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The following is a brief summary of certain information contained elsewhere in this Proxy Statement/Prospectus, including the Appendices hereto. This summary does not contain a complete statement of all material information relating to the Agreement and Plan of Merger dated April 14, 1997 (the "Merger Agreement") among Kurzweil Applied Intelligence, Inc. ("Kurzweil"), Lernout & Hauspie Speech Products N. V. ("Lernout & Hauspie") and Trappist Acquisition Corp. ("Merger Sub"), and the merger of Merger Sub into Kurzweil (the ''Merger") and is subject to, and qualified in its entirety by, the more detailed information and financial statements contained elsewhere in this Proxy Statement/Prospectus. Kurzweil stockholders are urged to carefully read this Proxy Statement/Prospectus and the attached Appendices in their entirety.

Unless the context otherwise requires, all information contained in this Proxy Statement/Prospectus reflects (i) a 334-for-1 split of the capital stock of Lernout & Hauspie effected in September 1993, (ii) a reverse 1-for-2 split of the capital stock of Lernout & Hauspie effected in October 1995 and (iii} the conversion of all of Lernout & Hauspie's capital stock and its then outstanding convertible bonds on December 6, 1995 into 10,226,420 shares of Lernout & Hauspie common stock, no par value per share (''L&H Common Stock").

Information contained in this Proxy Statement/Prospectus contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which con be identified by the use of forward-looking terminology, such as "may," "will" "expect," "anticipate," ''believe,'' "plan," "intend," ''could,'' ''estimate'' or ''continue'' or the negative thereof or other variations thereon or comparable terminology. All forward-looking statements involve risks and uncertainties, and actual results could differ materially from those set forth in the forward-looking statements contained herein, including as a result of the risks described below under ''Risk Factors.''

The Companies

Lernout & Hauspie

Lernout & Hauspie is a leading international developer and licensor of advanced speech technologies and provider of translation services. Lernout & Hauspie is combining its speech technologies and translation expertise to develop advanced machine translation software for the Internet and to enhance the efficiency of its translation business. Lernout & Hauspie is also applying its speech and language technologies to develop advanced continuous dictation software to enable users to dictate text accurately, while speaking naturally without pausing between words. The mailing address of Lernout & Hauspie's principal executive offices is Sint-Krispijnstraat 7, 8900 Ieper, Belgium and its telephone number is 011 32 57 22 8888.

Merger Sub

Merger Sub, a wholly-owned subsidiary of Lernout & Hauspie, is a Delaware Corporation newly created for the sole purpose of consummating the transactions contemplated by the Merger Agreement. Merger Sub has not conducted any activities other than those incident to its formation, its execution of the Merger Agreement and its participation in the preparation of this Proxy Statement/Prospectus. As a result of the Merger, Merger Sub will be merged into Kurzweil, and Kurzweil will become a wholly-owned subsidiary of Lernout & Hauspie. The mailing address and telephone number of Merger Sub are the same as those of Lernout & Hauspie.

Kurzweil

Kurzweil develops, markets and supports automated speech recognition systems used to create documents and interact with computers by voice and structured report generating software systems. Kurzweil's speech recognition technology is speaker-independent in that most users do not have to "train" the system on their voice to achieve satisfactory initial accuracy, and it is speaker-adaptive, in that the system is able to adapt with use to the acoustic, phonetic and linguistic patterns of individual users and thereby further boast accuracy. Kurzweil's large vocabulary systems, which recognize up to 60,000 words, accept discrete speech, which requires the user to pause briefly between words. Kurzweil's software technology is designed to run on 486 or Pentium-based industry standard personal computers running MS-DOS and Windows operating systems. The mailing address of Kurzweil's principal executive offices is 411 Waverley Oaks Road, Waltham, MA 02154 and its telephone number is (617)893-5151.

The Annual Meeting

Time, Place and Date

The 1997 Annual Meeting of Stockholders of Kurzweil will he held at The Atrium Conference Center located on the second floor of One Financial Center, Boston, Massachusetts on Thursday, June 26, 1997 at 10:00 a.m., local time (including any and all adjournments or postponements thereof, the "Annual Meeting").

