-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TawjC4WMqkW6Q3jUNlR0p1yLbr4exBeHJ4zswIFIxAoQhKTahheGtSHJH/4ICoxp b6nzqEz09RCiUJmP7Zzm+w== 0000950008-99-000063.txt : 19990315 0000950008-99-000063.hdr.sgml : 19990315 ACCESSION NUMBER: 0000950008-99-000063 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19990312 EFFECTIVENESS DATE: 19990312 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCANSOFT INC CENTRAL INDEX KEY: 0001002517 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 943156479 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-74343 FILM NUMBER: 99564269 BUSINESS ADDRESS: STREET 1: 34800 COMPUS DRIVE CITY: FREMONT STATE: CA ZIP: 94555 BUSINESS PHONE: 5106080300 MAIL ADDRESS: STREET 1: 2560 W BAYSHORE RD CITY: PALO ALTO STATE: CA ZIP: 94303 FORMER COMPANY: FORMER CONFORMED NAME: VISIONEER INC DATE OF NAME CHANGE: 19951020 S-8 1 FORM S-8 As filed with the Securities and Exchange Commission on March 12, 1999 Registration No. 333-______ - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form S-8 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ScanSoft, Inc. (Exact name of registrant as specified in its charter) Delaware 94-3156479 - --------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9 Centennial Drive Peabody, Massachusetts 01960 - --------------------------------- ---------------------- (Address of Principal (Zip Code) Executive Offices) SCANSOFT, INC. 1998 STOCK OPTION PLAN (Full title of the plan) Copy to: MICHAEL K. TIVNAN KATHARINE A. MARTIN ScanSoft, Inc. Pillsbury Madison & Sutro LLP 9 Centennial Drive 2550 Hanover Street Peabody, Massachusetts 01960 Palo Alto, CA 94304 (978) 977-2000 (650) 233-4500 - --------------------------------- ---------------------- (Name, address and telephone number, including area code, of agent for service) CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------------------
Title of Amount Proposed Maximum Proposed Amount of Securities To To Be Offering Price Maximum Aggregate Registration Be Registered Registered(1) per Share Offering Price(2) Fee(2) - ------------------------------------------------------------------------------------------------------------------------------------ Common Stock, 1,738,552 shares $0.61 $1,060,517 $295.00 par value $.001 - ------------------------------------------------------------------------------------------------------------------------------------
(1) This Registration Statement shall also cover any additional shares of Registrant's Common Stock which become issuable under the ScanSoft, Inc. 1998 Stock Option Plan by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the Registrant's receipt of consideration which results in an increase in the number of the Registrant's outstanding shares of Common Stock. (2) Estimated in accordance with Rule 457(h) under the Securities Act of 1933, as amended (the "Securities Act") solely for the purpose of calculating the amount of the registration fee based on the weighted average exercise price per share of outstanding options. ----------------- The Registration Statement shall become effective upon filing in accordance with Rule 462 under the Securities Act of 1933. - -------------------------------------------------------------------------------- PART I INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS ITEM 1. PLAN INFORMATION.* ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.* * Information required by Part I to be contained in the Section 10(a) prospectus is omitted from this Registration Statement in accordance with Rule 428 under the Securities Act of 1933, as amended, and the Note to Part I of Form S-8. PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. The following documents filed by Registrant with the Securities and Exchange Commission are incorporated by reference in this registration statement: (1) The Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 1997; (2) The Registrant's Quarterly Reports on Form 10-Q for the quarters ended March 31, June 28 and September 27, 1998. (3) The Registrant's Current Reports on Form 8-K filed on December 8, 1998 and January 21, 1999. (4) The description of the Registrant's Common Stock contained in the Registrant's Registration Statement on Form 8-A filed on October 20, 1995 with the Commission under Section 12 of the Securities Exchange Act of 1934, as amended, including any amendments or report filed for the purpose of updating such description. In addition, all documents subsequently filed by Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the date of filing of such documents. -2- ITEM 4. DESCRIPTION OF SECURITIES. Not applicable. ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL. Not applicable. ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law provides for the indemnification of officers, directors, and other corporate agents in terms sufficiently broad to indemnify such persons under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933, as amended (the "Act"). Article XI of the Registrant's Amended and Restated Certificate of Incorporation (Exhibit 4.1 to this Form S-8) authorizes indemnification of the Registrant's directors, officers, employees and other agents to the extent and under the circumstances permitted by the Delaware General Corporation Law. ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED. Not applicable. ITEM 8. EXHIBITS. See Index to Exhibits. ITEM 9. 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 of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the post-registration statement (or the most recent effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; -3- (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) do not apply if the registration statement is on Form S-3 or Form S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, 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 which remain unsold at the termination of the offering. (b) The undersigned Registrant hereby further undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 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) Insofar as indemnification for liabilities arising under the Securities Act of 1933 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 Securities and Exchange Commission such indemnification is against public policy as expressed in the 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 to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. -4- 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 of the requirements for filing on Form S-8 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Peabody, Commonwealth of Massachusetts, on March 12, 1999. SCANSOFT, INC. By /s/ Michael K. Tivnan ------------------------------------ Michael K. Tivnan President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael K. Tivnan and Sharon Plante, and each of them his or her true and lawful attorneys-in-fact and agents, each 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 and all amendments, including post-effective amendments, to this registration statement, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done, 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 his or her substitute or substitutes, may 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 date indicated: Name Title Date ---- ----- ---- /s/ Michael K. Tivnan President and Director March 12, 1999 - ------------------------------- (Principal Executive Michael K. Tivnan Officer) /s/ Richard Brenner Acting Chief Financial March 12, 1999 - ------------------------------- Officer (Principal Richard Brenner Financial Officer) /s/ Sharon Plante Treasurer (Principal March 12, 1999 - ------------------------------- Accounting Sharon Plante Officer) -5- Name Title Date ---- ----- ---- /s/ William J. Harding, Ph. D. Director March 12, 1999 - ------------------------------- William J. Harding, Ph.D. - ------------------------------- Director ________, 1999 David F. Marquardt /s/ Mark B. Myers Director March 12, 1999 - ------------------------------- Mark B. Myers /s/ Paul A. Ricci Director March 12, 1999 - ------------------------------- Paul A. Ricci /s/ J. Larry Smart Director March 12, 1999 - ------------------------------- J. Larry Smart -6- INDEX TO EXHIBITS Exhibit Number Exhibit - ------- ------- 4.1 Amended and Restated Certificate of Incorporation. 4.2 Specimen Stock Certificate. 5.1 Opinion regarding legality of securities to be offered. 23.1 Consent of PricewaterhouseCoopers LLP. 23.2 Consent of Pillsbury Madison & Sutro LLP (included in Exhibit 5.1). 24.1 Power of Attorney (included on page 6). 