option has been granted without such optionees's consent
20. Withholding.
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(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of Substitute Options under the Plan. Subject to the prior approval of the
Company, which may be withheld by the Company in its sole discretion, the
optionee may elect to satisfy such obligations, in whole or in part, (i) by
causing the Company to withhold shares of Common Stock otherwise issuable
pursuant to the exercise of a Substitute Option or (ii) by delivering to the
Company shares of Common Stock already owned by the optionee. The shares so
delivered or withheld shall have fair market value equal to such withholding
obligation. The fair market value of the shares used to satisfy such withholding
obligation shall be determined by the Company as of the date that the amount of
tax to be withheld is to be determined. An optionee who has made an election
pursuant to this Section 20(a) may only satisfy his or her withholding
obligation with shares of Common Stock which are not subject to any repurchase,
forfeiture, unfulfilled vesting or other similar requirements.
(b) Notwithstanding the foregoing, in the case of a Reporting Person, no
election to use shares for the payment of withholding taxes shall be effective
unless made in compliance with any applicable requirements of Rule 16b-3.
21. Cancellation and New Grant of Options, etc.
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The Board of Directors shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding Substitute Options under the Plan and the
grant in substitution therefor of new options under the Plan covering the same
or different numbers of shares of Common Stock and having an option exercise
price per share which may be lower or higher than the exercise price per share
of the cancelled options or (ii) the amendment of the terms of any and all
outstanding options under the
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Plan to provide an option exercise price per share which is higher or lower than
the then-current exercise price per share of such outstanding Substitute
Options.
22. Effective Date and Duration of the Plan.
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(a) Effective Date. The Plan shall become effective when adopted by the
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Board of Directors.
(b) Termination. Unless sooner terminated in accordance with Section 16,
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the Plan shall terminate, with respect to Incentive Stock Options, upon the
earlier of (i) the close of business on the day next preceding the tenth
anniversary of the date of its adoption by the Board of Directors, or (ii) the
date on which all shares available for issuance under the Plan shall have been
issued pursuant to the exercise or cancellation of options granted under the
Plan. Unless sooner terminated in accordance with Section 16, the Plan shall
terminate with respect to options which are not Incentive Stock Options on the
date specified in (ii) above. If the date of termination is determined under (i)
above, then options outstanding on such date shall continue to have force and
effect in accordance with the provisions of the instruments evidencing such
options.
23. Provision for Foreign Participants.
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The Board of Directors may, without amending the Plan, modify awards or
options granted to participants who are foreign nationals or employed outside
the United States to recognize differences in laws, roles, regulations or
customs of such foreign jurisdictions with respect to tax, securities, currency,
employee benefit or other matters.
24. Governing Law.
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Without prejudice to the mandatory provisions of Belgian law governing the
Company, the Substitute Options and the Common Stock, the provisions of the Plan
and all Awards made hereunder shall be governed by and interpreted in accordance
with the laws of the State of Delaware, without regard to any applicable
conflicts of law.
Adopted by the Board of Directors of the Company effective as of June 7, 2000.
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