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As filed with the Securities and Exchange Commission on August 25, 2000
Registration no. 333-____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
_____________________________________
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
(Exact name of registrant as specified in its charter)
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Belgium 7372 Not Applicable
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
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Flanders Language Valley 50
B-8900 Ieper, Belgium
(011) 32-57-22-8888
(Address, including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
___________________________________
John Duerden, President
Lernout & Hauspie Speech Products USA, Inc.
52 Third Avenue
Burlington, Massachusetts 01803-4414
Tel: (781) 203-5000
Fax: (781) 203-5070
(Name, Address, including Zip Code, and Telephone Number, including Area Code,
of Agent for Service)
__________________________________
Copies to:
Lawrence M. Levy, Esquire
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Tel: (617) 856-8200
Fax: (617) 856-8201
__________________________________
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box.[_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under Securities Act of 1933,
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.[X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.[_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.[_]
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CALCULATION OF REGISTRATION FEE
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Amount Proposed Proposed
Title of Each Class Of To Be Maximum Offering Maximum Aggregate Amount Of Registration
Securities To Be Registered Registered Price Per Share(1) Offering Price(1) Fee
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Common Stock, no par value $250,000,000(1) $(2) $250,000,000(1) $66,000 (3)
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(1) The Registrant is registering an indeterminate number of shares of common
stock to be sold from time to time at indeterminate prices. The aggregate
initial offering price of all securities issued from time to time pursuant
to this Registration Statement, calculated in accordance with Rule 457 of
the rules and regulations under the Securities Act of 1933, as amended (the
"Securities Act"), will not exceed $250,000,000. Such presently
indeterminable number of additional shares of Common Stock are also
registered hereunder as may be issued in the event of a stock split, stock
dividend, merger, combination, reclassification, reorganization or similar
event.
(2) The proposed maximum offering price per unit will be determined from time to
time by the Registrant in connection with the issuance of such securities.
(3) Calculated pursuant to Rule 457(o) under the Securities Act.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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The information contained in this prospectus is not complete and may be changed.
A registration statement relating to the common stock offered hereby has been
filed with the United States Securities and Exchange Commission. The common
stock may not be sold until this registration statement is declared effective by
the SEC. This prospectus is not an offer to sell the common stock and it is not
seeking an offer to buy the common stock in any state where the offer or sale is
not permitted.
Subject to completion; dated ____________, 2000.
Prospectus (Subject to Completion)
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
$250,000,000
Common Stock
We are offering up to a total amount of $250,000,000 in shares of our common
stock pursuant to this prospectus. The offering price of the shares will be
determined pursuant to our negotiations with the purchasers. This prospectus
allows us to issue shares of common stock over time, which means:
. we may issue the shares of common stock offered pursuant to this
prospectus from time to time;
. we will provide a prospectus supplement each time we issue shares of
common stock pursuant to this prospectus; and
. each prospectus supplement will contain information about the terms of
the offering to which it relates, including the offering price, and
may also add, update or change information contained in this
prospectus.
You should carefully read this prospectus and any prospectus supplement before
you invest.
Our common stock is traded on the Nasdaq National Market and on the EASDAQ
market in Europe under the symbol "LHSP". On [ ], 2000, the last reported sale
price of the common stock on the Nasdaq National Market was $[ ] per share.
An investment in the common stock offered under this prospectus involves a high
degree of risk. See "Risk Factors" beginning on page 5.
Neither the SEC nor any state securities commission has approved or disapproved
of these securities or determined if this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The date of this prospectus is _________, 2000.
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EXPLANATORY NOTE
We prepare our consolidated financial statements in United States dollars and in
accordance with accounting principles generally accepted in the United States
("U.S. GAAP"). In this prospectus, references to "U.S. dollars" or "$" are
to United States currency. References to "Belgian franc" or "BEF" are
references to Belgian currency.
We have presented U.S. dollar amounts in this prospectus that are derived from
the Consolidated Financial Statements at the exchange rates used in our
financial statements. We have calculated the U.S. dollar amounts of the
purchase price for our shares of capital stock at the exchange rate at the time
the shares were issued. Except as otherwise indicated, we have calculated all
other U.S. dollar amounts at the exchange rate of BEF 40 per U.S. dollar.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus under "Summary" and "Risk
Factors," and in the documents incorporated by reference herein, are forward-
looking made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. In essence, forward-looking statements are
predictions of future events. Although we would not make forward-looking
statements unless we believe we have a reasonable basis for doing so, we cannot
guarantee their accuracy and actual results may differ materially from those we
anticipated due to a number of uncertainties, many of which we are not aware.
We urge you to consider the risks and uncertainties discussed under "Risk
Factors" and in the other documents filed with the SEC that we have referred you
to in evaluating our forward-looking statements.
You should understand also that we have no plans to update our forward-looking
statements. Our forward-looking statements are accurate only as of the date of
this prospectus, or in the case of forward-looking statements in documents
incorporated by reference, as of the date of those documents.
We identify forward-looking statements with the words "plans," "expects,"
"anticipates," "estimates," "will," "should" and similar expressions. Examples
of our forward-looking statements may include statements related to:
. our plans, objectives, expectations and intentions;
. the timing of, availability, cost of development and functionality of
products under development or recently introduced; and
. the anticipated growth rate of the market for speech and language
technologies in general and our products in particular.
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SUMMARY
This summary briefly describes our business and our proposed sale of common
stock pursuant to this prospectus.
LERNOUT & HAUSPIE SPEECH PRODUCTS
We are a leading international developer, licensor and provider of advanced
speech and language technologies, products, solutions and services. Our core
technologies include automatic speech recognition, text-to-speech, digital
speech compression, text-to-text translation and linguistic components. In
1999, we operated our business in three customer-focused divisions:
. Speech and Language Technologies and Solutions;
. Speech and Language Applications; and
. Speech and Language Consulting and Services.
Our three divisions combine products and solutions with similar sales and
marketing models.
SPEECH AND LANGUAGE TECHNOLOGIES AND SOLUTIONS DIVISION. Our Technologies and
Solutions Division offers technologies that allow our customers to develop
products with a natural language interface for their end-users. Our
technologies enable products to recognize and respond to naturally spoken
speech, create speech from text and data, respond to commands with speech, and
efficiently store, transmit and replay speech. Our technologies and solutions
are available in numerous languages and for multiple computer chips and other
processors, including processors sold by Intel, Analog Devices, Hitachi, NEC,
Texas Instruments, Lucent Technologies, National Semiconductor and Thomson CST.
We license our technologies and software development tools to applications
developers, strategic partners, original equipment manufacturers, component
manufacturers and software vendors. Some of our strategic partners are
developing additional language versions for our core speech technology products.
We also sell customer specific solutions to corporate customers. Our customers
use our technologies in a broad range of applications in the following principal
markets: computers and multimedia; telecommunications; enterprise solutions;
automotive electronics; and consumer and industrial electronics.
SPEECH AND LANGUAGE APPLICATIONS DIVISION. Our Applications Division offers a
wide range of end-user applications, including dictation software that enables
users to dictate text and generate documents by speaking naturally without
pausing between words, PC -based translation software and educational software.
Our products also permit computer users to control many computer functions with
spoken commands rather than using a mouse or keyboard. We also license our
software kits and development tools for the development of additional
applications based on our technologies and products as well as additional
language versions for our applications products. We currently offer speech and
language applications products for the general personal computer market and for
a variety of healthcare, law enforcement and legal applications.
SPEECH AND LANGUAGE CONSULTING AND SERVICES DIVISION. Our Consulting and
Services Division, recently renamed the Globalization and Internet Translation
Group, offers human and machine translation services, as well as a wide range of
speech and language-related consulting, localization, and technical and
electronic publishing services. Our translation services range from traditional
translation of general, technical and software materials to the adaptation of
these materials for different markets, languages and cultures. We have access
to extensive language databases and the services of hundreds of correspondent
linguists and translators throughout the world. Our machine translation
software translates text from one language to another and is designed to enhance
the efficiency of translation services provided by our linguists. This software
also enables us to provide Internet/intranet translation services. We recently
introduced iTranslator, an integrated translation solution that combines both
machine and human translation offered over the Internet.
On May 5, 2000, we acquired all of the outstanding capital stock of Dictaphone
Corporation through a merger of Dictaphone into one of our wholly-owned
subsidiaries. Dictaphone Corporation, headquartered in Stratford, Connecticut,
is a leader in selected vertical markets in the development, manufacture,
marketing, service and
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support of integrated voice and data management systems and software, including
dictation, voice processing, voice response, unified messaging, records
management, call center monitoring systems and communications recording.
Dictaphone has two operating segments, System Products and Services and Contract
Manufacturing. The System Products and Services segment consists of the sale and
service of system-related products to dictation and voice management and
communications recording system customers in selected vertical markets. The
Contract Manufacturing segment consists of the manufacturing operations which
provides outside electronics manufacturing services to original equipment
manufacturers in the telecommunication, data management, computer and
electronics industries.
On June 7, 2000, we acquired Dragon Systems, Inc. through its merger with and
into one of our wholly-owned subsidiaries. Dragon, headquartered in Newton,
Massachusetts, is a leading supplier of speech and language technology. Dragon's
product offerings include continuous and discrete dictation products for
consumer, business and professional markets, command and control programs,
vertical market add-on vocabularies for specialized applications, such as legal
and medical, customized telephony solutions, and developers' tools.
We were incorporated in Belgium in December 1987. Our principal executive
offices are located in the Flanders Region of Belgium at Flanders Language
Valley 50, B-8900 Ieper, Belgium. Our telephone number is (011) 32-57-22-8888.
The offices of our United States subsidiary, Lernout & Hauspie Speech Products
USA, Inc., are located at 52 Third Avenue, Burlington, Massachusetts 01803-4414
and the telephone number is (781) 203-5000.
THE OFFERING
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Common Stock offered pursuant to this prospectus............. 7,547,170 shares (1)
Common Stock outstanding after the offering.................. 150,139,071 shares (2)
Nasdaq National Market and EASDAQ
market symbol............................................... LHSP
Use of Proceeds.............................................. For repayment of debt and working capital.
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(1) Based on an assumed offering price of $33.125 per share.