99.1 1998 ScanSoft, Inc. Stock Option Plan. 99.2 Form of Option Agreement under 1998 ScanSoft, Inc. Stock Option Plan. EX-4.1 2 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF VISIONEER, INC. a Delaware Corporation (Pursuant to Sections 242 & 245 of the Delaware General Corporation Law) The undersigned J. Larry Smart and Joshua L. Green hereby certify that: ONE: They are the duly elected and acting President and Secretary, respectively, of said corporation. TWO: That the name of the corporation is Visioneer, Inc. and that the corporation was originally incorporated on September 21, 1995 under the name Visioneer Communications, Inc. pursuant to the General Corporation Law. THREE: The Amended and Restated Certificate of Incorporation of this corporation shall be restated to read in full as follows: ARTICLE I The name of this corporation is Visioneer, Inc. ARTICLE II The address of the registered office of this corporation in the State of Delaware is 1013 Centre Road, Wilmington, County of New Castle, Delaware and its registered agent at such address is The Prentice-Hall Corporation System, Inc. ARTICLE III The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. ARTICLE IV (A) CLASSES OF STOCK. This corporation is authorized to issue two classes of stock to be designated common stock ("Common Stock") and preferred stock ("Preferred Stock"). The total number of shares which the Corporation is authorized to issue is Ninety Million (90,000,000) shares. The number of shares of Common Stock authorized to be issued is Seventy Million (70,000,000), par value $.001 per share, and the number of shares of Preferred Stock authorized to be issued is Twenty Million (20,000,000), par value $.001 per share. (B) RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The Preferred Stock authorized by this Amended and Restated Certificate of Incorporation may be issued from time to time in one or more series. The first series of Preferred Stock shall be designated "Series B Preferred Stock" and shall consist of fifteen million (15,000,000) shares. The rights, preferences, privileges, and restrictions granted to and imposed on the Series B Preferred Stock are as set forth below in this Article IV(B). The Board of Directors is hereby authorized, in the resolution or resolutions adopted by the Board of Directors providing for the issuance of any wholly unissued series of Preferred Stock, within the limitations and restrictions stated in this Amended and Restated Certificate of Incorporation, to fix or alter the dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price or prices, and the liquidation preferences of any wholly unissued series of Preferred Stock, and the number of shares constituting any such series and the designation thereof, or any of them, and to increase or decrease the number of shares of any series subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. 1. Dividend Provisions. (a) The holders of shares of Series B Preferred Stock shall be entitled to receive dividends, out of any assets legally available therefor, prior and in preference to any declaration or payment of any dividend (payable other than in Common Stock or other securities and rights convertible into or entitling the holder thereof to receive, directly or indirectly, shares of Common Stock of this corporation) on the Common Stock of this corporation, at the rate of $0.065 per share of Series B Preferred Stock per annum (as determined on a per annum basis and an as converted basis for the Series B Preferred Stock) whenever funds are legally available therefor, payable when, as and if declared by the Board of Directors. Such dividends shall be non-cumulative. Unless full dividends on the Series B Preferred Stock for the then current dividend period shall have been paid or declared and a sum sufficient for the payment thereof set apart: (i) no dividend whatsoever (other than a dividend payable solely in Common Stock or other securities and rights convertible into or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock of this corporation) shall be paid or declared, and no distribution shall be made, on any Common Stock. Dividends, if declared, must be declared and paid with respect to all series of Preferred Stock contemporaneously, and if less than full dividends are declared, the same percentage of the dividend rate will be payable to each series of Preferred Stock. (b) After payment of such dividends, any additional dividends or distributions shall be distributed among all holders of Common Stock and all holders of Series B Preferred Stock in proportion to the number of shares of Common Stock which would be held by each such holder if all shares of Series B Preferred Stock were converted to Common Stock at the then effective conversion rate. -2- 2. Liquidation Preference. (a) In the event of any liquidation, dissolution or winding up of this corporation, either voluntary or involuntary, the holders of Series B Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of this corporation to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to (i) $1.30 for each outstanding share of Series B Preferred Stock (the "Original Series B Issue Price") plus an amount equal to all declared but unpaid dividends on each such share. If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series B Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then the entire assets and funds of this corporation legally available for distribution shall be distributed ratably among the holders of the Series B Preferred Stock in proportion to the product of the liquidation preference of each such share and the number of such shares owned by each such holder. (b) After the distribution described in section (a) above has been paid, the remaining assets of this corporation available for distribution to stockholders shall be distributed among the holders of Common Stock pro rata based on the number of shares of Common Stock held by each. 3. No Redemption. No holder of Series B Preferred Stock shall have any right to require the corporation or any "related person" (within the meaning of section 351(g)(3)(B) of the Internal Revenue Code) to redeem or purchase any shares of Series B Preferred Stock. Similarly, neither the corporation nor any such related person shall have any right or option to redeem or purchase any shares of Series B Preferred Stock from any holder thereof. 4. Conversion. The holders of Series B Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): (a) Right to Convert; Automatic Conversion. (i) Subject to subsection (c), each share of Series B Preferred Stock shall be convertible, at the option of the holder thereof, during the periods specified in Section 4(a)(ii) below, at the office of this corporation or any transfer agent for the Series B Preferred Stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Series B Issue Price by the Conversion Price applicable to such shares in effect on the date the certificate for such share is surrendered for conversion. The initial Conversion Price per share for shares of Series B Preferred Stock shall be the Original Series B Issue Price; provided, however, that the Conversion Price for shares of Series B Preferred Stock shall be subject to adjustment as set forth in subsection 4(c) below. (ii) The shares of Series B Preferred Stock shall not be convertible into Common Stock prior to March 2, 2001; provided, however, that -3- notwithstanding the foregoing, each share of Series B Preferred Stock shall be convertible into Common Stock, at the option of the holder thereof, at any time after the date on which such holder owns directly or indirectly a number of outstanding shares of Common Stock of this corporation that represents less than 30.0% of the total number of shares of Common Stock outstanding immediately prior to conversion of such share; and provided further, however, that such holder shall not be entitled to convert any share of Series B Preferred Stock pursuant to this Section 4(a)(ii) if the conversion of such share to Common Stock would result in such holder owning directly or indirectly a number of outstanding shares of Common Stock of this corporation that represents more than 50.0% of the total number of shares of Common Stock outstanding immediately after the conversion of such share. (iii) At any time after March 2, 2001, upon the written consent of the holders of at least 66-2/3% of the then outstanding shares of Series B Preferred Stock, each share of Series B Preferred Stock shall automatically and immediately be converted into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Series B Issue Price by the Conversion Price applicable to such shares in effect on the date the certificate for such share is surrendered for conversion. The initial Conversion Price per share for shares of Series B Preferred Stock shall be the Original Series B Issue Price; provided, however, that the Conversion Price for shares of Series B Preferred Stock shall be subject to adjustment as set forth in subsection 4(c) below. (b) Mechanics of Conversion. Before any holder of shares of Series B Preferred Stock shall be entitled to convert the same into shares of Common Stock, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of this corporation or of any transfer agent for such Series B Preferred Stock, and shall give written notice by mail, postage prepaid, to this corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. This corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series B Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series B Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. If the conversion is in connection with an underwritten offering of securities registered pursuant to the Securities Act of 1933, as amended, the conversion may, at the option of any holder tendering Series B Preferred Stock for conversion, be conditioned upon the closing with the underwriter(s) of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the Common Stock issuable upon such conversion of shares of Series B Preferred Stock shall not be deemed to have converted such shares of Series B Preferred Stock until immediately prior to the closing of such sale of securities. -4- (c) Conversion Price Adjustments of Series B Preferred Stock. The Conversion Price of the Series B Preferred Stock shall be subject to adjustment from time to time as follows: (i) In the event this corporation should at any time or from time to time after the date upon which any shares of Series B Preferred Stock were initially issued (a "Purchase Date") fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then as of such record date (or the date of such dividend distribution split or subdivision if no record date is fixed), the Conversion Price of the Series B Preferred Stock shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of each such series shall be increased in proportion to such increase of outstanding shares. (ii) If the number of shares of Common Stock outstanding at any time after a Purchase Date