Purpose of the Annual Meeting

At the Annual Meeting, holders of Kurzweil common stock, $0.01 par value per share ("Kurzweil Common Stock"), will be asked to consider and vote upon (i) a proposal to approve and adopt the Merger Agreement and the Merger, (ii) the election of directors of Kurzweil, (iii) the ratification of the appointment of Arthur Andersen LLP as independent public accountants for Kurzweil and (iv) if necessary, the adjournment of the Annual Meeting to a later date to obtain the necessary quorum for a meeting or to obtain a sufficient number of votes to approve a proposal. Stockholders of Kurzweil will also consider and vote upon any other matter that may properly come before the Annual Meeting. If the Merger is consummated, Kurzweil will become a wholly-owned subsidiary of Lernout & Hauspie, its Board of Directors will consist of individuals appointed by Lernout & Hauspie, and Lernout & Hauspie's accountants, Klynveld Peat Marwick Goerdeler Bedrijfsrevisoren, will become Kurzweil's accountants.

Vote Required; Record Date

The affirmative vote of the holders of a majority of the outstanding shares of Kurzweil Common Stock entitled to vote at the Annual Meeting is required for the approval and adoption of the Merger Agreement and the Merger. To be elected, a director must receive the affirmative vote of the holders of a plurality of the votes cast. The ratification of the appointment of the independent public accountants and the authorization of proxy holders to adjourn the Annual Meeting requires the affirmative vote of the holders of a majority of the aggregate number of shares of Kurzweil Common Stock present or represented at the Annual Meeting and entitled to vote. Holders of Kurzweil Common Stock are entitled to one vote per share. Only holders of Kurzweil Common Stock at the close of business on May 22. 1997 (the "Record Date") will be entitled to notice of, and to vote at, the Annual Meeting.

Intentions and Agreements to Vote

Each of the directors and executive officers of Kurzweil has agreed with Lernout & Hauspie to vote in favor of the Merger and has granted Lernout & Hauspie an irrevocable proxy with respect to all shares of Kurzweil Common Stock over which be has voting control (a total of 17,898 shares, or less than one percent of the outstanding shares of Kurzweil Common Stock as of the Record Date) to vote in favor of the Merger. See "The Annual Meeting-Intentions and Agreements to Vote."

The Merger

Recommendation of the Kurzweil Board of Directors

The Board of Directors of Kurzweil, in approving the Merger and recommending it to Kurzweil's stockholders, believes that the terms of the Merger are fair and in the best interests of Kurzweil and its stockholders. The Board of Directors unanimously concluded that the Merger should be approved and recommends that the Kurzweil stockholders vote in favor of the Merger. For a discussion of the factors considered by the Kurzweil Board of Directors in making its recommendation, see "The Merger and Related Transactions-Kurzweil's Reasons for the Merger."

Effects of the Merger

The Merger will become effective after satisfaction of all conditions to the Merger Agreement and on the date the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware (the "Effective Time"). Assuming all of the conditions to the Merger are fulfilled, it is expected that the Effective Time will occur on June 27, 1997, or as soon thereafter as practicable. As a result of the Merger, Kurzweil will become a wholly-owned subsidiary of Lernout & Hauspie and stockholders of Kurzweil will receive, for each share of Kurzweil Common Stock held by them, $4.20 in cash plus a fraction of a share of L&H Common Stock having a value of $1.05 (subject to adjustment). See "The Merger and Related Transactions-- General."

Conversion of Kurzweil Shares

At the Effective Time, each share of Kurzweil Common Stock issued and outstanding immediately prior to the Effective Time will be converted into the right to receive (i) $4.20 in cash plus (ii) that number of shares of L&H Common Stock as is equal to the Conversion Ratio. The "Conversion Ratio" shall equal $1.05 divided by the average closing price per share of L&H Common Stock as reported on the Nasdaq National Market for the ten consecutive trading days ending with the last trading day prior to the date of the Annual Meeting (the "Average Market Value"); provided, however, that if the Average Market Value is greater than $22.08250, then the Conversion Ratio shall equal 0.047549; and, provided, further, that if the Average Market Value is less than $18.06750, then the Conversion Ratio shall equal 0.058115. In lieu of any fractional shares of L&H Common Stock that would otherwise be issued to Kurzweil stockholders, they will receive cash in the amount equal to such fractional share times the Average Market Value.