(2) Based on shares outstanding as of June 30, 2000. Excludes: (i)
13,778,283 shares of common stock issuable upon exercise of outstanding
warrants granted pursuant to our stock option plans at exercise prices
ranging from $1.258 to $59.058 per share; (ii) 160,000 shares of common
stock issuable upon exercise of outstanding warrants at an exercise price
of $6.91 per share; (iii) 656,700 shares of common stock issuable upon
conversion of $3,366,000 in principal amount of our 8% convertible
subordinated notes due 2001 at the conversion price of $5.125625 per share;
(iv) 4,349,034 shares of common stock issuable upon conversion of
$123,621,300 in principal amount of our 4.75% preferred income equity
redeemable trust securities at the conversion price of $28.425 per share;
and (v) 1,791,864 shares of common stock issuable upon conversion of
895,932 shares of automatically convertible stock, assuming a conversion
price of $33.484684 per automatically convertible share.
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RISK FACTORS
Risks Related to our Business
OUR BUSINESS COULD BE HARMED IF WE DO NOT SUCCESSFULLY MANAGE THE INTEGRATION OF
BUSINESSES THAT WE ACQUIRE.
As part of our business strategy, we have in the past and expect to continue to
acquire other businesses and technologies. Acquisitions involve a number of
risks, including:
. the difficulty of integrating the operations and personnel of the
acquired businesses;
. the potential disruption of our ongoing business and distraction of
management;
. the difficulty in incorporating acquired technology and rights into
our products and technology;
. unanticipated expenses and delays relating to completing acquired
development projects and technology integration;
. the management of geographically remote units;
. the maintenance of uniform standards, controls, procedures and
policies;
. the impairment of relationships with employees and customers as a
result of any integration of new management personnel;
. risks of entering markets or types of businesses in which we have
either limited or no direct experience;
. the potential loss of key employees of the acquired companies; and
. potential unknown liabilities or other difficulties associated with
acquired businesses.
We have recently acquired Dictaphone and Dragon; these significant acquisitions
will require substantial integration and management efforts. As a result of
these and other risks, we may not realize anticipated benefits from the
acquisitions. Failure to achieve these benefits could materially harm our
business.
OUR OPERATING RESULTS MAY BE HARMED BY THE MANNER IN WHICH WE ARE REQUIRED TO
ACCOUNT FOR OUR ACQUISITIONS.
We are currently required to account for acquisitions under the purchase method.
This approach has resulted and may continue to result in a significant amount of
goodwill and other intangible assets which create substantial ongoing
amortization charges to our income over the useful lives of the assets acquired.
Moreover, the inability to achieve expected results during the anticipated
useful life of acquired goodwill could result in unanticipated charges to income
and significant losses. For example, in 1998 we wrote off all of the goodwill
acquired from Berkeley Speech Technologies, Inc. as a result of our inability to
complete Berkeley's product line. As of December 31, 1999, we had approximately
$411 million of goodwill, as a result of our acquisitions.
OUR BUSINESS COULD BE HARMED BY ACQUISITIONS WE COMPLETE IN THE FUTURE.
We may not be able to identify and acquire suitable acquisition candidates on
reasonable terms, if at all. Acquisitions may involve expending significant
funds, incurring additional debt or the issuance of additional securities, which
may materially harm our business and dilute our stockholders. If we expend
significant funds or incur additional debt, our ability to obtain financing for
working capital or other purposes could decline and we may be more vulnerable to
economic down-turns and competitive pressures.
WE MAY HAVE DIFFICULTY MANAGING OUR GROWING NUMBER OF EMPLOYEES, OUR NEW
DIVISIONS AND OUR PLANNED NEW ENTITIES.
We have experienced a period of rapid growth. From December 31, 1997 through
December 31, 1999, the total number of our employees grew from approximately
1,100 to almost 1,900, and, following our recent acquisitions of Dictaphone,
Dragon and companies in the transcription business, the total number of our
employees now exceeds 5,000. In addition, since September 1996, through
acquisitions and internal growth, we added three new
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divisions (dictation technologies, translation services and language
technologies) to our core speech technologies division. In January 1999, we
reorganized these divisions into our present three division corporate structure.
During 1999, we announced plans to create separate entities for several of our
key business areas: Globalization and Internet Translation and Healthcare
Applications & Solutions, as well as Enterprise and Telephony Solutions and
Automotive Solutions. We also continue to review our business structure. Our
changing business will require considerable investment of our management
resources. Our failure to manage our growing and changing business effectively
could result in an interruption or loss of momentum that could materially harm
our business. To help manage our changing business, we intend to strengthen:
. management;
. financial and operational controls; and
. operational, financial and management information systems.
Any delay or failure to successfully implement these improvements could
materially harm our business.
WE MAY NOT BE ABLE TO SUSTAIN OUR RECENT PROFITABILITY.
Although we have been able to achieve profitability for fiscal year 1999, we
have had a history of substantial losses and may not be able to sustain our
recent profitability. In 1997 and 1998, write-offs of in-process research and
development associated with acquisitions completed in those periods adversely
impacted our net income. Through December 31, 1999, we had accumulated net
losses of approximately $107.9 million, including net losses of approximately
$13.3 million in 1997, $52.7 million in 1998 and a net income of $41.7 million
in 1999. Expenses during these periods included write-offs of acquired in-
process research and development of approximately $33.8 million in 1997, and
$79.4 million in 1998. We intend to continue to acquire businesses, products
and technologies. Future acquisitions may result in additional significant
acquired in-process research and development write-offs, significant
amortization of goodwill and other charges related to acquisitions. Future
operating results could also be materially harmed by many other factors, both
known and unknown, including those risk factors described below.
WE DEPEND UPON THE CONTINUED SERVICES OF OUR EXECUTIVE OFFICERS AND KEY RESEARCH
AND DEVELOPMENT PERSONNEL WITH EXPERTISE IN SPEECH AND LANGUAGE TECHNOLOGIES AND
WITH MULTILINGUAL SKILLS.
The loss of any of our executive officers or key research and development
personnel could have a material adverse effect on our business and prospects.
Our success will also depend upon our ability to attract and retain other
qualified managerial and technical personnel. Competition for personnel,
particularly software engineers, speech scientists and linguists, is intense.
We may not be able to attract and retain personnel necessary for the development
of our business. We do not have any key man life insurance for any of our
officers or other key personnel.
THE SPEECH AND LANGUAGE TECHNOLOGIES INDUSTRY IS RELATIVELY NEW, AND A MARKET
FOR OUR PRODUCTS MAY NEVER FULLY DEVELOP.
Because the speech and language technologies industry is relatively new and
rapidly evolving, it is difficult to accurately predict demand and market
acceptance for our recently introduced products and products under development.
Increased acceptance of our products and technologies will depend upon:
. the development of our targeted markets;
. the performance and price of our products, our customers' and their
competitors' products;
. customer service; and
. customer reaction to those products.
The development of the speech and language technologies markets also will depend
upon:
. the growth of third party applications incorporating our products and
technologies;
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. the demand for new applications;
. the ability of our products and technologies to meet and adapt to
these needs; and
. continuing price and performance improvements in hardware technology
that we expect to reduce the cost and increase the performance of
products incorporating our products and technologies.
These markets may not develop further and our products may not achieve market
acceptance.
WE MUST ADAPT TO RAPID CHANGES IN TECHNOLOGY AND CUSTOMER REQUIREMENTS TO REMAIN
COMPETITIVE.
The market for our products has been characterized by:
. rapid technological change;
. frequent product introductions; and
. evolving customer requirements.
We believe that these trends will continue into the foreseeable future. Our
success will depend, in part, upon our ability to:
. enhance our existing products;
. develop successfully new products that meet increasing customer
requirements; and
. gain market acceptance.
To achieve these goals, we will need to continue to make substantial investments
in product development and marketing. We may not:
. have sufficient resources to make these investments;
. be successful in developing product enhancements or new products on a
timely basis, if at all; or
. be able to market successfully these enhancements and new products
once developed.
Further, our products may be rendered obsolete or uncompetitive by new industry
standards or changing technology.
TO SUCCEED WE MUST DEVELOP AND INTEGRATE NEW PRODUCTS AND ENHANCE THE
PERFORMANCE OF EXISTING PRODUCTS ON A TIMELY BASIS AND WITHIN BUDGET.
Developing and applying our technology has required, and will continue to
require, substantial technical innovations. Once we have developed, acquired or
licensed a technology, we must adapt that technology to meet the specific
requirements of the application in which it is to be integrated. The adaptation
process can be time-consuming and costly to both us and our customers. The
quality and resulting market acceptance of the end product may depend, to a
substantial extent, upon the success of this adaptation. We may not be
successful in developing new products, integrating new technologies, or
enhancing the performance of our existing products on a timely basis or within
budget, if at all.
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OUR BUSINESS COULD BE HARMED IF OUR PRODUCTS CONTAIN UNDETECTED ERRORS OR
DEFECTS OR DO NOT MEET CUSTOMER SPECIFICATIONS.
We are continuously developing new products and technologies and improving our
existing products and technologies. Newly introduced products and technologies
can contain undetected errors or defects. In addition, these products or
technologies may not meet their performance specifications under all conditions
or for all applications. If, despite our internal testing and testing by our
customers, any of our products or technologies contain errors or defects or any
of our products or technologies fail to meet customer specifications, then we
may be required to enhance or improve those products or technologies. We may
not be able to do so on a timely basis, if at all, and may only be able to do so
at considerable expense. Although we maintain general liability insurance,
including coverage for errors and omissions, we cannot guarantee that the
coverage will continue to be available on reasonable terms or will be available
in amounts sufficient to cover one or more large claims, or that the insurer
will not disclaim coverage as to any future claim. Despite the existence of the
insurance, any significant reliability problems could result in adverse customer
reaction and negative publicity and could materially harm our business.
WE FACE SIGNIFICANT COMPETITION WHICH COULD RESULT IN DECREASED DEMAND FOR OUR
PRODUCTS OR SERVICES.
We may not be able to compete successfully. A number of companies have
developed, or are expected to develop, products that compete or will compete
with our products. Many of these competitors and potential competitors have
substantially greater resources than we do. Competitors in the speech and
language technologies markets include:
. Apple Computer, Inc.;
. Bowne International, Inc.;
. IBM;
. Lucent Technologies;
. Microsoft Corporation;
. Motorola;
. NEC Corp.;
. Nuance;
. Philips Electronics N.V.;
. SpeechWorks International, Inc.;
. Systran Corp.; and
. Texas Instruments Incorporated.