is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for the Series B Preferred Stock shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of each such series shall be decreased in proportion to such decrease in outstanding shares. (d) Other Distributions. In the event this corporation shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by this corporation or other persons, assets (excluding cash dividends) or options or rights not referred to in subsection 4(c)(i), then, in each such case for the purpose of this subsection 4(d), the holders of Series B Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of this corporation into which their shares of Series B Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of this corporation entitled to receive such distribution. (e) Recapitalization. If at any time or from time to time there shall be a recapitalization of the Common Stock (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 4 or Section 5), provision shall be made so that the holders of Series B Preferred Stock shall thereafter be entitled to receive upon conversion of their Series B Preferred Stock, the number of shares of stock or other securities or property of this corporation or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate -5- adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the holders of Series B Preferred Stock after the recapitalization to the end that the provisions of this Section 4 (including adjustment of the Conversion Price then in effect and the number of shares purchasable upon conversion of the Series B Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable. (f) No Impairment. This corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by this corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series B Preferred Stock against impairment. (g) Fractional Shares and Certificate as to Adjustments. (i) No fractional shares shall be issued upon conversion of any share or shares of Series B Preferred Stock. All shares of Common Stock (including fractions thereof) issuable upon such conversion shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a share of Common Stock, the corporation shall, in lieu of issuing any fractional share, pay the holder otherwise entitled to such fraction a sum in cash equal to the fair market value of such fraction on the date of conversion (as determined in good faith by the Board of Directors). (ii) Upon the occurrence of each adjustment or readjustment of the Conversion Price of Series B Preferred Stock pursuant to this Section 4, this corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series B Preferred Stock, a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. This corporation shall, upon the written request at any time of any holder of Series B Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Conversion Price for Series B Preferred Stock at the time in effect, and (C) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of a share of Series B Preferred Stock. (h) Notices of Record Date. In the event of any taking by this corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, this corporation shall mail -6- to each holder of Series B Preferred Stock, at least 20 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right. (i) Reservation of Stock Issuable Upon Conversion. This corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of Series B Preferred Stock such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series B Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series B Preferred Stock, in addition to such other remedies as shall be available to the holder of Series B Preferred Stock, this corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. (j) Notices. Any notice required by the provisions of this Section 4 to be given to the holders of shares of any series of Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books of this corporation. 5. Merger, Consolidation or Reorganization. (a) A consolidation, merger or other reorganization of this corporation with or into another corporation or other entity or person in which this corporation shall not be the continuing or surviving entity of such merger, consolidation or reorganization, or the sale of all or substantially all of this corporation's properties and assets to any other person, or any transaction or series of related transactions by this corporation in which an excess of 50% of this corporation's voting power is transferred shall be deemed to be a liquidation for all purposes of Section 2 hereof, unless this corporation's stockholders of record immediately prior to such merger, consolidation, reorganization, sale or transaction are holders of more than 50% of the voting equity securities of the surviving corporation. (b) In the event the requirements of subsection 5(a) are not complied with, this corporation shall forthwith either: (i) cause such closing to be postponed until such time as the requirements of this Section 5 have been complied with, or (ii) cancel such transaction, in which event the rights, preferences and privileges of the holders of the Series B Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in subsection 5(c) hereof. -7- (c) This corporation shall give each holder of record of Series B Preferred Stock written notice of such impending transaction not later than 20 days prior to the stockholders' meeting called to approve such transaction, or 20 days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 5, and this corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place earlier than 20 days after this corporation has given the first notice provided for herein or earlier than ten days after this corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of a majority of the shares of the Series B Preferred Stock then outstanding. 6. Voting Rights. The holders of Series B Preferred Stock shall not be entitled to vote on any matters except as expressly provided in Section 242(b)(2) of the Delaware General Corporation Law. In such event, the holder of each share of Series B Preferred Stock shall have the right to one vote for each share of Common Stock into which such Series B Preferred Stock could then be converted. In all cases any fractional share, determined on an aggregate as-converted basis, shall be rounded to the nearest whole share (with one-half being rounded upward). If the Series B Preferred Stockholders are entitled to vote, such holders shall be entitled, notwithstanding any provision hereof, to notice in accordance with the bylaws of this corporation of any stockholders' meeting that is called to consider a matter as to which the Series B Preferred Stockholders would be entitled to vote. 7. Status of Converted Stock. In the event any shares of Series B Preferred Stock shall be converted pursuant to Section 4 hereof, the shares so converted shall be canceled and shall not be issuable by this corporation. 8. No Preemptive Rights. The holders of the Series B Preferred Stock shall not have any preemptive rights. (C) COMMON STOCK. This corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least sixty-six and two-thirds percent (66 2/3%) the then outstanding shares of Common Stock, voting together as a separate class: 1. sell, convey, or otherwise dispose of or encumber all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly-owned subsidiary corporation) or effect any other transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Corporation is disposed of, provided that this provision shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Corporation; 2. authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible into or exercisable for any equity security, having a -8- preference over, or being on a parity with, the Series B Preferred Stock with respect to voting, dividends, conversion or upon liquidation; 3. alter or change the rights, preferences or privileges of the shares of Series B Preferred Stock so as to adversely affect them; 4. increase or decrease (other than by conversion) the total number of authorized shares of Series B Preferred Stock; 5. redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any share or shares of Common Stock or Preferred Stock, provided however, that this restriction shall not apply to the repurchase of shares of Common Stock from employees, officers, directors, consultants or other persons performing services for this corporation or any subsidiary pursuant to agreements under which this corporation has the option to repurchase such shares at cost or at cost upon the occurrence of certain events, such as the termination of employment; 6. declare or pay any dividends on its Common or Preferred Stock; or 7. amend the Corporation's Bylaws. ARTICLE V Except as otherwise provided in this Amended and Restated Certificate of Incorporation, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend, and rescind any or all of the Bylaws of this corporation. ARTICLE VI The number of directors of this corporation shall be fixed from time to time by a bylaw or amendment thereof duly adopted by the Board of Directors or by the stockholders. ARTICLE VII Elections of directors need not be by written ballot unless the Bylaws of this corporation shall so provide. ARTICLE VIII Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of this corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of this corporation. -9- ARTICLE IX A director of this corporation shall, to the full extent permitted by the Delaware General Corporation Law as it now exists or as it may hereafter be amended, not be liable to this corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Neither any amendment nor repeal of this Article, nor the adoption of any provision of this Amended and Restated Certificate of Incorporation inconsistent with this Article, shall eliminate