As of the Record Date, there were 9,091,742 shares of Kurzweil Common Stock outstanding. Assuming the Conversion Ratio is 0.047549 (calculated based upon the Average Market Value as if the date of the Annual Meeting were the date of this Proxy Statement/Prospectus), and without giving effect to the issuance of any shares of Kurzweil Common Stock after the Record Date, upon consummation of the Merger, Lernout & Hauspie will pay a total of approximately $38,185,316 and issue a total of approximately 432,303 shares of L&H Common Stock to the holders of outstanding shares of Kurzweil Common Stock. See "The Merger and Related Transactions-- General."

Conversion of Kurzweil Options and Kurzweil Warrants

At the Effective Time, all options to purchase Kurzweil Common Stock ("Kurzweil Options") and all warrants to purchase Kurzweil Common Stock ("Kurzweil Warrants"), to the extent they are vested or exercisable on or prior to the Effective Time, will be terminated. Each holder of vested or exercisable Kurzweil Options or Kurzweil Warrants which are "in the money" (i.e., have a per share exercise price less than the aggregate dollar value of the consideration per share to be paid in the Merger (the "Merger Consideration")) shall receive in exchange for such Kurzweil Options or Kurzweil Warrants Merger Consideration as if such holder held that number of shares of Kurzweil Common Stock equal to (i) the number of shares of Kurzweil Common Stock subject to each "in the money" Kurzweil Opinion or Kurzweil Warrant held by such holder multiplied by the difference between the Merger Consideration per share and the exercise price of each of those Kurzweil Options or Kurzweil Warrants, divided by (ii) the Merger Consideration per share (the number of shares of Kurzweil Common Stock deemed to be so received are collectively referred to herein as the "O&W Shares"). See "The Merger and Related Transactions-- General."

To the extent Kurzweil Options and Kurzweil Warrants are not vested or exercisable prior to or at the Effective Time, Lernout & Hauspie shall substitute substantially equivalent options and warrants to purchase L&H Common Stock for such Kurzweil Options and Kurzweil Warrants. Each option or warrant so substituted (i) shall have substantially the same terms and conditions, consistent with Belgian law, as are set forth in the Kurzweil Option or Kurzweil Warrant prior to the Effective Time and (ii) shall be for that number of whole shares of L&H Common Stock equal to the number of shares of Kurzweil Common Stock that were subject to the unvested or unexercisable portion of such Kurzweil Option or Kurzweil Warrant immediately prior to the Effective Time, multiplied by the Option Conversion Ratio (as defined below). The per share exercise price for the L&H Common Stock issuable upon exercise of such options and warrants will be equal to the exercise price of the Kurzweil Option or Kurzweil Warrant immediately prior to the Effective Time divided by the Option Conversion Ratio. The "Option Conversion Ratio" shall equal a fraction, the numerator of which shall be $5.25 and the denominator of which shall be the Average Market Value, which shall not be greater than $22.08250 nor less than $18.06750. See "The Merger and Related Transactions-General."

As of the Record Date, there were 1,587,418 shares of Kurzweil Common Stock subject to outstanding Kurzweil Options and Kurzweil Warrants (excluding options and warrants held by Lernout & Hauspie and its affiliates), with exercise prices ranging from $1.50 to $7.00 per share. An additional 12,000 options will automatically be issued to non-employee directors of Kurzweil on June 20, 1997 pursuant to Kurzweil's 1995 Non-Employee Director Stock Option Plan. Of these Kurzweil Options and Kurzweil Warrants, 1,141,244 are expected to be vested or exercisable at the Effective Time. Assuming a Conversion Ratio of 0.047549 (calculated based upon the Average Market Value as if the date of the Annual Meeting were the date of this Proxy Statement/Prospectus) and thus Merger Consideration per share of $5.42618, the Kurzweil Options and Kurzweil Warrants that are expected to be vested or exercisable at the Effective Time and have a per share exercise price less than the Merger Consideration per share would represent the right to purchase 1,034,958 shares of Kurzweil Common Stock, would be deemed to constitute a total of 588,969 O&W Shares and would be converted into a total of approximately $2,473,670 in cash and approximately 28,005 shares of L&H Common Stock. The Kurzweil Options and Kurzweil Warrants that are expected to be vested or exercisable at the Effective Time but have a per share exercise price greater than or equal to the Merger Consideration per share would represent the right to purchase 106,286 shares of Kurzweil Common Stock and would be terminated and be of no further effect. The Kurzweil Options and Kurzweil Warrants which are expected to be unvested or unexercisable at the Effective Time represent the right to purchase 458,174 shares of Kurzweil Common Stock and would be converted into options and warrants to purchase 108,931 shares of L&H Common Stock at exercise prices ranging from $9.99 to $19.98. Lernout & Hauspie has agreed to file (within 30 days of the Effective Time) and make commercially reasonable efforts to maintain the effectiveness of a Registration Statement on Form S-8 under the Securities Act with respect to all shares of L&H Common Stock subject to substituted options and warrants that may be registered on Form S-8.