IBM and Philips have introduced dictation products which compete directly with
our dictation products. We also compete with other smaller companies which have
developed advanced speech and language technology products. Current and
potential competitors have established, or may establish, cooperative
relationships among themselves or with third parties to increase the abilities
of their advanced speech and language technology products to address the needs
of our prospective customers. Accordingly, new competitors or alliances among
competitors may emerge and rapidly acquire significant market share.
The translation services market is also highly competitive. Although none of
the current participants in this market has a significant market share, we have
numerous competitors with significant resources (such as Bowne International).
OUR QUARTERLY TECHNOLOGIES REVENUE MAY FLUCTUATE SIGNIFICANTLY BECAUSE A
SIGNIFICANT PORTION OF THESE REVENUES HAS BEEN ATTRIBUTABLE TO UP-FRONT
PAYMENTS.
A significant portion of our technologies revenue have been attributable to up-
front revenue, including up-front license fees from strategic partners for the
licensing of development tools for the development of additional language
versions and language translation pairs for our products. We recognized this
revenue upon execution of license agreements or upon acceptance by our customers
of our technology under these agreements. This revenue may significantly
fluctuate each quarter. These potential fluctuations will depend upon the
number, size and
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nature of license agreements into which we enter. We expect that ongoing license
revenue from sales of products incorporating our technology, as well as sales of
our own products, will also fluctuate each quarter. The fluctuations will be
based on a number of factors, including:
. the size and timing of individual license transactions by our
customers;
. the potential for delay or deferral of customer implementation of our
technology;
. the timing of our introduction of new products or product
enhancements;
. the timing of our competitors' introduction of new products or product
enhancements;
. seasonality of technology purchases; and
. other general economic conditions.
OUR REVENUES FROM OUR CONSUMER PRODUCTS FOR THE PERSONAL COMPUTER MARKET MAY BE
SEASONAL WITH LOWER REVENUES IN OUR FIRST TWO QUARTERS AND HIGHER REVENUES IN
THE FOURTH QUARTER, AND MAY FURTHER FLUCTUATE SIGNIFICANTLY BASED UPON THE
TIMING OF NEW PRODUCT INTRODUCTIONS.
We recently introduced consumer products for the personal computer market,
including continuous dictation products. Our revenues from sales in this market
may be seasonal with higher revenues in the fourth quarter. Our revenues from
these products can also vary significantly depending upon the timing of new
product introductions.
OUR REVENUES FROM THE CONSULTING AND SERVICES DIVISION MAY BE SEASONAL WITH
HIGHER REVENUES IN THE THIRD AND FOURTH QUARTERS.
Our consulting and services division derives significant revenue from the
computer, consumer, telephony and automotive industries. These revenues, which
tend to track the product release cycles of these industries, are somewhat
seasonal, with comparatively higher revenues in the third and fourth quarters.
WE HAVE SIGNIFICANT FIXED COSTS WHICH ARE NOT EASILY REDUCED IF REVENUES FALL
BELOW EXPECTATIONS.
A high percentage of our operating expenses is relatively fixed. We likely will
not be able to reduce spending to compensate for adverse fluctuations in
revenues. Accordingly, shortfalls in revenues are likely to materially
adversely affect our operating results.
OUR BUSINESS MAY BE HARMED BY CHANGES IN THE RELATIVE LEVEL OF REVENUES AMONG
OUR LINES OF BUSINESS WHICH HAVE SIGNIFICANTLY DIFFERENT PROFIT MARGINS.
Changes in the relative level of revenues among our lines of business could
materially adversely affect our gross profit margins and other results of
operations. Our lines of business have different profit margins. For the year
ended December 31, 1999, gross profit margins in our three divisions were as
follows:
Division Gross Profit Margin
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Technologies and Solutions 85.8%
Applications 83.2%
Consulting and Services 39.4%
The growth of translation services revenues in relation to our other businesses
would result in a reduction in our overall gross profit margins.
OUR INTERNATIONAL BUSINESS OPERATIONS EXPOSE US TO DIFFICULTIES IN COORDINATING
OUR INTERNATIONAL ACTIVITIES AND DEALING WITH MULTIPLE REGULATORY ENVIRONMENTS,
AS WELL AS TO RISKS OF INTERNATIONAL POLITICAL AND ECONOMIC CONDITIONS.
Our worldwide business may be materially adversely affected by:
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. difficulties in staffing and managing operations in multiple locations
in many countries;
. greater difficulties in trade accounts receivable collection;
. possibly adverse tax consequences;
. governmental currency controls;
. changes in various regulatory requirements;
. political and economic changes and disruptions;
. export/import controls; and
. tariff regulations.
In addition, a significant portion of our executive offices and our research
and development operations are located in Belgium. Therefore, our operations
and the market price of the common stock may also be affected by economic
conditions in Belgium. Likewise, we have recently substantially increased our
revenues in Korea and elsewhere in the Far East. Our ability to continue to
generate significant revenues in Korea and the Far East may be affected by
economic conditions or political instability in Korea or other countries in the
Far East, as well as other external business risks.
FLUCTUATIONS IN THE EXCHANGE RATES, IN RELATION TO THE U.S. DOLLAR, OF OUR
FUNCTIONAL CURRENCY, THE BELGIAN FRANC, THE EURO AND THE OTHER FOREIGN
CURRENCIES IN WHICH WE CONDUCT OUR BUSINESS MAY HARM OUR OPERATING RESULTS.
We generate sales primarily in U.S. dollars and incur expenses in a number of
currencies; principally in the U.S. dollar, the Belgian franc, the Euro and
other currencies. Fluctuations in the value of the Belgian franc, U.S. dollar
and foreign currencies have caused, and are likely to continue to cause, amounts
translated into U.S. dollars to fluctuate in comparison with previous periods.
In particular, an increase in the value of the Belgian franc in relation to the
U.S. dollar would likely increase our expenses relative to U.S. dollar sales and
could materially harm our business. Because our functional currency for our
Belgian operations is the Belgian franc, we recognize unrealized foreign
exchange gains with respect to our assets denominated in U.S. dollars when the
value of the U.S. dollar increases in relation to the Belgian franc.
Conversely, we recognize unrealized foreign exchange losses when the relative
value of the U.S. dollar decreases.
Since 1996, we have not entered into any exchange rate hedging transactions. We
may, however, enter into hedging contracts in the future. Our decision not to
enter into hedging transactions has been primarily attributable to:
. our perception of the strength of the U.S. dollar compared to the
Belgian franc; and
. our receipt of substantial sums of Belgian francs from capital
transactions, principally the exercise of warrants.
We cannot guarantee that the U.S. dollar will continue to be stronger than the
Belgian franc or that we will continue to receive revenues denominated in
Belgian francs or raise capital in Belgian francs. Exchange rate fluctuations,
whether or not we enter into hedge transactions, may materially harm our
business.
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WE RELY ON OUR CUSTOMERS, SOME OF WHOM ARE OUR COMPETITORS, TO DEVELOP
APPLICATIONS FOR OUR PRODUCTS, MARKET PRODUCTS INCORPORATING OUR TECHNOLOGY AND
GENERATE LICENSE REVENUES FOR US.
Many of our core speech products are licensed primarily to applications
developers, original equipment manufacturers, component manufacturers and
software vendors which incorporate our technology into applications developed by
them and sold to end-users. The success of these licensed products depends to a
substantial degree on the efforts of others in developing and marketing products
incorporating our technology. Our customers often require several months to
integrate our technologies into their products. Although we have entered into
numerous license agreements with customers, to date we have received significant
recurring license revenues from only a limited number of customers. Products
incorporating our technology will not necessarily be successfully implemented or
marketed by our customers.
Our customers, such as Microsoft, have also developed or acquired products or
technologies that compete with our technology. These customers may give higher
priority to the sale of these competitive products or technologies. Few of our
customers have any exclusive purchase obligations under their license agreements
with us.
CHANGES IN OUR RELATIONSHIP WITH MICROSOFT, ONE OF OUR LARGEST CUSTOMERS AND A
STRATEGIC PARTNER, COULD HARM OUR BUSINESS.
An adverse change in our relationship with Microsoft could have a material
adverse effect on our business. On September 11, 1997, we announced a strategic
alliance with Microsoft to accelerate development of speech products in multiple
languages running on Microsoft Windows platforms. As part of this strategic
alliance, Microsoft holds 7,295,124 shares of our common stock which represented
approximately 5.12% of our outstanding common stock as of June 30, 2000.
Microsoft has also exercised its registration rights with respect to the shares
of common stock purchased under the Microsoft purchase agreement and issuable
under the warrants. Microsoft's representative, Bernard Vergnes, was elected to
our Board of Directors in May 1998 pursuant to Microsoft's right under the
purchase agreement to cause one Microsoft nominee to be elected to the Board of
Directors. In addition, we entered into a license agreement with Microsoft
under which we granted Microsoft exclusive licenses of patent rights, in defined
areas, and received a non-exclusive cross license of Microsoft patent rights.
Microsoft has the right to terminate the license if L&H Holding N.V. transfers
its control over L&H to a third party as a result of L&H Holding's transfer of
our common stock.
The relationship with Microsoft may preclude or limit our ability to enter into
similar license arrangements or relationships with others. Sales to Microsoft
accounted for 12% of our total revenues in 1998 and 9% of our total revenues in
1999. Microsoft has also entered into nonexclusive license agreements with us
for many of our core speech technologies. A reduction of revenues from
Microsoft could have a material adverse effect upon our business and prospects.
WE MAY BE OVERLY DEPENDENT ON OUR STRATEGIC PARTNERS, AND THE MANNER IN WHICH WE
HAVE STRUCTURED THESE PARTNERSHIPS, INCLUDING OUR EXCLUSIVE LICENSING OF
TECHNOLOGY, COULD HARM OUR BUSINESS.
We are dependent on our strategic partners in connection with our research and
development efforts. Our agreements with our strategic partners may include an
exclusive license of our technology for the development of specified
technologies or products. For example, we are relying primarily on strategic
partners for the development of our technologies in new languages, including
Thai, Thamil, Hindi, Vietnamese, Urdu, Malay, Taiwanese, Arabic, Armenian,
Russian, Ukrainian, Polish, Czech, Greek, Bahassa, Turkish, and various
Scandinavian languages. Similarly we are relying primarily on strategic
partners to develop machine translation language pairs outside our core language
groups. Pursuant to the agreements relating to these ventures, we have
exclusively licensed our technology to our strategic partners. Our strategic
partners also have exclusive rights to develop, market and distribute products
incorporating the developed technology for specified languages. Further,
subject to our underlying rights and our rights in jointly developed technology
or products, our strategic partners will own the technology and products
developed pursuant to these agreements.