or reduce the effect of this Article in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. If the Delaware General Corporation Law is amended after approval by the stockholders of this Article to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law as so amended. Any repeal or modification of the foregoing provisions of this Article by the stockholders of this corporation shall not adversely affect any right or protection of a director of this corporation existing at the time of such repeal or modification. ARTICLE X No action required to be taken or that may be taken at any annual or special meeting of the stockholders of this corporation may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. ARTICLE XI To the fullest extent permitted by applicable law, this corporation is authorized to provide indemnification of (and advancement of expenses to) its agents (and any other persons to which Delaware law permits this corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law of the State of Delaware, subject only to limits created by applicable Delaware law (statutory or non-statutory), with respect to actions for breach of duty to this corporation, its stockholders, and others. Any repeal or modification of any of the foregoing provisions of this Article shall not adversely affect any right or protection of a director, officer, agent or other person existing at the time of, or increase the liability of any director of this corporation with respect to any acts or omissions of such director, officer, agent or other person occurring prior to such repeal or modification. ARTICLE XII -10- This corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. * * * * -11- FOUR: That thereafter said amendment and restatement was duly adopted in accordance with the provisions of the General Corporation Law. IN WITNESS WHEREOF, the undersigned have executed this certificate on March 2, 1999. VISIONEER, INC. /s/ J. Larry Smart ----------------------------------------- J. Larry Smart President and Chief Executive Officer /s/ Joshua L. Green ---------------------------------------- Joshua L. Green Secretary -12- EX-4.2 3 SPECIMEN STOCK CERTIFICATE (Certificate Face) [Logo] ScanSoft, Inc NUMBER SHARES SS INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE COMMON STOCK CUSIP 80603P 10 7 SEE REVERSE FOR CERTAIN DEFINITIONS THIS CERTIFIES THAT is the owner of FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $0.001 PER SHARE, OF SCANSOFT, Inc.,(the "Corporation"), a Delaware corporation. The shares represented by this certificate are transferable only on the stock transfer books of the Corporation by the holder of record hereof, or by the holder's duly authorized attorney or legal representative, upon the surrender of this certificate properly endorsed. This certificate is not valid until countersigned by the Corporation's transfer agent and registrar. IN WITNESS WHEREOF, the Corporation has caused this certificate to be executed by the facsimile signatures of its duly authorized officers. Dated: [Katharine A. Martin] Secretary [Seal] [Michael K. Tivnan ] President COUNTERSIGNED AND REGISTERED: U.S. STOCK TRANSFER COMPANY TRANSFER AGENT AND REGISTRAR BY AUTHORIZED SIGNATURE (Certificate Back) ScanSoft, Inc. A statement of the rights, preferences, privileges and restrictions granted to or imposed upon the respective classes or series of shares of stock of the Corporation, and upon the holders thereof as established by the Certificate of Incorporation or by any certificate of determination of preferences, and the number of shares constituting each series or class and the designations thereof, may be obtained by any stockholder of the Corporation upon request and without charge from the Secretary of the Corporat ion at the principal office of the Corporation. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - . . . . . . . . Custodian . . . . . . . . . (Cust) (Minor) under Uniform Gifts to Minors Act . . . . . . . . . . . . . . . . . . . . . (State) UNIF TRF MIN ACT - . . . . . . . Custodian (until age . . . . . .) (Cust) . . . . . . . . under Uniform Transfer to Minors Act . . . . . . . . . . . . . . . . (State) Additional abbreviations may also be used though not in the above list. FOR VALUE RECEIVED, . . . . . . . . . . . . . . . . . hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney to transfer the said stock on the books of the within Corporation with full power of substitution in the premises. Dated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVEY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. Signature(s) Guaranteed: By . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15 EX-5.1 4 OPINION REGARDING LEGALITY Exhibit 5.1 PILLSBURY MADISON & SUTRO LLP 2550 Hanover Street Palo Alto, CA 94304 Tel: (650) 233-4500 Fax: (650) 233-4545 March 12, 1999 ScanSoft, Inc. 9 Centennial Drive Peabody, MA 01960 Re: Registration Statement on Form S-8 Gentlemen: With reference to the Registration Statement on Form S-8 to be filed by ScanSoft, Inc., a Delaware corporation (the "Company"), with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended, relating to 1,738,552 shares of the Company's Common Stock issuable upon the exercise of options granted pursuant to options granted under the 1998 ScanSoft, Inc. Stock Option Plan (the "Plan"), it is our opinion that when and if the Company's Common Stock is issued and sold in accordance with the options granted under the Plan, such Common Stock will be legally issued, fully paid and nonassessable. We hereby consent to the filing of this opinion with the Commission as Exhibit 5.1 to the Registration Statement. Very truly yours, /s/ PILLSBURY MADISON & SUTRO LLP PILLSBURY MADISON & SUTRO LLP [05573] EX-23.1 5 CONSENT OF INDEPENDENT AUDITORS Exhibit 23.1 CONSENT OF INDEPENDENT AUDITORS We hereby consent to the incorporation by reference in this Registration Statement on Form S-8 of our reports dated January 22, 1998 appearing on page 24 and page 38 of ScanSoft, Inc.'s (formerly Visioneer, Inc.'s) Annual Report on Form 10-K for the year ended December 31, 1997. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP San Jose, California March 10, 1999 EX-99.1 6 1998 STOCK OPTION PLAN ScanSoft Inc. 1998 STOCK OPTION PLAN ARTICLE I General Purpose of Plan The name of this plan is the ScanSoft, Inc. 1998 Stock Option Plan (the "Plan"). The purpose of the Plan is to enable ScanSoft, Inc., a Delaware corporation (the "Company"), and any Subsidiary to obtain and retain the services of the types of employees, consultants, officers and directors who will contribute to the Company's long range success and to provide incentives which are linked directly to increases in share value which will inure to the benefit of all shareholders of the Company. ARTICLE 2 Definitions For purposes of the Plan, the following terms are defined as set forth below: "Administrator" has the meaning set forth in Article 3. "Board" means the Board of Directors of the Company. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto. "Committee" means a committee of the Board designated by the Board to administer the Plan and composed of not less than the minimum number of persons from time to time required by Rule 16 b-3 under the Exchange Act, each of whom is a Non-Employee Director. However, a member of the Committee is not required to be a Non-Employee Director as defined by Rule 16b-3(b)(3)(i) under the Exchange Act if the Company does not have a class of equity securities registered pursuant to Section 12 of the Securities Act or if the Board determines that the Non-Employee Director requirement shall not apply. "Company" means ScanSoft, Inc. a corporation organized under the laws of the State of Delaware (or any successor corporation). "Date of Grant" means the date on which the Administrator adopts a resolution expressly granting a Right to a Participant, or if a different date is set forth in such resolution as the Date of Grant, then such date as is set forth in such resolution. "Director" means a member of the Board. "Disability" means permanent and total disability as defined by the Administrator. ScanSoft, Inc. "Director" means a member of the Board. "Disability" means permanent and total disability as defined by the Administrator. "Eligible Person" means an employee, officer or consultant or, subject to the limitations set forth in Article 5, Director of the Company, or any Parent or Subsidiary. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fair Market Value" per share at any date shall mean (i) if the Stock is listed on an exchange or exchanges, or admitted for trading in a market system which provides last sale data under Rule 11 Aa3-1 under the Exchange Act (a "Market System"), the last reported sales price per share on the last business day prior to such date on the principal exchange on which it is traded, or in such a Market System, as applicable, or if no sale was made on such day on such principal exchange or in such a Market System, as applicable, the last reported sales price per share on the most recent day prior to such date on which a sale was reported on such exchange or such Market System, as applicable; or (ii) if the Common Stock is not then traded on an exchange or in such a Market System, the average of the closing bid and asked prices per share for the Common Stock in the over-the-counter market as quoted on NASDAQ on the day prior to such date; or (iii) if the Common Stock is not listed on an exchange or quoted on NASDAQ, an amount determined by the Administrator in good faith. "Incentive Stock Option" means a Stock Option intended to qualify as an "incentive stock option" as that term is defined in Section 422 of the Code. "Liquidating Event" has the meaning set forth in Section 8.1(b) of the Plan. "Liquidity Event" has the meaning set forth in Section 8.1(c) of the Plan. "Non-Employee Director" has the meaning set forth in Rule 16b-3(b)(3)(i) under the Exchange Act, or any successor definition adopted by the SEC. "Non-Statutory Option" means a Stock Option intended not to qualify as an Incentive Stock Option. "Optionee" means a Participant who is granted a Stock Option pursuant to the Plan. Page 2 ScanSoft, Inc. "Parent" means any present or future corporation which would be a "parent corporation" as that term is defined in Section 424 of the Code. "Participant" means any Eligible Person selected by the Administrator, pursuant to the Administrator's authority in Article 3, to receive grants of Rights. "Plan" means this Venture Name 1996 Stock Option Plan, as the same may be amended or supplemented from time to time. "Purchased Shares" has the meaning set forth in Section 6.2(g) of the Plan. "Rights" means Stock Options. "Reorganization Event" has the meaning set forth in Section 8.1(c) of the Plan. "Retirement" means retirement from active employment with the Company or Subsidiary as defined by the Administrator. "SEC" means the Securities and Exchange Commission. "Section 16(b) Person" means a person subject to Section 16(b) of the Exchange Act. "Securities Act" means the Securities Act of 1933, as amended. "Special Terminating Event" with respect to a Participant shall mean the death, Disability or Retirement of that Participant. "Stock" means the Common Stock, par value $0.001 per share, of the Company. "Stock Option" means an option to purchase shares of Stock granted pursuant to Article 6. "Stock Option Agreement" has the meaning set forth in Section 6.2 of the Plan. "Subsidiary" means any present or future corporation which would be a "subsidiary corporation" as that term is defined in Section 424 of the Code. "Ten Percent Shareholder" means a person who on the Date of Grant owns, either directly or through attribution as provided in Section 424(d) of the Code, Stock Page 3 ScanSoft, Inc. possessing more than 10% of the total combined value or voting power of all classes of stock of his or her employer corporation or of any Parent or Subsidiary. ARTICLE 3 ADMINISTRATION SECTION 3.1 ADMINISTRATOR. The Plan shall be administered by either (i) the Board, or (ii) the Committee (the group that administers the Plan is referred to as the "Administrator"). SECTION 3.2 POWERS IN GENERAL. The Administrator shall have the power and authority to grant Stock Options to Eligible Persons, pursuant to the terms of the Plan. SECTION 3.3 SPECIFIC POWERS. In particular, the Administrator shall have the authority: (i) to construe and interpret the Plan and apply its provisions; (ii) to promulgate, amend and rescind rules and regulations relating to the administration of the Plan; (iii) to authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan; (iv) to determine when Rights are to be granted under the Plan; (v) from time to time to select, subject to the limitations set forth in this Plan, those Eligible Persons to whom Rights shall be granted; (vi) to determine the number of shares of Stock to be made subject to each Right; (vii) to prescribe the terms and conditions of each Stock Option, including, without limitation, the exercise price, medium of payment, right of first refusal and repurchase provisions and to determine whether the Stock Option is to be an Incentive Stock Option or a Non-Statutory Option and to specify the provisions of the Stock Option agreement relating to such Stock Option; (viii) to prescribe the terms and conditions of each Stock Option, including, without limitation, the purchase price and medium of payment, vesting provisions and repurchase provisions, and to specify the provisions of the Stock Option relating to such sale; (ix) to amend any outstanding Rights for the purpose of modifying the time or manner of vesting, or the exercise price, as the case may be, thereunder or otherwise, subject to applicable legal restrictions and to the consent of the other party to such agreement; (x) to determine the duration and purpose of leaves of absences which may be granted to a Participant without constituting termination of their employment for purposes of the Plan; and (xi) to make any and all other determinations which it determines to be necessary or advisable for administration of the Plan. SECTION 3.4 DECISIONS FINAL. All decisions made by the Administrator pursuant to the provisions of the Plan shall be final and binding on the Company and the Participants. Page 4 ScanSoft, Inc. SECTION 3.5 THE COMMITTEE. The Board may, in its sole and absolute discretion, from time to time delegate any or all of its duties and authority with respect to the Plan to the Committee whose members are to be appointed by and to serve at the pleasure of the Board. Once appointed, the Committee shall continue to serve until otherwise directed by the Board. From time to time, the Board may increase or decrease (to not less than two) the size of the Committee, add additional members to, remove members (with or without cause) from, appoint new members in substitution therefor, and fill vacancies, however caused, in the Committee. The Committee shall act pursuant to a vote of the majority of its members or, in the case of a committee comprised of only two members, the unanimous consent of its members, whether present or not, or by the written consent of the majority of its members or, in the case of a committee comprised of only two members, the unanimous written consent of its members, and minutes shall be kept of all of its meetings and copies thereof shall be provided to the Board. Subject to the limitations prescribed by the Plan and the Board, the Committee may establish and follow such rules and regulations for the conduct of its business as it may determine to be advisable. ARTICLE 4 STOCK SUBJECT TO PLAN SECTION 4.1 STOCK SUBJECT TO THE PLAN. Subject to adjustment as provided in Article 8, the total number of shares of Stock reserved and available for issuance under the Plan shall be 4,000,000 shares. Shares reserved hereunder may consist, in whole or in part, of authorized and unissued shares or treasury shares. SECTION 4.2 UNEXERCISED RIGHTS: REACQUIRED SHARES. To the extent that any Rights expire or are otherwise terminated without being exercised, the shares underlying such Rights (and shares related thereto) shall again be available for issuance in connection with future Rights under the Plan. Shares acquired by the Company upon exercise of Rights pursuant to Section 6.2(g) shall not increase the shares available for issuance under the Plan. ARTICLE 5 ELIGIBILITY Directors, officers, employees and consultants of the Company or any Parent or Subsidiary, who, as determined by the Administrator, are responsible for or contribute to the management, growth or profitability of the business of the Company or any Subsidiary, shall be eligible to be granted Rights hereunder subject to limitations set forth in this Plan; provided, however that only officers and employees of the Company shall be eligible to be granted Incentive Stock Options hereunder. Page 5 ScanSoft, Inc. ARTICLE 6 STOCK OPTIONS SECTION 6.1 GENERAL. Each Stock Option granted under the Plan shall be in such form and under such terms and conditions as the Administrator may from time to time approve; provided, that such terms and conditions are not inconsistent with the Plan. The provisions of Stock Option Agreements entered into under the Plan need not be identical. Stock Options granted under the Plan may be either Incentive Stock Options or Non-Statutory Options. SECTION 6.2 TERMS AND CONDITIONS OF STOCK OPTIONS. Each Stock Option granted pursuant to the Plan shall be evidenced by a written option agreement between the Company and the Optionee (the "Stock Option Agreement"), which shall comply with and be subject to the following terms and conditions: (a) Number of Shares. Each Stock Option Agreement shall state the number of shares of Stock to which the Stock Option relates. (b) Type of Option. Each Stock Option Agreement shall identify the portion (if any) of the Stock Option which constitutes an Incentive Stock Option. (c) Exercise Price. Each Stock Option Agreement shall state the price at which shares subject to the Stock Option may be purchased (the "Exercise Price"), which shall with respect to Incentive Stock Options be not less than 100% of the Fair Market Value of the shares of Stock on the Date of Grant. In the case of Non-Statutory Options, the Exercise Price shall be determined in the sole discretion of the Administrator, provided, however, that the Exercise Price shall be no less than 85% of the Fair Market Value of the shares of Stock on the Date of Grant of the Non-Statutory Option. In the case of either an Incentive Stock Option or a Non-Statutory Option granted to a Ten Percent Shareholder, the Exercise Price shall not be less than 110% of such Fair Market Value. (d) Value of Shares. The Fair Market Value of the shares of Stock (determined as of the Date of Grant) with respect to which Incentive Stock Options are first exercisable by an Optionee under this Plan and all other incentive option plans of the Company and any Parent or Subsidiary in any calendar year shall not, for such year, in the aggregate, exceed $100,000; but this Section 6.2(d) shall not affect the right of the Administrator to accelerate or otherwise alter the time of vesting of any Options granted as Incentive Stock Options, even, if as a result thereof, some of such Options cease being Incentive Stock Options. Page 6 ScanSoft, Inc. (e) Medium and Time of Payment. The Exercise Price shall be paid in full, at the time of exercise, in cash. (f) Term and Exercise of Stock Options. Stock Options shall be exercisable over the exercise