Opinion of Kurzweil's Financial Advisor

Montgomery Securities ("Montgomery") has delivered its written opinion to the Kurzweil Board of Directors dated April 14, 1997 and the date of this Proxy Statement/Prospectus that, as of the date of such opinion and subject to certain assumptions, factors and limitations set forth in that opinion. the Merger Consideration to be offered to Kurzweil's stockholders is fair, from a financial point of view, to such stockholders. A copy of the opinion of Montgomery, which sets forth the assumptions made, matters considered and the scope of the review undertaken by Montgomery, is attached as Appendix B to this Proxy Statement/Prospectus. Stockholders of Kurzweil are urged to read the opinion carefully and in its entirety. See "The Merger and Related Transactions-- Opinion of Kurzweil's Financial Advisor."

Interests of Certain Persons in the Merger

In considering the recommendation of the Kurzweil Board of Directors with respect to the Merger Agreement and the transactions contemplated thereby, Kurzweil stockholders should be aware that certain members of Kurzweil's management (some of whom are members of Kurzweil's Board of Directors) and the Kurzweil Board of Directors have interests in the Merger in addition to their interests as stockholders of Kurzweil generally. Among other things (i) the Merger Agreement includes provisions obligating Lernout & Hauspie to preserve and assume certain indemnification rights and benefits of, and to provide liability insurance coverage for, the current and in some cases former directors and officers of Kurzweil, (ii) previously unvested Kurzweil Options to purchase an aggregate of 337,522 shares of Kurzweil Common Stock held by officers and nonemployee directors of Kurzweil will become fully vested at the Effective Time and will be exchanged for Merger Consideration as described in "The Merger and Related Transactions-- General," and (iii) certain executive officers will be entitled to change in control payments aggregating $643,000. See "The Merger and Related Transactions-Interests of Certain Persons in the Merger" and "Kurzweil Management-Employment Agreements, Termination of Employment and Change-in-Control Arrangements."

Conditions to the Merger

In addition to the requirement that the stockholders of Kurzweil approve the Merger Agreement and the Merger, consummation of the Merger is subject to a number of other conditions that, if not satisfied or waived, may result in the termination of the Merger Agreement. Each party's obligation to consummate the Merger is conditioned upon, among other things, the accuracy of the other party's representations and warranties in the Merger Agreement, the other party's performance of its covenants in the Merger Agreement and the absence of certain litigation. Lernout & Hauspie's obligation to consummate the Merger is also conditioned upon the absence of a material adverse change to the business of Kurzweil. See "The Merger and Related Transactions-Conditions to the Merger."

Termination

At any time prior to the Effective Time, the Merger Agreement may be terminated and the Merger abandoned under certain circumstances, including without limitation by mutual consent of Lernout & Hauspie and Kurzweil, or by either Lernout & Hauspie or Kurzweil if the other party commits certain material breaches of any of its representations, warranties or covenants in the Merger Agreement. The Merger Agreement may also be terminated by either party if (i) without fault of the party seeking termination, the Merger has not been not consummated on or before August 15, 1997, (ii) a non-appealable final order, decree or ruling restraining, enjoining or otherwise prohibiting the Merger has been issued and the party seeking termination has diligently contested such ruling, (iii) the Merger Agreement and the Merger fail to receive the requisite approval of Kurzweil stockholders or (iv) Kurzweil's Board of Directors withdraws, modifies, or changes, or resolves to withdraw, modify or change, its recommendation so that it is not in favor of the Merger Agreement or the Merger or the Kurzweil Board shall have recommended or resolved to recommend to its stockholders an acquisition transaction other than the Merger. In addition, Lernout & Hauspie may terminate the Merger Agreement if Kurzweil furnishes non-public information to a third party with respect to another acquisition transaction, or shall have resolved to disclose such information and publicly discloses such resolution. See "The Merger and Related Transactions-Termination."