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We have also entered into a non-exclusive license and development agreement with
Sail Labs to support the long-term development of advanced speech and language
technologies and products based on our technologies.
We generally have limited or no control over the operations of our strategic
ventures, including with respect to the amount and timing of resources that our
strategic partners devote to these ventures. As a result, our strategic
partners may not perform their obligations as expected. In addition, in the
event that our strategic relationships are terminated, we may not be able to
continue to maintain or develop strategic relationships or to replace strategic
partners. Further, some of our partners are newly formed companies and do not
have any history of operations or development or commercialization of speech or
language technologies or products. Therefore, we cannot assure that our
strategic partnerships will be successful. If our strategic partnerships are
terminated or otherwise fail to meet our expectations, we may not be able to
sustain or grow our business as expected which may materially harm our business.
In addition, in cases where we have exclusively licensed rights or technology,
we may be precluded from developing products and technology internally. We may
also be precluded from owning or controlling developments to and new products
based on our technology, which may materially harm our business. Further, our
strategic partners may become competitors, which may lead to conflicts of
interest. We cannot assure you that we will be able to compete successfully, if
at all, with our strategic partners or that any conflicts with our strategic
partners will be resolved in our favor, which may also materially harm our
business.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY TECHNOLOGY.
We rely primarily on a combination of copyright and trademark laws, trade
secrets, patents, confidentiality procedures and contractual provisions to
protect our proprietary rights. Existing copyright laws afford only limited
protection. We have obtained patents and will continue to make efforts to
obtain patents, when available, in connection with our technologies. We seek to
protect our software and other written materials under trade secret and
copyright laws, which afford only limited protection.
Our pending patent applications or any future applications may not be approved.
Any patents may not provide us with competitive advantages and may be challenged
by third parties. Others may have filed, and in the future may file, patent
applications that are similar or identical to ours. To determine the priority of
inventions, we may have to participate in interference proceedings declared by
the United States Patent and Trademark Office or similar authorities in other
countries. These proceedings could result in substantial cost to us. Such
patent applications may have priority over our filed patent applications.
Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy aspects of our products or to obtain and use information that we
regard as proprietary. We have a significant international presence and the laws
of some foreign countries, including the laws of Belgium, may not protect our
proprietary rights to the extent of the laws of the United States. Our means of
protecting our proprietary rights may not be adequate.
OUR OPERATIONS OR PRODUCTS COULD INFRINGE UPON THE INTELLECTUAL PROPERTY RIGHTS
OF OTHERS.
Others may assert that our technology and products infringe their patents or
other intellectual property rights. Any such assertion, if resolved adversely
to us, may require us to enter into royalty or licensing arrangements and may
materially harm our business.
OUR OBLIGATIONS UNDER OUR PREFERRED INCOME EQUITY REDEEMABLE SECURITIES AND OUR
DEBT FACILITIES COULD PREVENT US FROM OBTAINING ADDITIONAL FINANCING AND HARM
OUR LIQUIDITY.
In June 1998, we completed the sale of $156 million of 4.75% preferred income
equity redeemable trust securities. In connection with the sale of these
securities, we incurred both distribution obligations and $156 million in
redemption obligations; approximately $123.6 million in principal amount of
these securities were still outstanding as of June 30, 2000.
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In May 2000 we entered into various financing arrangements in connection with
the acquisition of Dictaphone, including a $200 million short-term facility due
March 31, 2001 and a five year declining balance facility of $230 million. An
aggregate of $285 million is currently outstanding under these facilities.
These outstanding securities and our outstanding indebtedness could adversely
affect our ability to obtain additional financing for acquisitions, working
capital or other purposes. They could also make us more vulnerable to economic
downturns and competitive pressures. Our obligations under these securities and
debt facilities could also adversely affect our liquidity. In the event of a
cash shortfall, we could be forced to reduce other expenditures to be able to
meet our requirements with respect to these securities and our debt facilities.
Our ability to meet these obligations will be dependent upon our future
performance, which will be subject to financial, business and other factors
affecting our operations. Many of these factors are beyond our control. If we
are unable to generate sufficient cash flow from operations in the future to
meet our obligations under these securities and to service our debt, we may be
required to refinance all or a portion of these obligations or obtain additional
financing.
OUR OPERATING RESULTS COULD BE HARMED BY OUR HIGH BALANCES OF ACCOUNTS
RECEIVABLE, SOME OF WHICH WE MAY NOT BE ABLE TO COLLECT.
We have historically had high balances of accounts receivable. These balances
are high because a significant portion of our revenues had been attributable to
nonrefundable, up-front license fees that generally have payment terms of up to
90 days. As of December 31, 1999, we had accounts receivable of $104 million,
net of an allowance for doubtful accounts of $9.3 million. We maintain credit
procedures to evaluate the creditworthiness of prospective customers and employ
personnel specifically for the purpose of monitoring and collecting accounts
receivable. Despite adherence to these procedures, we may not be able to collect
these receivables when they become payable and may further reduce the length of
deferral of payment of up-front fees.
AN UNFAVORABLE OUTCOME OR PROLONGED LITIGATION IN CLASS ACTION LAWSUITS FILED
AGAINST US COULD HARM OUR BUSINESS.
In August 2000, several law firms announced that they have named us in class
action lawsuits which allege that we misrepresented our financial condition by
inflating our reported revenues. The announcements contend that our actions
violated Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule
10b-5 promulgated under that Act. The announcements state that the lawsuits are
being filed on behalf of all purchasers of our Common Stock during varying
periods ranging from as early as December 31, 1999 through August 7, 2000. We
believe that the claims are groundless and we intend to vigorously defend
ourselves. Nevertheless, class action litigation can be extremely expensive and
time consuming. Furthermore, we cannot make any guarantees regarding the outcome
of these actions. An unfavorable outcome or prolonged litigation in this
lawsuit could materially harm our business.
BECAUSE OUR FOUNDING STOCKHOLDERS HAVE RIGHTS TO CONTROL LERNOUT & HAUSPIE,
DECISIONS MAY BE MADE BY THEM THAT ARE DETRIMENTAL TO YOUR INTERESTS.
As of June 30, 2000, Messrs. Jo Lernout and Pol Hauspie, the founders, Co-
Chairmen and Managing Directors of Lernout & Hauspie, controlled 43,667,208
shares of common stock (including outstanding rights to acquire common stock)
through various controlled entities (including (i) 9,064,329 shares of our
common stock which were issued as consideration for the Dictaphone merger
because the Stonington Fund has assigned certain voting rights to all the shares
it acquired in the merger for so long as it holds the shares by agreeing to hold
the shares through an entity controlled by Messrs. Lernout and Hauspie, (ii)
9,807,489 shares of our common stock which were issued to the principal
stockholders of Dragon as consideration for the Dragon merger because these
stockholders have assigned certain voting rights to all the shares they acquired
in the merger for so long as they hold the shares by agreeing to hold the shares
through entities controlled by Messrs. Lernout and Hauspie, and (iii) the
securities acquired by Intel Atlantic which are exchangeable at any time into
shares of our Automatically Convertible Stock held by a trust on behalf of
Intel, as to which the voting rights, which are equivalent to the voting rights
of 1,791,864 shares of our common stock, are controlled by Messrs. Lernout &
Hauspie). As of that date, these shares represented approximately 30.11% of our
outstanding shares of common stock.
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Members of the L&H Holding Control Group have entered into forward sale
contracts with unaffiliated investment funds that require the members to
transfer, on August 31, 2001, or an earlier date on the occurrence of a default,
shares of common stock based upon the fair market value of the shares on the
date of transfer. Under our restated articles of incorporation for so long as
the L&H Holding Control Group owns at least 10% of our common stock, L&H Holding
N.V., an entity controlled by Messrs. Lernout and Hauspie, has the right to
nominate for election nine of our 17 directors. Accordingly, L&H Holding N.V.
is able to control our Board of Directors and the direction of our affairs. In
addition, by reason of L&H Holding Control Group's stock ownership, Messrs.
Lernout and Hauspie are able to exert substantial influence over other actions
requiring stockholders' approval, including amendments to our restated articles
of incorporation, mergers, sales of assets or other business acquisitions or
dispositions. The L&H Holding Control Group agreed not to approve, propose or
vote with respect to any capital increase of Lernout & Hauspie by way of a
rights offering to existing Lernout & Hauspie stockholders on a preemptive basis
or any resolution to pay a cash dividend on common stock, without the consent of
the purchasers in the forward sales.
The interest of Messrs. Lernout and Hauspie in ensuring that the L&H Holding
Control Group maintains a 10% equity interest could cause Messrs. Lernout and
Hauspie to cause us to take actions that may not be in your best interests, such
as declining opportunities to acquire businesses or raise funds through
issuances of our equity.
OUR INTERESTS MAY BE IN CONFLICT WITH THE INTERESTS OF A NUMBER OF ENTITIES IN
WHICH OUR DIRECTORS ARE INVOLVED; THESE CONFLICTS COULD HARM OUR BUSINESS.
In 1995, the Government of Flanders, together with Lernout & Hauspie and others,
created the Flanders Language Valley V.Z.W., a not-for-profit entity, designed
to foster the establishment and growth of enterprises near our headquarters in
Flanders that seek to develop and commercialize products based upon advanced
speech and language technology. Messrs. Lernout and Hauspie have been active
promoters of the foundation but do not have any beneficial interest in the
assets of the foundation. At the time of the formation of the foundation, a
group of private investors formed the FLV Fund, a for-profit limited
partnership, to invest in high technology based companies that specialize in
speech- and language-based products. In connection with its investment in
Lernout & Hauspie, Microsoft has invested approximately $3.0 million in the FLV
Fund. The FLV Fund is now publicly traded on EASDAQ.
Lessius Management Consulting, N.V., Gewestelijke Investeringsmaatschappij
Vlaanderen N.V. ("GIMV") and S.A.I.L Trust V.Z.W. each hold a one-third interest
in the Flanders Language Valley Fund Management N.V., the manager of the FLV
Fund (the "FLV Fund Manager"). Lessius Management Consulting, N.V. is a
subsidiary of a Belgian-based investment bank, Lessius N.V. GIMV is one of our
stockholders and has rights under our restated articles of incorporation to
nominate one of our directors. S.A.I.L Trust V.Z.W. is a not-for-profit
foundation formed in May 1998 by Messrs. Lernout and Hauspie and Mr. Fernand
Cloet, one of our directors. The purpose of this foundation is to further
support the economic development and to assist in the financing of the
infrastructure and the enhancement of the educational system of the Flanders
Language Valley region. Messrs. Lernout and Hauspie have advised us that they
do not have a beneficial interest in the assets of this foundation. Messrs.