period at the times the Administrator may determine, as reflected in the related Stock Option Agreements, but the exercise period shall not exceed ten (10) years from the Date of Grant of the Stock Option. The Stock Option Agreements shall provide that the Stock Options will vest, and the Option Holders shall have the right to exercise the Stock Options at a rate to be determined by the Administrator but at a rate of at least 20% per year over a period of 5 years from the Date of Grant of such Stock Options, unless a lower vesting rate or longer vesting period is permitted by applicable law or regulation. In the case of an Incentive Stock Option granted to a Ten Percent Shareholder, the vesting or exercise period shall be determined by the Administrator, but shall not exceed five years from the Date of Grant of the Stock Option. The vesting or exercise period shall be subject to earlier termination upon the occurrence of either a Special Terminating Event, as provided in Section 10.6, or the Termination of Employment, as provided in Section 10.7. A Stock Option may be exercised, as to any or all full shares of Stock as to which the Stock Option has become exercisable, by giving written notice of such exercise to the Company. (g) Repurchase Rights: First Refusal Rights. (A) Subject to Section 6.2(g)(D) below, each Stock Option Agreement shall provide that the Company shall have the right (the "Repurchase Right") exercisable following termination of an Optionee's employment to repurchase all of the Stock purchased by the Optionee upon exercise of the Optionee's Stock Option (the "Purchased Shares") at the Fair Market Value on the date of termination of employment. Such Repurchase Right must be exercised by the Company for cash or cash equivalents (including the cancellation of any purchase money indebtedness & the Optionee to the Company) within 90 days of the later of the date of termination of employment or the last date upon which an Option may be exercised. (B) Subject to Section 6.2(g)(D) below, each Stock Option Agreement shall provide that the Company shall have the right of first refusal (the "First Refusal Right"), exercisable in connection with any proposed sale, hypothecation or other disposition of the Purchased Shares; and that in the event the holder of the Purchased Shares desires to accept a bona fide third party offer for any or all of the Purchased Shares such shares shall first be offered to the Company at the same terms and conditions as are set forth in the bona fide offer. The Company must elect to purchase such Purchased Shares within 30 days after receipt of notice of the related Page 7 ScanSoft, Inc. proposed sale, and upon such election the Company must purchase such Purchased Shares within 60 days of the receipt of notice of the proposed sale. (C) Each Stock Option Agreement shall provide that the Repurchase Rights and First Refusal Rights shall lapse and cease to have effect upon the earlier to occur of (1) the first date on which shares of the Company's Common Stock are held of record by more than five hundred (500) persons, (2) a determination by the Company's Board of Directors that a public market exists for the outstanding shares of the Company's Common Stock or (3) the closing of a public offering pursuant to an effective registration statement under the Securities Act, covering the offer and sale of Common Stock by the Company with aggregate proceeds to the Company of $10,000,000 or more. (D) The Administrator may, in its sole and absolute discretion, determine whether ceasing to be an officer, director or consultant of the Company or any Parent or Subsidiary or ceasing to be an employee of a Subsidiary shall be subject to Section 6.2(g) and may determine to omit all or part of the provisions described in Section 6.2(g) from any Stock Option Agreement and shall, in the exercise of its discretion, prescribe the terms and conditions of the Repurchase Rights and First Refusal Rights of each Stock Option Agreement. (h) Other Terms and Conditions. Each Stock Option Agreement shall contain such other terms and conditions as the Administrator shall from time to time approve; provided, that such terms and conditions are not inconsistent with the Plan. ARTICLE 7 INFORMATION TO OPTION HOLDERS The Company will provide to Rights holders such information about the Company as it is required by the Securities Act to provide to the then current stockholders of the Company. ARTICLE 8 ADJUSTMENTS SECTION 8.1 EFFECT OF CERTAIN CHANGES. (a) Stock Dividends, Splits. Etc. In the event of a Stock split, reverse Stock split, Stock dividend, recapitalization, combination or reclassification of the Stock, (i) the number of shares of Stock available for Rights, (ii) the number of shares covered by outstanding Rights and (iii) the Exercise Price of any Stock Option, in effect Page 8 ScanSoft, Inc. prior to such change, shall be appropriately adjusted by the Administrator; provided, however, that any fractional shares resulting from the adjustment shall be eliminated. (b) Liquidating Event. In the event of the proposed dissolution or liquidation of the Company, or in the event of any corporate separation or division, including, but not limited to, a split-up, split-off or spin-off (each, a "Liquidating Event"), the Administrator may provide that the holder of any Right then exercisable shall have the right to exercise such Right (at the price provided in the Rights) subsequent to the Liquidating Event, and for the balance of its term, solely for the kind and amount of shares of Stock and other securities, cash or other property or any combination thereof receivable upon such Liquidating Event by a holder of the number of shares of Stock for or with respect to which such Right might have been exercised immediately prior to such Liquidating Event; or the Administrator may provide, in the alternative, that each Right granted under the Plan shall terminate as of a date to be fixed by the Board; provided, however, that not less than 30 days written notice of the date so fixed shall be given to each Rights holder and if such notice is given, each Rights holder shall have the right, during the period of 30 days preceding such termination, to exercise the Right as to all or any part of the shares of Stock covered thereby, to the extent that such Right is then exercisable, on the condition, however, that the Liquidating Event actually occurs; and if the Liquidating Event actually occurs, such exercise shall be deemed effective (and, if applicable, the Rights holder shall be deemed a shareholder with respect to the Rights exercised) immediately preceding the occurrence of the Liquidating Event, or the date of record for shareholders entitled to share in such Liquidating Event, if a record date is set. (c) Merger or Consolidation. In the case of any capital reorganization, any reclassification of the Common Stock (other than a change in par value or recapitalization described in Section 8.1(a) of the Plan), or the consolidation of the Company with, or a sale of substantially all of the assets of the Company to (which sale is followed by a liquidation or dissolution of the Company), or merger of the Company with another person (a "Reorganization Event"), the Administrator shall be obligated to determine whether the Reorganization Event shall constitute a "Liquidity Event," and to deliver to Rights holders at least 15 days prior to such Reorganization Event (or at least 15 days prior to the date of record for shareholders entitled to share in the securities, cash or other property distributed in the Reorganization Event, if a record date is set) a notice which shall (i) indicate whether the Reorganization Event is a Liquidity Event, and (ii) advise the Rights holder of his or her rights pursuant to the agreement applicable to such Rights. If the Reorganization Event is determined to be a Liquidity Event, in its sole and absolute discretion, the surviving corporation may, but shall not be obligated to, (i) tender stock options to the Rights holder with respect to the surviving corporation which shall contain terms and provisions that substantially preserve the rights and benefits of the applicable Right, and (ii) in the event that no Page 9 ScanSoft, Inc. stock options have been tendered by the surviving corporation pursuant to the terms of item "(i)" immediately above, the Rights holder shall have the right exercisable during a ten-day period ending on the fifth day prior to the Reorganization Event (or ending on the fifth day prior to the date of record for shareholders entitled to share in the securities or property distributed in the Reorganization Event, if a record date is set) to exercise his or her Rights, to the extent that such Rights are then exercisable, in whole or in part, on the condition, however, that the Reorganization Event is actually effected; and if the Reorganization Event is actually effected, such exercise shall be deemed effective (and, if applicable, the Rights holder shall be deemed a shareholder with respect to the Rights exercised) immediately preceding the effective time of the Reorganization Event (or on the date of record for shareholders entitled to share in the securities or property distributed in the Reorganization Event, if a record date is set). If the Reorganization Event is not determined to be a Liquidity Event, the Rights holder shall thereafter be entitled upon exercise of the Right to purchase the kind and number of shares of stock or other securities, cash or other property of the surviving corporation receivable upon such event by a holder of the number of shares of the Common Stock which the Right entities the Rights holder to purchase from the Company immediately prior to such event, and in any such case, appropriate adjustment