Consequences of Termination

Whether or not the Merger is consummated, all costs and expenses incurred in connection with the Merger Agreement and the Merger will be paid by the party incurring the expense, and the payment of fees and expenses in connection with the printing and filing of this Proxy Statement/Prospectus and the Registration Statement will be shared equally.

Notwithstanding the foregoing, if the Merger Agreement is terminated, Lernout & Hauspie or Kurzweil may be obligated to pay to the other up to $1.5 million of the reasonable, documented expenses incurred by the other party in connection with the Merger Agreement. In addition, Kurzweil shall be obligated to pay Lernout & Hauspie a termination fee of $2.2 million (the "Termination Fee"), less certain documented expenses, if any, paid to Lernout & Hauspie, if (i) the Merger Agreement is terminated because Kurzweil's Board of Directors withdraws, modifies, or changes, or resolves to withdraw, modify or change, its recommendation so that it is not in favor of the Merger Agreement or the Merger or the Kurzweil Board shall have recommended or resolved to recommend to its stockholders an acquisition transaction other than the Merger or (ii) any person shall have made or discussed with Kurzweil a proposal concerning a business combination transaction and prior to or within 12 months after the termination of the Merger Agreement Kurzweil or any of its subsidiaries or affiliates enters into a definitive agreement with a third party with respect to a business combination transaction or such a transaction is effected, and certain other conditions are met.

At the same time it entered into the Merger Agreement, Kurzweil also entered into a Stock Option Agreement with Lernout & Hauspie (the "Option Agreement"). Under the Option Agreement, Kurzweil granted Lernout & Hauspie an option to purchase newly issued shares of Kurzweil Common Stock equal to up to 16% of the then outstanding shares of Kurzweil Common Stock at an exercise price of $5.25 per share in certain circumstances if (i) the Merger Agreement shall have been terminated in a fashion where the Termination Fee is or may he payable and (ii) Kurzweil enters into a business combination transaction with a third party within 12 months of such termination. See "The Merger and Related Transactions -Termination" and "-Consequences of Termination."

No Solicitation

Kurzweil and its executive officers and directors have agreed that they will not directly or indirectly encourage, solicit, initiate, engage or participate in negotiations with or disclose any nonpublic information to any person or entity (other than Lernout & Hauspie) concerning any acquisition of Kurzweil or take any other action intended or designed to facilitate the efforts of any person or entity (other than Lernout & Hauspie) relating to a possible acquisition of Kurzweil, subject to certain qualifications. See "The Merger and Related Transactions-No Solicitation."

Related Agreements

Loan Agreement. Pursuant to the terms of a Loan Agreement dated April 14, 1997 (the "Loan Agreement"), a subsidiary of Lernout & Hauspie (the "L&H Subsidiary") agreed to loan to Kurzweil up to $1.5 million under a line of credit (the "Loan") to finance Kurzweil's working capital needs, including certain license payments due. The Loan bears interest at a rate of 8.5% per annum and is secured by all of Kurzweil's assets. On May 1, 1997, Kurzweil drew down the full amount of the Loan. All outstanding principal and interest under the Loan is due and payable in full on October 31,1997.

Common Stock Warrant. In consideration for the commitment to make the Loan, Kurzweil issued to the L&H Subsidiary the right to purchase 185,000 shares of Kurzweil Common Stock at a price of $3.21 per share pursuant to the terms of a common stock warrant (the "Warrant") dated April 14, 1997. The Warrant is immediately exercisable and expires on the earlier to occur of the Effective Time or April 14, 2002. See "The Merger and Related Transactions-Related Agreements."

Federal Securities Law Consequences

L&H Common Stock received in the Merger will be freely transferable by the holders thereof, except for those shares held by holders who may be deemed to be "affiliates" of Kurzweil (generally the current executive officers and directors of Kurzweil) under applicable federal securities laws. See "The Merger and Related Transactions-Federal Securities Laws Consequences."

Certain Federal Income Tax Matters

Holders of Kurzweil Common Stock will recognize gain or loss on the exchange of their Kurzweil Common Stock for cash and L&H Common Stock measured by the difference between the basis of the Kurzweil Common Stock surrendered and the sum of the amount of cash and the fair market value of L&H Common Stock received in exchange. Such gain or loss will be long-term capital gain or loss if the Kurzweil Common Stock was held for more than one year, and will be short-term capital gain or loss if held for one year or less. Short-term capital gains are taxable at the rates applicable to ordinary income, while long-term capital gains are generally taxable at a maximum rate of 28%. Capital losses are generally deductible only against capital gains and not against ordinary' income. However, in the case of an individual, unused capital losses in excess of capital gains may offset ordinary income up to specified amounts. See "The Merger and Related Transactions-Certain Tax Considerations.''