Lernout and Hauspie have used a portion of the purchase price received on their
forward sales of common stock by the L&H Holding Control Group to provide
initial funding for this foundation and may provide additional funding to the
foundation in the future. In April 1999, we provided a short-term bridge loan
of approximately $1.6 million to an affiliate of the foundation to support
ongoing development and construction projects in the Flanders region of Belgium
so as to avoid possible delays in the construction schedules; this loan was
repaid in full in December 1999.
Messrs. Cloet, one of our current directors, and Philip Vermeulen, one of our
former directors, currently serve as two of the nine directors of the FLV Fund
Manager. Mr. Vermeulen also serves as an officer of the FLV Fund Manager.
Messrs. Lernout and Hauspie served as directors of the FLV Fund Manager from
its inception until their resignation on May 30, 1997. Pursuant to contractual
rights obtained in May 1998 to nominate five members for election to the Board
of Directors of the FLV Fund Manager, the S.AI.L Trust nominated two of the 10
members of the Board of Directors of the FLV Fund Manager, including its
current chairman and Mr. Vermeulen. The stockholders of the FLV Fund Manager
may increase the number of directors serving on the FLV Fund
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Manager's board from 10 to 15. Messrs. Lernout and Hauspie have indicated that
although they do not plan to rejoin the Board of Directors of the FLV Fund
Manager, they intend to spend a portion of their time on the activities of the
FLV Fund.
In October 1998, Messrs. Lernout and Hauspie formed L&H Investment Company N.V.
Messrs. Lernout and Hauspie beneficially own a controlling interest in and are
co-chairmen of L&H Investment Company. Another one of our directors, Mr.
Francis Vanderhoydonck, also serves as President and Managing Director of L&H
Investment Company. The principal purpose of L&H Investment Company is to
invest in high technology based companies that specialize in speech- and
language-based products. We do not have any interest as a stockholder, director
or otherwise in L&H Investment Company.
We have contractual rights with companies in which the FLV Fund and L&H
Investment Company have invested. In addition, the companies in which either
the FLV Fund or L&H Investment Company may invest in the future are likely to
have contractual relations with us or may be our competitors. As a result of
the conflicts of interest that may arise as a result of these overlapping
relationships, including for example, the influence Messrs. Lernout, Hauspie and
Cloet have over the Boards of Directors of these entities, our directors may
make decisions on behalf of us involving the FLV Fund, L&H Investment Company or
companies supported by them that are not in the best interest of us or our
stockholders. Companies funded in part by the FLV Fund and L&H Investment
Company accounted for approximately 3.7% of our revenues in 1998 and 0.3% of our
revenues in 1999.
The coordinated laws of commercial companies of Belgium do not permit Messrs.
Lernout, Hauspie and Cloet or any other member of Lernout & Hauspie or the FLV
Management N.V.'s Board of Directors to participate in deliberations and
decision making with respect to matters in which these individuals have a direct
or indirect conflict of interest with Lernout & Hauspie or FLV Management N.V.
RISKS RELATED TO OUR COMMON STOCK AND OUR BELGIAN INCORPORATION
PROVISIONS OF OUR CHARTER AND CONTRACTS AND OF BELGIAN LAW MAY DISCOURAGE
TAKEOVER OFFERS AND MAY LIMIT THE PRICE THAT INVESTORS WOULD BE WILLING TO PAY
FOR OUR COMMON STOCK.
Laws and documents contain provisions that may discourage bids for Lernout &
Hauspie. These include:
. our restated articles of incorporation;
. Belgian company law;
. other provisions of Belgian law; and
. our contractual arrangements which contain rights adverse to us if
there is a change of control.
These laws and arrangements could discourage advantageous offers for our
business or common stock and limit the price that investors might be willing to
pay in the future for shares of the common stock. Our restated articles of
incorporation contain provisions permitting specified entities to nominate
members of the maximum 17 member Board of Directors of Lernout & Hauspie as
follows:
. L&H Holding N.V............................ 9 Members
. GIMV....................................... 1 Member
. Microsoft.................................. 1 Member
Microsoft may terminate our rights under our license agreement with it upon a
change in control of Lernout & Hauspie. Our Board of Directors is permitted to
issue preferred stock upon terms it deems appropriate without the prior approval
of the holders of the common stock. Our ability to issue preferred stock in
such a manner could enable our Board of Directors to prevent changes in our
management or control. Belgian company law and other Belgian laws provide that
takeover bids must be made for all outstanding voting securities of Lernout &
Hauspie
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and are subject to the supervision and approval of the Commission for Banking
and Finance in Belgium. In some instances, takeover bids must be approved by the
competent Belgian and European antitrust authorities.
OUR INCORPORATION IN BELGIUM CAUSES US TO BE GOVERNED BY BELGIAN LAW WHICH
PROVIDES FOR DIFFERENT AND IN SOME CASES MORE LIMITED STOCKHOLDER RIGHTS THAN
THE LAWS OF JURISDICTIONS IN THE UNITED STATES.
We are a Belgian corporation and our corporate affairs are governed by our
restated articles of incorporation and Belgian company law. Although provisions
of Belgian company law resemble various provisions of the corporation laws of a
number of states of the United States, principles of law relating to such
matters as:
. the validity of corporate procedures;
. the fiduciary duties of management; and
. the rights of our stockholders
may differ from those that would apply if we were incorporated in a jurisdiction
within the United States. For example, there is no statutory right of appraisal
under Belgian law with respect to mergers, and the right for stockholders of a
Belgian corporation to sue derivatively, on the corporation's behalf, is
limited.
In addition, a provision of Belgian company law which recently became applicable
to us restricts our ability to sell shares of our stock for a cash purchase
price which is lower than the average price of our stock for the thirty days
prior to issuance of the new shares unless we also offer to sell shares at such
price to our existing stockholders. This restriction could inhibit our ability
to raise capital in the future.
YOU MAY BE UNABLE TO SERVE LEGAL PROCESS OR ENFORCE JUDGMENTS AGAINST US AND OUR
DIRECTORS AND OFFICERS.
We are a Belgian corporation and a substantial portion of our assets are located
in Belgium. Most of our officers and directors and our independent auditors are
not residents of the United States. Furthermore, all or a substantial portion
of the assets of these persons are located outside the United States. As a
result, you may not be able to effect service of process within the United
States upon these persons or to enforce any judgments of United States courts
upon these people or us predicated upon the civil liability provisions of the
securities or other laws of the United States. We have been advised by our
Belgian legal counsel, Loeff Claeys Verbeke, that civil liabilities under the
securities and other laws of the United States may not be enforceable in
original actions instituted in Belgium, or in actions instituted in Belgium to
enforce judgments of United States courts. Actions for enforcement of judgments
of United States courts might be successful only if the Belgian court confirms
the substantive correctness of the judgment of the United States court, and is
satisfied:
. that the judgment is not contrary to the principles of public policy
in Belgium or rules of Belgian public law;
. that the judgment did not violate the rights of the defendant;
. that the judgment is not subject to further appeal under United States
law;
. that the United States court did not accept its jurisdiction solely on
the basis of the nationality of the plaintiff; and
. as to the authenticity of the text of the judgment submitted to it.
THE VOLATILITY OF OUR STOCK PRICE COULD ADVERSELY AFFECT YOUR INVESTMENT IN OUR
STOCK.
The market price of the common stock has been, and may continue to be, highly
volatile. We believe that a variety of factors could cause the price of the
common stock to fluctuate, perhaps substantially, including:
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. announcements of developments related to our business;
. quarterly fluctuations in our actual or anticipated operating results
and order levels;
. general conditions in the worldwide economy;
. announcements of technological innovations;
. new products or product enhancements by us or our competitors;
. developments in patents or other intellectual property rights and
litigation; and
. developments in our relationships with our customers and suppliers.
In addition, in recent years the stock market in general and the markets for
shares of small capitalization and "high-tech" companies in particular, have
experienced extreme price fluctuations which have often been unrelated to the
operating performance of affected companies. Any such fluctuations in the
future could adversely affect the market price of the common stock and the
market price of the common stock may decline.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Until our acquisition of Dictaphone on May 5, 2000, we
were a foreign private issuer required to file annual reports on Form 20-F and
interim reports on Form 6-K with respect to our financial results and certain
other matters. On June 30, 2000 we filed an annual report on Form 20-F for our
fiscal year ended December 31, 1999. On June 30, 2000 we also voluntarily
filed:
. quarterly reports for the fiscal quarters ended June 30, 1999,
September 30, 1999 and March 31, 2000; and
. our annual report on Form 10-K for our fiscal year ended December 31,
1999;
in order to be eligible to file this registration statement on Form S-3.
You may read and copy any document we file with the SEC at the SEC's public
reference rooms at 450 Fifth Street, N.W., Washington, D.C., 20549, Chicago,
Illinois and New York, New York. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. The SEC maintains an
Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC at
http://www.sec.gov. Our Internet address is http://www.lhs.com.
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act of 1933, as amended, with respect to the common stock offered in
connection with this prospectus. This prospectus does not contain all of the
information set forth in the registration statement. We have omitted parts of
the registration statement in accordance with the rules and regulations of the
SEC. For further information with respect to us and our common stock, you
should refer to the registration statement. Statements contained in this
prospectus as to the contents of any contract or other document are not
necessarily complete and, in each instance, you should refer to the copy of such
contract or document filed as an exhibit to or incorporated by reference in the
registration statement. Each statement as to the contents of such contract or
document is qualified in all respects by such reference. You may obtain copies
of the registration statement from the SEC's principal office in Washington,
D.C. upon payment of the fees prescribed by the SEC, or you may examine the
registration statement without charge at the offices of the SEC described above.
The SEC allows us to "incorporate by reference" the information that we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the following documents:
. Our Report on Form 6-K/A filed September 9, 1999;
. Our Current Report on Form 8-K filed May 22, 2000, as amended by Form
8-K/A filed May 25, 2000 and Form 8-K/A/2 filed June 30, 2000;
. Our Current Report on Form 8-K filed June 22, 2000 as amended by Form
8-K/A filed August 21, 2000;
. Our Annual Report on Form 10-K for the year ended December 31, 1999
filed June 30, 2000;
. Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000
filed June 30, 2000;
. Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2000,
filed August 14, 2000 as amended by Form 10-Q/A filed on August 22,
2000;
. The description of our common stock contained in our Registration
Statement on Form 8-A filed under the Securities Exchange Act of 1934,
as amended, dated November 30, 1995.
