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Under the terms of the Merger Agreement, at the effective time of the merger, each share of Company common stock will be converted into and represent the right to receive $4.20 in cash and a fraction of a share of Lernout & Hauspie common stock, no par value. The fraction is based on a conversion ratio equal to $1.05 divided by the average closing price per share of Lernout & Hauspie's common stock on the Nasdaq National Market for the ten consecutive trading days ending with the last trading day prior to the date of the Company's 1997 Annual Meeting of Stockholders, except that the conversion ratio will be no less than 0.047549 of a share of Lernout & Hauspie common stock for each share of Company common stock and no more than 0.058115 of a share of Lernout & Hauspie common stock for each share of Company common stock.
As part of the consideration for Lernout & Hauspie entering into the Merger Agreement, the Company has granted Lernout & Hauspie an option pursuant to a Stock Option Agreement dated as of April 14, 1997 to purchase up to 16% of the Company's shares outstanding during the option term at a purchase price of $5.25 per share, exercisable under certain circumstances in the event of the termination of the Merger Agreement. The Company has the right to repurchase the option and any shares purchased under the option under certain circumstances.
In addition, pursuant to a Loan Agreement dated as of April 14, 1997, Lernout & Hauspie's United States subsidiary, Lernout & Hauspie Speech Products USA, Inc. ("L&H USA"), has agreed to make available to the Company until October 31, 1997 a line of credit of $1.5 million for working capital purposes. In consideration of the line of credit, the Company has issued to L&H USA a warrant to purchase 185,000 shares of Company common stock at a purchase price of $3.21 per share.
The foregoing summaries of the Merger Agreement, the Stock Option Agreement, the Loan Agreement and the warrant are not intended to be complete statements of all of the material terms of those agreements. The summaries are qualified in their entirety by the agreements themselves and related agreements that are filed herewith as Exhibits 99.2 through 99.7.
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