Tax matters are very complicated and the tax Consequences of the Merger to a particular stockholder will depend on the facts of the stockholder's situation. Kurzweil stockholders should consult their own tax advisors to fully understand the tax consequences of the Merger.

Accounting Treatment

The Merger will be accounted for under the purchase method of accounting. The purchase price will be allocated to the assets acquired and liabilities assumed based on their fair value. The allocation will be made based upon valuations that have not been finalized. However, it is anticipated that a significant portion of the purchase price will be allocated to in-process research and development, which will be written-off and which will result in a charge to Lernout & Hauspie's earnings of approximately $39.0 million in the fiscal quarter in which the Merger is consummated. The amount of the estimated charge to earnings is based on a preliminary valuation and the actual amount could vary significantly upon completion of the final valuation.

In addition, the Merger will result in a significant amount of goodwill and other intangible assets which will create substantial amortization charges to the consolidated income of Lernout & Hauspie over the useful lives of the assets acquired. The amount of such charges is estimated at approximately $2.0 million per fiscal year for approximately seven years; however, actual charges could vary significantly in the event the underlying assets are impaired or the related useful lives are less than currently estimated. See ''Risk Factors-Risks Relating to the Merger-Transaction Costs" and "Lernout & Hauspie Pro Forma Condensed Consolidated Financial Information."

Appraisal Rights

Holders of Kurzweil Common Stock who (i) elect to dissent from the approval and adoption of the Merger Agreement, (ii) have not voted their shares in favor of the Merger. (iii) have delivered to Kurzweil a written demand for appraisal of such shares and (iv) meet certain other statutory requirements, will be entitled to have the value of their shares appraised in accordance with Section 262 of the Delaware General Corporation Law, as amended (the "DGCL"), the text of which is attached as Appendix C. See "The Merger and Related Transactions-Appraisal Rights."

Regulatory Matters

Neither Lernout & Hauspie nor Kurzweil is aware of any governmental or regulatory approvals required for the consummation of the Merger other than the compliance with applicable securities laws and filings under Belgian and Delaware law.

Comparative Rights of Stockholders

If the Merger is consummated, the rights of Kurzweil stockholders will no longer be governed by the DGCL, Kurzweil's Restated Certificate of Incorporation, as amended, and its Amended and Restated Bylaws, but instead will he governed by Belgian law and Lernout & Hauspie's Restated Articles of Association. There are significant differences between the corporate laws of Delaware and the corporate laws of Belgium applicable to Lernout & Hauspie and its stockholders. See "Comparison of Rights of Stockholders of Lernout & Hauspie and Kurzweil."

Exchange of Securities

If the Merger becomes effective, the holders of record of Kurzweil Common Stock and holders of vested or exercisable ''in the money'' Kurzweil Options and Kurzweil Warrants will be required to surrender their stock certificates and their agreements representing such ''in the money'' Kurzweil Options and Kurzweil Warrants, respectively, in exchange for $4.20 in cash, certificates representing shares of L&H Common Stock and a cash payment in lieu of fractional shares, if any, for each share of Kurzweil Common Stock held by them and each O&W Share deemed held by them in connection with their "in the money" Kurzweil Options and Kurzweil Warrants. Stock certificates and agreements representing "in the money" Kurzweil Options and Kurzweil Warrants should not he surrendered at this time. See "The Merger and Related Transactions-- Conversion of Securities; Procedures for Exchange."

Comparative Per Share Market Price Data

The L&H Common Stock is traded, and following consummation of the Merger will continue to be traded, on the Nasdaq National Market under the symbol "LHSPF." Kurzweil Common Stock is traded on the Nasdaq National Market under the symbol "KURZ." If the Merger is consummated, the Kurzweil Common Stock will be delisted from the Nasdaq National Market and the registration of the Kurzweil Common Stock under the Securities Exchange Act of 1934, as amended, will be terminated. For a comparison of per share market price data of L&H Common Stock and Kurzweil Common Stock, see "Comparative Market Price Data."