We also incorporate by reference any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, prior to the termination of the offering to which this prospectus
relates.
We will provide at no cost to each person, including a beneficial owner, to whom
a prospectus is delivered, a copy of any and all of the information that has
been incorporated by reference into this prospectus, but not delivered
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with this prospectus. To receive any such information please contact us by
writing or telephoning us at the following address:
Lernout & Hauspie Speech Products USA, Inc.
52 Third Avenue
Burlington, MA 01803-4414
Tel: (781) 203-5000
Attn: Investor Relations
You should rely only on the information contained in this document (or any
supplement) or that we have referred you to. We have not authorized anyone else
to provide you with different information. You should not assume that the
information in this prospectus or any supplement is accurate as of any date
other than the date on the front of those documents.
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USE OF PROCEEDS
We estimate that the proceeds that we will receive from the sale of our common
stock will be approximately $238 million, assuming an offering price of $33.125
per share and after deducting our estimated offering expenses.
Unless otherwise specified in the applicable prospectus supplement, we intend to
use the net proceeds from the sale of our common stock for repayment of debt and
working capital.
On May 5, 2000, we acquired Dictaphone Corporation. In connection with that
acquisition we were required to assume or refinance approximately $430 million
of Dictaphone debt and other obligations. These Dictaphone obligations included
$200 million of senior subordinated notes, bearing interest at the rate of 11
3/4% per year, a bank facility of approximately $165 million and redeemable
preferred stock of approximately $27 million. Dresdner Bank Luxembourg S.A.,
Deutsche Bank N.V., Artesia Banking Corporation N.V., KBC Bank N.V. and Fortis
Bank N.V. collectively provided a total of $430 million in financing in
connection with the acquisition. The acquisition financing consisted of a $200
million short-term debt facility due March 31, 2001 which bears interest at
LIBOR plus 100 basis points and a $230 million five year declining balance
facility which bears interest at LIBOR plus 175 basis points.
Initial funding of $200 million under the short term facility and $30 million
under the five year facility was used to repay Dictaphone's existing bank debt
and the outstanding preferred stock, to satisfy other obligations in connection
with the acquisition and to cover closing costs. Since the closing of that
acquisition, we have borrowed an additional $55 million under the five year
facility for redemption of approximately $41.5 million of Dictaphone's senior
subordinated notes that were put to Dictaphone by the noteholders at 101% of par
following our acquisition of Dictaphone and for interest due on the redeemed
senior subordinated notes and the remaining outstanding senior subordinated
notes.
The $145 million remaining committed amount of the five year facility will be
available to partially cover our redemption of the remaining balance of
Dictaphone's senior subordinated notes, should we elect to do so and for general
corporate purposes. These notes are redeemable by Dictaphone, at its option, at
a declining rate beginning at 105.875% of par commencing in August 2000.
The terms of our bank credit facilities provide that we must use the cash
proceeds of any sale of equity to prepay amounts outstanding under the short
term facility, provided that an aggregate of $50,000,000 in cash proceeds of any
sales of equity made during the term of the short term facility may be used by
us for other purposes. Since we entered into the credit facility through August
1, 2000, we have received net proceeds in the sale of our common stock in the
aggregate amount of $20.5 million, the proceeds of which we used for purposes
other than prepayment of the short term facility. As a result, unless otherwise
consented to by our lenders, no more than $29.5 million of the net proceeds of
this offering, less any other funds that we may raise through the sale of our
equity securities, may be used by us for purposes other than repayment of the
short term facility, until the remaining balance of the short term facility is
paid in full.
Pending the use of the net proceeds, we intend to invest the net proceeds from
the sale of our common stock in short-term, investment grade, interest-bearing
instruments.
20
<PAGE>
PLAN OF DISTRIBUTION
We may offer the common stock:
. directly to institutional investors or other purchasers;
. to or through underwriters;
. through dealers, agents or institutional investors; or
. through a combination of such methods.
Regardless of the method used to sell the common stock, we will provide a
prospectus supplement that will disclose:
. the identity of any dealers or agents who purchase the common stock;
. the material terms of the distribution, including the number of shares
sold and the consideration paid;
. the amount of any compensation, discounts or commissions to be
received by the underwriters, dealers or agents;
. the terms of any identification provisions, including indemnification
from liabilities under the federal securities laws;
. the intention of an underwriter, dealer or agent to engage in passive
market making transactions as permitted by Rule 103 of Regulation M;
and
. the nature of any transaction by an underwriter, dealer or agent
during the offering that is intended to stabilize or maintain the
market price of the common stock.
Any shares of common stock sold pursuant to this prospectus will be listed on
the Nasdaq National Market and EASDAQ, subject to official notice of issuance.
In order to comply with the securities laws of certain states, if applicable,
the common stock will be sold in such jurisdictions only through registered or
licensed brokers or dealers.
SERVICE AND ENFORCEMENT OF LEGAL PROCESS
We are a Belgian corporation. Most of our officers and directors and experts
are not residents of the United States. All or a substantial portion of the
assets belonging to these individuals are located outside the United States. A
substantial portion of our assets are located in Belgium and other foreign
countries. As a result, it may not be possible for you to effect service of
process within the United States on us or most of our officers or directors or
experts. It is possible that a Belgian court would not enforce liabilities upon
us or our officers and directors in original actions predicated solely upon the
federal securities laws of the United States. You also may not be able to
enforce judgments of United States courts in Belgium that are based on the civil
liability provisions of the federal securities laws of the United States.
Enforcing judgments of United States courts in Belgium might be successful only
if a Belgian court confirms that the judgment of the United States court is
substantively correct and is satisfied:
. that the judgment is not contrary to the principles of public policy
in Belgium or rules of Belgian public law;
. that the judgment did not violate the rights of the defendant;
21
<PAGE>
. that the judgment is not subject to further appeal under United States
law;
. that the United States court did not accept its jurisdiction solely on
the
. basis of the nationality of the plaintiff; and
. as to the authenticity of the text of the judgment submitted to it.
22
<PAGE>
LEGAL MATTERS
For the purpose of this offering, Brown, Rudnick, Freed & Gesmer, Boston,
Massachusetts, our U.S. counsel, may pass upon U.S. legal matters in connection
with the offering. Loeff Claeys Verbeke, Brussels, Belgium, our Belgian
counsel, is giving an opinion as to the validity of the common stock. A member
of Brown, Rudnick, Freed & Gesmer, holds 90,000 shares of our common stock. An
entity controlled by a partner of Loeff Claeys Verbeke, holds 39,864 shares of
common stock and holds a minority interest in L&H Holding N.V.
EXPERTS
Our consolidated financial statements of as of December 31, 1998 and 1999 and
for each of the years in the three-year period ended December 31, 1999, have
been incorporated in this prospectus by reference in reliance on the report of
Klynveld Peat Marwick Goerdeler Bedrijfsrevisoren, independent public
accountants, appearing in our Annual Report on Form 10-K for the year ended
December 31, 1999 and upon the authority of said firm as experts in accounting
and auditing.
The financial statements of Brussels Translation Group N.V. as of December 31,
1998 and December 31, 1997 and for the twenty-two month period and the twelve
month period ended December 31, 1998 and the ten month period ended December 31,
1997, appearing in our Form 6-K/A filed with the SEC September 9, 1999 which is
referred to and made a part of this Registration Statement, have been audited by
Ernst & Young Reviseurs d'Entreprises S.C.C., independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such financial statements are incorporated in the prospectus by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Dictaphone Corporation and Subsidiaries as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1999 incorporated by reference (from the
Annual Report on Form 10-K of Dictaphone Corporation and subsidiaries for the
fiscal year ended December 31, 1999) into our Form 8-K/A filed with the SEC May
25, 2000 which is referred to and made a part of this Registration Statement,
have been audited by Deloitte & Touche LLP, independent auditors, as set forth
in their report thereon incorporated by reference therein and incorporated
herein by reference. Such financial statements are incorporated in the
prospectus by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The audited consolidated balance sheets of Dragon Systems, Inc. and Subsidiaries
as of December 31, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1999 appearing in our Current Report on
Form 8-K/A filed with the SEC on August 21, 2000, incorporated by reference in
this Registration Statement, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference in reliance upon the authority of
said firm as experts in accounting and auditing.
23
<PAGE>
This prospectus is part of a registration statement
we filed with the SEC. You should rely only on the
information or representations provided in this
prospectus. We have authorized no one to provide
you with different information. We are not making
an offer in any jurisdiction where the offer is not
permitted. You should not assume that the
information in this prospectus is accurate as of any
date other than the date of this prospectus.
LERNOUT & HAUSPIE
SPEECH PRODUCTS N.V.
$250,000,000
Common Stock
PROSPECTUS
__________, 2000
TABLE OF CONTENTS Page
Explanatory Note............................... 2
Special Note Regarding Forward-Looking
Statements.................................... 2
Summary........................................ 3
Risk Factors................................... 5
Where You Can Find More Information............ 18
Use of Proceeds................................ 20
Plan of Distribution........................... 21
Service and Enforcement of Legal Process....... 21
Legal Matters.................................. 23
Experts........................................ 23
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses payable by the Registrant
in connection with the sale and distribution of the securities registered
hereby. All amounts are estimated except the SEC filing fee. Costs of issuance
and distribution will be borne by the Registrant as follows:
SEC Registration Fee.................................... $ 66,000
Accounting Fees and Expenses............................ 10,000*
Legal Fees and Expenses................................. 20,000*
Miscellaneous........................................... 5,000*
--------
Total.............................................. $101,000
____________
*Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Belgian law, directors and the statutory auditor may be liable for
damages to us, a trustee in bankruptcy and third parties in case of improper
performance of their duties, violation of our Restated Articles of Association
or the Companies Act, or tortious misconduct. Under certain circumstances,
directors may also be criminally liable. One or more stockholders holding at
least one percent of our common stock (approximately 1,410,000 shares) or
holding shares representing a fractional value in our capital of at least BEF
50.0 million can, under certain conditions provided in the Companies Act, sue
the directors and the statutory auditor derivatively on behalf of us.