Recent Market Prices

The following table sets forth the closing prices per share of L&H Common Stock and Kurzweil Common Stock, respectively, on the Nasdaq National Market on April 14,1997, the last trading day preceding the public announcement of the Merger, and on May 29, 1997. the latest practicable trading day before the printing of this Proxy Statement/Prospectus, and the equivalent per share value of Kurzweil Common Stock on such dates. The equivalent per share value for Kurzweil Common Stock has been computed by multiplying the L&H Common Stock per share price by the Conversion Ratio (assuming the Conversion Ratio is 0.0523 and 0.047549 calculated based upon the Average Market Value for the periods ending on the last trading day before April 14, 1997 and May 29, 1997, respectively) and adding the applicable cash payment of $4.20 per share. See "The Merger and Related Transactions-- General."

Kurzweil stockholders are advised to obtain current market quotations for L&H Common Stock and Kurzweil Common Stock. Because the market price of L&H Common Stock is subject to fluctuation, the market value of the shares of L&H Common Stock that holders of Kurzweil Common Stock will receive in the Merger and, as a result, the equivalent per share value for the Kurzweil Common Stock, may increase or decrease prior to and at the Effective Time from that shown above. No assurance can be given as to the market prices of L&H Common Stock or Kurzweil Common Stock at, or in the case of the L&H Common Stock after, the Effective Time. See "Risk Factors-Risks Relating to the Merger-Kurzweil Nasdaq National Market Listing" and "-Risks Relating to Lernout & Hauspie and Kurzweil-Volatility of Stock Price."

Number of Holders

As of the Record Date. there were 386 holders of record of L&H Common Stock and 802 holders of record of Kurzweil Common Stock, as shown on the records of their respective transfer agents.

Dividend Policy

Neither Lernout & Hauspie nor Kurzweil has declared or paid any cash dividends on its capital stock. Lernout & Hauspie's current policy is to propose that the stockholders vote to retain Lernout & Hauspie's earnings to finance future growth. Under Belgian law, dividends, if any, are declared by Lernout & Hauspie's stockholders out of Lernout & Hauspie's net profits based on Lernout & Hauspie's audited accounts maintained in accordance with Belgian law, provided (i) Lernout & Hauspie has reserved five percent of its net profits in accordance with Belgian law until such reserve has reached an amount equal to ten percent of its share capital (the "Nondistributable Reserves") and (ii) following any such dividend, the net assets of Lernout & Hauspie remain above the sum of its paid-in capital and of its Nondistributable Reserves. Kurzweil intends to continue to retain any earnings for the foreseeable future for use in the operation of its business.

Lernout & Hauspie Summary Consolidated Financial Data

The following selected summary financial data of Lemout & Hauspie have been derived from its historical consolidated financial statements and should be read in conjunction with such consolidated financial statements and notes thereto.

	Years Ended December 31,
	1992	1993	1994	1995	1996
	(in thousands, except per share data)
Statement of Operations Data:
Revenues(1)	$ ---	$ 180	$ 2,381	$ 7,722	$ 31,014
Write-off of in-process research and developrnent(2)	---	---	---	---	11,514
Operating (loss)	(7,886)	(10,453)	(15,269)	(10,863)	(7,501)
Loss from continuing operations	(9,302)	(12,602)	(18,862)	(13,975)	(7,376)
Loss from discontinued operations(3)	(3,750)	---	---	---	---
Net loss	$ (13,052)	$ (12,602)	$ (18,862)	$ (13,975)	$ (7,939)
Net loss per share:
Continuing operations	$ (2.09)	$ (1.67)	$ (2.47)	$ (1.67)	$ (0.53)
Discontinued operations	(0.84)
Total net loss per share	$ (2.93)	$ (1.67)	$ (2.47)	$ (1.67)	$ (0.53)
Number of shares used in calculating per share amounts	4,459	7,553	7,636	8,355	14,900
	December 31,
	1992	1993	1994	1995	1996
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$ 1,213	$ 13	$ 2,048	$ 22,543	$ 27,690
Working capital (deficiency)	(20,412)	(27.120)	(22,040)	18,622	18,885
Total assets	6,408	6,253	7,036	32,792	79,874
Long-term debt, less current portion	1,606	4,796	20,584	3,210	38,941
Total stockholders' equity (deficit)	(17,488)	(26,379)	(39,311)	18,889	16,535

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(1) License and engineering revenues for the year ended December 31, 1995 included approximately $2.3 million from Quarterdeck Flanders N.V. and Quarterdeck Corporation, and for the year ended December 31, 1996 included approximately $15.2 million from Quarterdeck Corporation, NDC Europe N.V., NOC China N.V., NDC Far East N.V., NDC Voice Eastern Europe N.V., NDC Voice Middie East N.V., NDC Voice South America N.V., Keyware Technologies N.V. and Dictation Consortium N.V. See Notes 11 and 14 to Notes to Consolidated Financial Statements of Lernout & Hauspie.

(2) This write-off was recorded in connection with Lemout & Hauspie's acquisition of Berkeley Speech Technologies, Inc. and BeSTspeech Products Inc. (collectively, "Berkeley"). See Note 4 to Notes to Consolidated Financial Statements of Lernout & Hauspie.

(3) Loss from discontinued operations is attributable to losses from Lernout & Hauspie's applications business, which was discontinued upon the sale of substantially all of the assets of that business in March 1992. See Note 16 to Notes to Consolidated Financial Statements of Lemout & Hauspie.

Kurzweil Summary Financial Data

The following selected summary financial data of Kurzweil have heen derived from its historical financial statements and should be read in conjunction with such financial statements and notes thereto.

	Fiscal Years Ended January 31,
	1995	1996	1997
	(in thousands, except per share data)
Statement or Operations Data:
Total revenue	$ 12,362	$ 9,360	$ 8,547
Net (loss)	(11,192)	(2,586)	(4,140)
Net (loss) per share	(2.13)	(0.38)	(0.50)
Weighted average common shares outstanding	5,248	6,756	8,342
	January 31,
	1995	1996	1997
	(in thousands)
Balance Sheet Data:
Working capital (deficiency)	$ 3,717	$ 660	$ (97)
Total assets	13,041	8,864	8,173
Stockholders' equity	5,327	2,888	2,787

Lernout & Hauspie Summary Pro Forma Condensed Consolidated Financial Data

In September 1996, Lemout & Hauspie acquired Mendez Translations S.A. and subsidiaries ("Mendez") for approximately $17.9 million, including acquisition costs. In November 1996, Lernout & Hauspie acquired Berkeley for $16.0 million, including acquisition costs. The financial results of Mendez and Berkeley have been included in Lemout & Hauspie's historical consolidated financial statements from the respective dates of acquisition. See Note 4 to Notes to the Consolidated Financial Statements of Lernout & Hauspie. In April 1997, Lemout & Hauspie entered into the Merger Agreement to acquire Kurzweil for approximately $53.0 million, including acquisition costs and subject to adjustment.

The following selected summary unaudited pro forma statement of operations data (the "Summary Pro Forms Statement of Operations") for the year ended Decemher 31, 1996 gives pro forms effect to the acquisitions of Mendez, Berkeley and Kurzweil as if they had occurred on January 1, 1996. The Summary Pro Forma Statement of Operations is based on the historical results of operations of Lemout & Hauspie for the year ended December 31, 1996, of Mendez for the eight months ended August 31, 1996, of Berkeley for the period January 1, 1996 to November 25, 1996 and of Kurzweil for the year ended January 31, 1997. The following selected summary unaudited pro forma balance sheet data as of December 31, 1996 (the "Summary Pro Forma Balance Sheet'') gives pro forma effect to the acquisition of Kurzweil as if it had occurred on that date. The Summary Pro Forma Statement of Operations and Summary Pro Forma Balance Sheet (the "Summary Pro Forma Financial Data") should be read in conjunction with and are qualified by the historical financial statements of Lemout & Hauspie, Mendex, Berkeley and Kurzweil and Notes thereto and the Lernout & Hauspie Pro Forms Condensed Consolidated Financial Information and Notes thereto appearing elsewhere herein.

The Summary Pro Forms Financial Data is intended for informational purposes only and is not necessarily indicative of the future financial position or future results of operations of the consolidated company afier the acquisitions of Mendez, Berkeley and Kurzweil, or of the financial position or results of operations of the consolidated company that would have actually occurred had the acquisition of Mendez, Berkeley and Kurzweil been effected as of the date or on the first day of the period presented.

(1) Includes a $11.5 million write-off of in-process research and development incurred in connection with the acquisition of Berkeley and a $39.0 million write-off anticipated to be incurred in connection with the Merger.