A simple majority of the stockholders at a duly convened stockholders meeting
may discharge directors and the statutory auditor from liability to us relating
to the performance of their respective duties after the presentation of a
management report and the annual accounts by our directors and presentation of
the statutory auditors' report to our stockholders. This discharge prohibits
stockholders from bringing derivative suits on behalf of us on such grounds. A
general discharge of director or auditor liability does not relieve such persons
from liability to third parties or for violations of the Companies Act or the
Restated Articles of Association. Violations of the Restated Articles of
Association may only be discharged if specifically identified by the
stockholders. Notwithstanding a general discharge, directors and auditors may be
held liable for willful misconduct and fraud in the performance of their duties
for us.
Our Restated Articles of Association include provisions permitting us to
indemnify our directors and officers to the fullest extent permitted by Belgian
law. We plan to enter into an indemnification agreement with each of our
directors, future directors and certain of our officers. Generally, each
indemnification agreement attempts to provide the maximum protection permitted
by Belgian law with respect to the indemnification of the director or officer.
The indemnification agreements will provide that we will pay certain amounts
incurred by a director or officer in connection with any civil or criminal
action or proceeding (excluding actions by us or in our name, i.e. derivative
suits) where the individual's involvement is by reason of the fact that he is or
was a director of officer. Such amounts include, to the maximum extent
permitted by law, attorneys fees, judgments, civil or criminal fines, settlement
amounts and other expenses customarily incurred in connection with legal
proceedings. Under the indemnification agreements, a director or officer will
not receive indemnification if he is found not to have acted in good faith in
the reasonable belief that his action was in our best interest.
We also maintain directors' and officers' liability insurance.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
------
<C> <S>
2.01 Agreement and Plan of Merger, dated as of March 7, 2000, by and among the Registrant,
Dark Acquisition Corp., and Dictaphone Corporation (filed as Exhibit 2.01 to the Current
Report on Form 8-K of the Registrant filed on May 22, 2000).
2.02 Asset Purchase Agreement, dated as of May 19, 1999, between the Registrant, a Fonix
Corporation and Fonix/ASI Corporation.**
2.03 Stock Purchase Agreement, dated as of September 9, 1999, by and among the Registrant,
Bumil Information and Communication Co., Ltd. and Ju-Chul Seo, for the purchase of Bumil
Information and Communication Co., Ltd.**
2.04 Assets For Cash Purchase Agreement, dated as of December 22, 1999, and amended on January
20, 2000, between the Registrant and OmniMed Transcription, Inc., certain principal
stockholders of OmniMed Transcription, Inc. and L&H Medical Transcription USA, Inc.**
2.05 Asset Purchase Agreement, dated as of May 23, 2000, between the Registrant and Rodeer
Systems, Inc.**
2.06 Agreement and Plan of Merger, dated as of March 27, 2000, and Amendment No. 1 dated May
25, 2000, between the Registrant, Dragon Systems, Inc., L&H Holdings USA, Inc. and
certain Principal Stockholders of Dragon Systems, Inc. (filed as Exhibit 2.1 and 2.2 to
the Current Report on Form 8-K of the Registrant filed on June 22, 2000 (the "June 22,
2000 8-K").
2.07 Agreement and Plan of Merger, dated July 20, 1998, between the Registrant, Beach
Acquisition Corporation and Globalink, Inc. (filed as Exhibit 1 to the Registrant's
Amendment No. 1 to its Form 13-D filed August 3, 1998 with respect to Globalink, Inc.).
2.08 Agreement for the acquisition of Dictation Consortium, dated May 29, 1998 (filed as
Exhibit 2.16 to the Registrant's Form F-3 filed August 19, 1998 (Registration No.
333-9306)).***
2.09 Agreement for the acquisition of Brussels Translation Group N.V. dated June 23, 1999
(filed as Exhibit 2.20 to the Registrant's Form 20-F for the year ended December 31, 1998
(the "1998 Form 20-F")).***
4.01 Specimen Registered Certificate of Common Stock (filed as Exhibit 4.01 to the
Registrant's Registration Statement on Form F-1, filed November 30, 1995 (Registration
No. 33-97928) (the "1995 Form F-1")).
4.02 Specimen Bearer Certificate of Common Stock (filed as Exhibit 4.02 to the 1995 Form F-1).
4.03 Description of Capital Stock (included in the Registrant's Restated Articles of
Association filed as Exhibit 3.01 to the Registrant's Form 20-F for the year ended
December 31, 1999).
4.04 Indenture, dated as of November 20, 1996, between the Registrant and United States Trust
Company of New York, including form of Note (filed as Exhibit 4.05 to the Registrant's
Registration Statement on Form F-3, filed February 18, 1997 (Registration No. 333-6468)
(the "1997 Form F-3")).
4.05 Specimen Form of Note (filed as part of Exhibit 4.04 to the 1997 Form F-3).
4.06 Registration Rights Agreement, dated as of November 10, 1996, among the Registrant,
Lehman Brothers, Inc., Hambrecht & Quist, Cowen & Company and Banque Indosuez (filed as
Exhibit 4.07 to the Registrant's 1997 Form F-3).
4.07 Share Purchase Agreement between Gesellschaft fur Multilinguale Systeme GmbH and the
Registrant (filed as Exhibit 4.11 to the Registrant's Registration Statement on Form F-4,
filed May 30, 1997 (Registration No. 333-6982)).
4.08 Warrant Agreement between the Registrant and Shoreline Pacific (filed as Exhibit 4.16 to
the Registrant's Registration Statement on Form F-3, filed July 21, 1997 (Registration
No. 333-7292)).
4.09 Subscription Agreement between the Registrant and Intel Atlantic, Inc. (filed as Exhibit
10.45 to the Registrant's 1998 Form 20-F).
4.10 Registration Rights Agreement, dated April 14, 1998, relating to sale of Common Stock by
L&H Holding Control Group (filed as Exhibit 4.23 to the Registrant's Form 20-F for the
year ended December 31, 1997).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number
-------
<C> <S>
4.11 Guarantee Agreement, dated May 27, 1998, between the Registrant and Wilmington Trust
Company (filed as Exhibit 4.24 to the Registrant's Form F-3, filed June 9, 1998
(Registration No. 333-8922) (the "1998 Form F-3")).
4.12 Multiple Series Indenture, dated May 27, 1998, between the Registrant and Wilmington
Trust Company (filed as Exhibit 4.25 to the 1998 Form F-3).
4.13 First Supplemental Indenture, dated May 27, 1998, between the Registrant and Wilmington
Trust Company (filed as Exhibit 4.26 to the 1998 Form F-3).
4.14 Registration Rights Agreement, dated May 27, 1998 (filed as Exhibit 4.27 to the 1998 Form
F-3).
4.15 Amended and Restated Declaration of Trust of the Registrant's Delaware Trust, dated May
27, 1998 (filed as Exhibit 4.28 to the 1998 Form F-3).
4.16 Registration Rights Agreement, dated July 17, 1998, relating to sale of Common Stock by
L&H Holding Control Group (filed as Exhibit 2 to the Registrant's Form 6-K filed
September 28, 1998).
4.17 Registration Rights Agreement, dated as of May 5, 2000, by and among the Registrant,
Stonington Holdings, LLC, Mellon Bank, N.A., as Trustee for the Bell Atlantic Master
Trust, Merrill Lynch KECALP, L.P. 1994, John Duerden, Robert G. Schwager, Joseph
Skrzypczak, Ronald Elwell, Thomas Hodge, Daniel Hart and Egon Jungheim (filed as Exhibit
4.1 to the Registrant's Amendment to its Current Report on Form 8-K/A filed on May 25,
2000).
4.18 Stockholders' Agreement, dated as of May 5, 2000, by and among the Registrant, Stonington
Holdings, LLC, LEHA, L&H Holding N.V., L&H Holding III, Oldco N.V. and L&H Investment
Company (filed as Exhibit 4.2 to the Current Report on Form 8-K of the Registrant filed
on May 22, 2000).
4.19 Registration Rights Agreement, dated as of June 7, 2000,by and among the Registrant, L&H
Holdings USA, Inc., Dragon Systems, Inc., Janet M. Baker and Seagate Technology, Inc. on
behalf of the Principal Stockholders of Dragon Systems, Inc. (filed as Exhibit 4.1 to the
June 22, 2000 8-K)
4.20 Stockholders' Agreement, dated as of June 7, 2000, by and between the Registrant, LEHA,
L&H Holding N.V., L&H Holding III, Oldco N.V., L&H Investment Company, JK Baker LLC, JM
Baker LLC, Seagate LLC, Roth Special LLC, CFB Gilbert LLC, RGB Rumpole LLC, James K.
Baker, Janet M. Baker, Robert Roth, Seagate Technology, Inc., The Paul G. Bamberg Trust,
The Cherry F. Bamberg Trust (filed as Exhibit 4.2 to the June 22, 2000 8-K).
5.01 Legal Opinion of Loeff Claeys Verbeke*
23.01 Consent of Klynveld Peat Marwick Goerdeler Bedrijfsrevisoren.*
23.02 Consent of Loeff Claeys Verbeke (contained in Exhibit 5.01 hereof)
23.03 Consent of Brown, Rudnick, Freed & Gesmer*
23.04 Consent of Ernst & Young Reviseurs d'Entreprises*
23.05 Consent of Deloitte & Touche LLP*
23.06 Consent of Arthur Andersen LLP*
24.01 Power of Attorney (contained on pages II-6 and II-7 hereof)
</TABLE>
-----------------
* Filed herewith.
** Incorporated by reference to the Exhibit of the same number filed on the
Registrant's Form 20-F for the year ended December 31, 1999.
*** Translated in full or summary version; the original language version is on
file with the Registrant and is available upon request.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information in the
Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered ) and any deviation from the low or high end of the
estimated maximum offering ranges may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a
20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section do
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the SEC by the Registrant pursuant to section 13 or section 15(d)
of the Exchange Act that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g) Not applicable.
(h) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit
II-4
<PAGE>
to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(i) The undersigned Registrant undertakes that:
(1) For purpose of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of the
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b) (1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(j) Not applicable.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Ieper, Belgium, on August 25, 2000.
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
By: /s/ John Duerden
---------------------
John Duerden
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Gaston Bastiaens, Jo Lernout and Pol Hauspie, and
each of them (with full power to each of them to act alone), his or her true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, and, in connection
with any registration of additional securities pursuant to Rule 462(b) under the
Securities Act, to sign any abbreviated registration statement and any and all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, in each case, with the SEC, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or either of them, or their substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
Signature Title Date
------------------------------------------------ --------------------------------------- ---------------------------------
<S> <C> <C>
/s/ John Duerden President and Chief Executive Officer August 25, 2000
------------------------------------------------ (Principal Executive Officer)
John Duerden
/s/ Carl Dammekens Chief Financial Officer, Senior Vice August 25, 2000
------------------------------------------------ President of Finance (Principal
Carl Dammekens Accounting and Principal Financial
Officer)
/s/ Jo Lernout Co-Chairman of the Board and Managing August 25, 2000
------------------------------------------------ Director
Jo Lernout
/s/ Pol Hauspie Co-Chairman of the Board and Managing August 25, 2000
------------------------------------------------ Director
Pol Hauspie
/s/ Nico Willaert Vice Chairman and Managing Director August 25, 2000
------------------------------------------------
Nico Willaert
/s/ Gaston Bastiaens Director August 25, 2000
------------------------------------------------
Gaston Bastiaens
Director August __, 2000
------------------------------------------------
Dirk Cauwelier
Director August __, 2000
------------------------------------------------
Fernand Cloet
Director August __, 2000
------------------------------------------------
Jan Coene
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Marc G. H. DePauw Director August 25, 2000
------------------------------------------------
Marc G. H. De Pauw
/s/ Hubert Detremmerie Director August 25, 2000
------------------------------------------------
Hubert Detremmerie
/s/ Albert J. Fitzgibbons, III Director August 25, 2000
------------------------------------------------
Albert J. Fitzgibbons, III
/s/ Roel Pieper Vice Chairman August 25, 2000
------------------------------------------------
Roel Pieper
RDV SECURITIES N.V., represented by
Erwin Vandendriessche
August 25, 2000
/s/ Erwin Vandendriessche Director
------------------------------------------------
Erwin Vandendriessche
/s/ Alex Vieux Director August 25, 2000
------------------------------------------------
Alex Vieux
/s/ Gerard Van Acker Director August 25, 2000
------------------------------------------------
Gerard Van Acker
Director August __, 2000
------------------------------------------------
Bernard Vergnes
/s/ Francis Vanderhoydonck Director August 25, 2000
------------------------------------------------
Francis Vanderhoydonck
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number
--------
<C> <S>
2.01 Agreement and Plan of Merger, dated as of March 7, 2000, by and among the Registrant,
Dark Acquisition Corp., and Dictaphone Corporation (filed as Exhibit 2.01 to the Current
Report on Form 8-K of the Registrant filed on May 22, 2000).
2.02 Asset Purchase Agreement, dated as of May 19, 1999, between the Registrant, a Fonix
Corporation and Fonix/ASI Corporation.**
2.03 Stock Purchase Agreement, dated as of September 9, 1999, by and among the Registrant,
Bumil Information and Communication Co., Ltd. and Ju-Chul Seo, for the purchase of Bumil
Information and Communication Co., Ltd.**
2.04 Assets For Cash Purchase Agreement, dated as of December 22, 1999, and amended on January
20, 2000, between the Registrant and OmniMed Transcription, Inc., certain principal
stockholders of OmniMed Transcription, Inc. and L&H Medical Transcription USA, Inc.**
2.05 Asset Purchase Agreement, dated as of May 23, 2000, between the Registrant and Rodeer
Systems, Inc.**
2.06 Agreement and Plan of Merger, dated as of March 27, 2000, and Amendment No. 1 dated May
25, 2000, between the Registrant, Dragon Systems, Inc., L&H Holdings USA, Inc. and
certain Principal Stockholders of Dragon Systems, Inc. (filed as Exhibit 2.1 and 2.2 to
the Current Report on Form 8-K of the Registrant filed on June 22, 2000 (the "June 22,
2000 8-K").
2.07 Agreement and Plan of Merger, dated July 20, 1998, between the Registrant, Beach
Acquisition Corporation and Globalink, Inc. (filed as Exhibit 1 to the Registrant's
Amendment No. 1 to its Form 13-D filed August 3, 1998 with respect to Globalink, Inc.).
2.08 Agreement for the acquisition of Dictation Consortium, dated May 29, 1998 (filed as
Exhibit 2.16 to the Registrant's Form F-3 filed August 19, 1998 (Registration No.
333-9306)).***
2.09 Agreement for the acquisition of Brussels Translation Group N.V. dated June 23, 1999
(filed as Exhibit 2.20 to the Registrant's Form 20-F for the year ended December 31, 1998
(the "1998 Form 20-F")).***
4.01 Specimen Registered Certificate of Common Stock (filed as Exhibit 4.01 to the
Registrant's Registration Statement on Form F-1, filed November 30, 1995 (Registration
No. 33-97928) (the "1995 Form F-1")).
4.02 Specimen Bearer Certificate of Common Stock (filed as Exhibit 4.02 to the 1995 Form F-1).
4.03 Description of Capital Stock (included in the Registrant's Restated Articles of
Association filed as Exhibit 3.01 to the Registrant's Form 20-F for the year ended
December 31, 1999).
4.04 Indenture, dated as of November 20, 1996, between the Registrant and United States Trust
Company of New York, including form of Note (filed as Exhibit 4.05 to the Registrant's
Registration Statement on Form F-3, filed February 18, 1997 (Registration No. 333-6468)
(the "1997 Form F-3")).
4.05 Specimen Form of Note (filed as part of Exhibit 4.04 to the 1997 Form F-3).
4.06 Registration Rights Agreement, dated as of November 10, 1996, among the Registrant,
Lehman Brothers, Inc., Hambrecht & Quist, Cowen & Company and Banque Indosuez (filed as
Exhibit 4.07 to the Registrant's 1997 Form F-3).
4.07 Share Purchase Agreement between Gesellschaft fur Multilinguale Systeme GmbH and the
Registrant (filed as Exhibit 4.11 to the Registrant's Registration Statement on Form F-4,
filed May 30, 1997 (Registration No. 333-6982)).
4.08 Warrant Agreement between the Registrant and Shoreline Pacific (filed as Exhibit 4.16 to
the Registrant's Registration Statement on Form F-3, filed July 21, 1997 (Registration
No. 333-7292)).
4.09 Subscription Agreement between the Registrant and Intel Atlantic, Inc. (filed as Exhibit
10.45 to the Registrant's 1998 Form 20-F).
4.10 Registration Rights Agreement, dated April 14, 1998, relating to sale of Common Stock by
L&H Holding Control Group (filed as Exhibit 4.23 to the Registrant's Form 20-F for the
year ended December 31, 1997).
</TABLE>
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Exhibit
Number
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4.11 Guarantee Agreement, dated May 27, 1998, between the Registrant and Wilmington Trust
Company (filed as Exhibit 4.24 to the Registrant's Form F-3, filed June 9, 1998
(Registration No. 333-8922) (the "1998 Form F-3")).
4.12 Multiple Series Indenture, dated May 27, 1998, between the Registrant and Wilmington
Trust Company (filed as Exhibit 4.25 to the 1998 Form F-3).
4.13 First Supplemental Indenture, dated May 27, 1998, between the Registrant and Wilmington
Trust Company (filed as Exhibit 4.26 to the 1998 Form F-3).
4.14 Registration Rights Agreement, dated May 27, 1998 (filed as Exhibit 4.27 to the 1998 Form
F-3).
4.15 Amended and Restated Declaration of Trust of the Registrant's Delaware Trust, dated May
27, 1998 (filed as Exhibit 4.28 to the 1998 Form F-3).
4.16 Registration Rights Agreement, dated July 17, 1998, relating to sale of Common Stock by
L&H Holding Control Group (filed as Exhibit 2 to the Registrant's Form 6-K filed
September 28, 1998).
4.17 Registration Rights Agreement, dated as of May 5, 2000, by and among the Registrant,
Stonington Holdings, LLC, Mellon Bank, N.A., as Trustee for the Bell Atlantic Master
Trust, Merrill Lynch KECALP, L.P. 1994, John Duerden, Robert G. Schwager, Joseph
Skrzypczak, Ronald Elwell, Thomas Hodge, Daniel Hart and Egon Jungheim (filed as Exhibit
4.1 to the Registrant's Amendment to its Current Report on Form 8-K/A filed on May 25,
2000).
4.18 Stockholders' Agreement, dated as of May 5, 2000, by and among the Registrant, Stonington
Holdings, LLC, LEHA, L&H Holding N.V., L&H Holding III, Oldco N.V. and L&H Investment
Company (filed as Exhibit 4.2 to the Current Report on Form 8-K of the Registrant filed
on May 22, 2000).
4.19 Registration Rights Agreement, dated as of June 7, 2000,by and among the Registrant, L&H
Holdings USA, Inc., Dragon Systems, Inc., Janet M. Baker and Seagate Technology, Inc. on
behalf of the Principal Stockholders of Dragon Systems, Inc. (filed as Exhibit 4.1 to the
June 22, 2000 8-K)
4.20 Stockholders' Agreement, dated as of June 7, 2000, by and between the Registrant, LEHA,
L&H Holding N.V., L&H Holding III, Oldco N.V., L&H Investment Company, JK Baker LLC, JM
Baker LLC, Seagate LLC, Roth Special LLC, CFB Gilbert LLC, RGB Rumpole LLC, James K.
Baker, Janet M. Baker, Robert Roth, Seagate Technology, Inc., The Paul G. Bamberg Trust,
The Cherry F. Bamberg Trust (filed as Exhibit 4.2 to the June 22, 2000 8-K).
5.01 Legal Opinion of Loeff Claeys Verbeke*
23.01 Consent of Klynveld Peat Marwick Goerdeler Bedrijfsrevisoren.*
23.02 Consent of Loeff Claeys Verbeke (contained in Exhibit 5.01 hereof)
23.03 Consent of Brown, Rudnick, Freed & Gesmer*
23.04 Consent of Ernst & Young Reviseurs d'Entreprises*
23.05 Consent of Deloitte & Touche LLP*
23.06 Consent of Arthur Andersen LLP*
24.01 Power of Attorney (contained on pages II-6 and II-7 hereof)
</TABLE>
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* Filed herewith.
** Incorporated by reference to the Exhibit of the same number filed on the
Registrant's Form 20-F for the year ended December 31, 1999.
*** Translated in full or summary version; the original language version is on
file with the Registrant and is available upon request.
E-2