shall be made in the application of the provisions set forth in this Plan with respect to the Rights holder's rights and interests thereafter, to the end that the provisions set forth in the agreement applicable to such Rights (including the specified changes and other adjustments to the Exercise Price) shall thereafter be applicable in relation to any shares or other property thereafter purchasable upon exercise of the Right. In the case of any Reorganization Event that is a reorganization, merger or consolidation in which the Company is not the "surviving corporation," the Administrator may, in its sole and absolute discretion, accelerate the "vesting" period described in Section 6.2(f). (d) Where Company Survives. Section 8.1(c) shall not apply to a merger or consolidation in which the Company is the surviving corporation, unless shares of Stock are converted into or exchanged for securities other than publicly traded common stock, cash (excluding cash in payment for actual shares) or any other thing of value. Notwithstanding the preceding sentence, in case of any consolidation or merger of another corporation with the Company in which the Company is the surviving corporation and in which there is a reclassification or change (including a change to the right to receive an amount of money payable by cash or cash equivalent or other property) of the shares of Stock (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination, but including any change in such shares into two or more classes or series of shares), the Administrator may provide that the holder of each Right then exercisable shall have the right to exercise such Right solely for the kind and amount of shares of Stock and other securities Page 10 ScanSoft, Inc. (including those of any new direct or indirect Parent of the Company), cash or other property or any combination thereof receivable upon such reclassification change, consolidation or merger by the holder of the number of shares of Stock for which such Right might have been exercised. (e) Surviving Corporation Defined. The determination as to which party to a merger or consolidation is the "surviving corporation" shall be made on the basis of the relative equity interests of the shareholders in the corporation existing after the merger or consolidation, as follows: if immediately following any merger or consolidation the holders of outstanding voting securities of the Company immediately prior to the merger or consolidation own equity securities possessing more than 50% of the voting power of the corporation existing following the merger or consolidation, then for purposes of this Plan, the Company shall be the surviving corporation. In all other cases, the Company shall not be the surviving corporation. In making the determination of ownership by the shareholders of a corporation immediately after the merger or consolidation, of equity securities pursuant to this Section 8.1(e), equity securities which the shareholders owned immediately before the merger or consolidation as shareholders of another party to the transaction shall be disregarded. Further, for purposes of this Section 8.1(e) only, outstanding voting securities of a corporation shall be calculated by assuming the conversion of all equity securities convertible (immediately or at some future time) into shares entitled to vote. (f) Par Value Changes. In the event of a change in the Stock of the Company as presently constituted which is limited to a change of all of its authorized shares with par value, into the same number of shares without par value, or a change in the par value, the shares resulting from any such change shall be "Stock" within the meaning of the Plan. SECTION 8.2 DECISION OF ADMINISTRATOR FINAL. To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Administrator, whose determination in that respect shall be final, binding and conclusive; provided, however, that each Incentive Stock Option granted pursuant to the Plan shall not be adjusted without the prior consent of the holder thereof in a manner that causes such Stock Option to fail to continue to qualify as an Incentive Stock Option. SECTION 8.3 NO OTHER RIGHTS. Except as expressly provided in this Article 8, no Rights holder shall have any rights by reason of any subdivision or consolidation of shares of Stock or the payment of any dividend or any other increase or decrease in the number of shares of Stock of any class or by reason of any Liquidating Event, merger, or consolidation of assets or stock of another corporation, or any other issue by the Company of shares of stock of any class, or securities convertible into shares of Page 11 ScanSoft, Inc. stock of any class; and except as provided in this Article 8, none of the foregoing events shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Stock subject to Rights. The grant of a Right pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structures or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or part of its business or assets. SECTION 8.4 NO RIGHTS AS SHAREHOLDER. Except as specifically provided in this Article 8, a Rights holder or a transferee of a Right shall have no rights as a shareholder with respect to any shares covered by the Rights until the date of the issuance of a Stock certificate to him or her for such shares, and no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions of other rights for which the record date is prior to the date such Stock certificate is issued, except as provided in Section 8.1(b) or 8.1(c). ARTICLE 9 AMENDMENT AND TERMINATION The Board may amend, alter or discontinue the Plan, but no amendment, alteration or discontinuation shall be made, without the approval of the shareholders, which would: (a) except as provided in Article 8, increase the total number of shares of Stock reserved for the purposes of the Plan; (b) materially increase the benefits accruing to Participants or Eligible Persons under the Plan; or (c) materially modify the requirements for eligibility under the Plan. The Administrator shall have the authority to interpret the Plan and any Stock Option Agreements and to take whatever administrative actions, correction of administrative errors, or the award of options under the Plan, as the Administrator in its sole good faith judgment shall determine to be advisable. All decisions, interpretations and administrative actions made by the Administrator hereunder or under any Stock Option Agreement shall be binding on the Company and the Optionee (including successors and assigns). Page 12 ScanSoft, Inc. ARTICLE 10 GENERAL PROVISIONS SECTION 10.1 GENERAL RESTRICTIONS. (a) Limitation on Granting of Rights. Subject to adjustment as provided in Article 8, no Participant shall be granted Rights with respect to more than 1,000,000 shares of Stock during any one year period. (b) No View to Distribute. The Administrator may require each person acquiring shares of Stock pursuant to the Plan to represent to and agree with the Company in writing that such person is acquiring the shares without a view towards distribution thereof. The certificates for such shares may include any legend which the Administrator deems appropriate to reflect any restrictions on transfer. (c) Legends. All certificates for shares of Stock delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the Administrator may deem advisable (1) under the rules, regulations and other requirements of the SEC, any stock exchange upon which the Stock is then listed and any applicable federal or state securities laws, and (2) to secure the First Refusal Rights and Repurchase Rights of the Company, and the Administrator may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (d) Market Stand-Off. All Stock Option Agreements and Stock Purchase Agreements shall provide that in connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company's initial public offering, the Participant agrees (the "Hold-Back Agreement") not to sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose or transfer for value or otherwise agree to engage in any of the foregoing transactions with respect to any Purchased Shares or any securities the value of which is derived by reference to the value of the Purchased Shares without the prior written consent of the Company or its underwriters, for such period of time from and after the effective date of such registration statement as may be requested by the Company or such underwriters; provided, however, that in no event shall such period exceed one hundred-eighty (180) days. Stock Option Agreements may provide that the Hold-Back Agreement shall terminate following expiration of the two-year period immediately following the effective date of the Company's initial public offering. SECTION 10.2 OTHER COMPENSATION ARRANGEMENTS. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation Page 13 ScanSoft, Inc. arrangements, subject to shareholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. SECTION 10.3 DISQUALIFYING DISPOSITIONS: WITHHOLDING TAXES. (a) Disqualifying Disposition. Employee agrees that should he or she make a "disposition" (as defined in the Code) of all or any of the Purchased Shares acquired pursuant to an Incentive Stock Option within two years from the date of grant of the Option or within one year after the issuance of such Purchased Shares, he or she shall immediately advise the Company in writing as to the occurrence of the sale and the price realized upon the sale of such Purchased Shares. Employee agrees that he or she shall maintain all Purchased Shares in his or her name so long as he or she maintains beneficial ownership of such Purchased Shares. (b) Withholding Required. Each Participant shall, no later than the date as of which the value derived from a Right first becomes includable in the gross income of the Participant for income tax purposes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of, any federal, state or local taxes of any kind required by law to be withheld with respect to the Right or its exercise. The obligations of the Company under the Plan shall be conditioned upon such payment or arrangements and the Participant shall, to the extent permitted by law, have the right to request that the Company deduct any such taxes from any payment of any kind otherwise due to the Participant. SECTION 10.4 INDEMNIFICATION. In addition to such other rights of indemnification as they may have as Directors or members of the Committee, and to the extent allowed by applicable law, the Administrators shall be indemnified by the Company against the reasonable expenses, including attorney's fees, actually incurred in connection with any action, suit or proceeding or in connection with any appeal therein, to which they or any one of them may be party by reason of any action taken or failure to act under or in connection with the Plan or any option granted under the Plan, and against all amounts paid by them in settlement thereof (provided that the settlement has been approved by the Company, which approval shall not be unreasonably withheld) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Administrator did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Company, and in the case of a criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful; provided, however, that within 60 days after institution of any such action, suit or proceeding, such Administrator shall, in writing, offer and permit the Company the opportunity at its own expense to handle and defend such action, suit or proceeding. Page 14 ScanSoft, Inc. SECTION 10.5 OTHER PROVISIONS. The Stock Option Agreements authorized under the Plan may contain such other provisions not inconsistent with this Plan, including, without limitation, restrictions upon the exercise of the Rights, as the Administrator may deem advisable. SECTION 10.6 SPECIAL TERMINATION EVENTS. If a Special Terminating Event occurs, all Rights theretofore granted to such Rights holder may, unless earlier terminated in accordance with their terms, be exercised by the Rights holder or by his or her estate or by a person who acquired the right to exercise such Right by bequest or inheritance or otherwise by reason of the death or Disability of the Rights holder, at any time within one year after the date of the Special Terminating Event. Notwithstanding the foregoing, an Incentive Stock Option shall only be exercisable at any time within three months after the date of Retirement or termination of employment of an Optionee. SECTION 10.7 TERMINATION OF EMPLOYMENT. Except as provided in this Section 10.7, no Right may be exercised unless the Right holder is then a Director, or officer of the Company, or in the employ, or officer or director of the Company or any Parent or Subsidiary, or rendering services as a consultant to the Company or any Subsidiary, and unless he or she has remained continuously so employed or engaged since the Date of Grant. If the employment or services of a Right holder shall terminate (other than by reason of a Special Terminating Event), all Rights previously granted to the Right holder which are exercisable at the time of such termination may be exercised for the period ending 80 days after such termination; provided, however, that if the employment or services of a Rights holder is terminated for "cause" such Rights may be exercised for the period not to exceed 30 days (and which may be less (and may zero days) in the case of termination for a "cause" which is recognized under applicable law as a good cause for the termination of employment) after such termination; provided, further, that no Right may be exercised following the date of its expiration. Nothing in the Plan or in any Right granted pursuant to the Plan shall confer upon an employee, officer or director any right to continue in the employ of the Company or any Parent or Subsidiary or continue as a consultant to or an officer or director thereof or interfere in any way with the right of the Company, any Parent or any Subsidiary to terminate such employment or relationship at any time. SECTION 10.8 NON-TRANSFERABILITY OF RIGHTS. Each Stock Option Agreement shall provide that the Rights granted under the Plan shall not be transferable, but the Stock Option Agreement may provide that Rights may be transferable by will or by the laws of descent and distribution, and the Rights may be exercised, during the lifetime of the Rights holder, only by the Rights holder or by his or her guardian or legal representative. Page 15 ScanSoft, Inc. SECTION 10.9 REGULATORY MATTERS. Each Stock Option shall provide that no shares shall be purchased or sold thereunder unless and until (i) any then applicable requirements of state or federal laws and regulatory agencies, and, if applicable, foreign laws, shall have been fully complied with to the satisfaction of the Company and its counsel; and (ii) if required to do so by the Company, the Optionee shall have executed and delivered to the Company a letter of investment intent in such form and containing such provisions as the Board or Committee may require. SECTION 10.10 RECAPITALIZATIONS. Each Stock Option Agreement shall contain provisions required to reflect the provisions of Article 8. SECTION 10.11 DELIVERY. Upon exercise of a Right granted under this Plan, the Company shall issue Stock or pay any amounts due within a reasonable period of time thereafter. Subject to any statutory obligations the Company may otherwise have, for purposes of this Plan, thirty days shall be considered a reasonable period of time. SECTION 10.12 RULE 16B-3. With respect to persons subject to Section 16 of the Exchange Act, transactions under this plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the plan or action by the Administrator fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Administrator. ARTICLE II EFFECTIVE DATE OF PLAN The Plan shall become effective on the date on which the Plan approved by the Company's stockholders. ARTICLE 12 TERM OF PLAN No Right shall be granted pursuant to the Plan on or after December 31, 2002, but Rights theretofore granted may extend beyond that date. [END] Page 16 EX-99.2 7 STOCK OPTION AGREEMENT ScanSoft, Inc. ScanSoft, Inc. Stock option agreement (Non-Statutory Stock Option) This STOCK OPTION AGREEMENT (this "Option Agreement") is, made and entered into on the execution date of the Option Certificate to which it is attached (the "Certificate"), by and between ScanSoft, Inc., a Delaware corporation (the "Company"), and the Director, consultant or employee named in the Certificate ("Optionee"). By executing and delivering the Certificate Optionee will be deemed to have signed, become a party to and agreed to all the terms of this Option Agreement. Pursuant to the ScanSoft, Inc. 1998 Stock Option Plan (the "Plan"), a copy of which has previously been provided to Optionee, the Board of Directors of the Company (the "Board") has authorized the grant to Optionee of a non-statutory stock option to purchase shares of the Company's Common Stock, par value $0.001 per share (the "Common Stock"), upon the terms and subject to the conditions set forth in this Option Agreement and in the Plan. The Company and Optionee agree as follows: 1. GRANT OF OPTION. The Company hereby grants to Optionee the right and option (the "Option"), upon the terms and subject to the conditions set forth in this Option Agreement, to purchase all or any portion of that number of shares of the Common Stock (the "Shares") set forth in the Certificate, at the Option exercise price set forth in the Certificate (the "Exercise Price"). 2. TERM OF OPTION. The Option shall terminate and expire on the Option Expiration Date set forth in the Certificate, unless sooner terminated as provided herein. 3. EXERCISE PERIOD. (a) Subject to the provisions of Paragraphs 3(b), 5, 7(c) and 7(d) of this Option Agreement, the Option shall vest and become become exercisable (in whole or in part) upon and after the dates set forth under the caption "Exercise Schedule " in the Certificate. The installments shall be cumulative, i. e., the Option may be exercised, as to any or all Shares covered by an installment, at any time or times Page 1 ScanSoft, Inc. after the installment vests or first becomes exercisable and until expiration or termination of the Option. (b) Notwithstanding anything to the contrary contained in this Option Agreement, the Option may not be exercised, in whole or in part, unless and until any then applicable requirements of all federal, state and local laws and regulatory agencies shall have been fully complied with to the satisfaction of the Company and its legal counsel. 4. EXERCISE OF OPTION. There is no obligation to exercise the Option, in whole or in part. The Option may be exercised, in whole or in part, only by delivery to the Company of: (a) written notice of exercise in form and substance identical to Exhibit "A" attached to this Option Agreement stating the number of shares of Common Stock then being purchased (the "Purchased Shares"); and (b) payment of the Exercise Price of the Purchased Shares in cash. Following receipt of a valid notice and full payment as referred to above, the Company shall issue and deliver to Optionee a stock certificate or stock certificates evidencing the Purchased Shares; provided, however, that the Company shall not be obligated to issue a fraction or fractions of a share of its Common Stock, and may pay to Optionee, in cash or by check, the Fair Market Value of any fraction or fractions of a share exercised by Optionee, which Fair Market Value shall be determined as set forth in the definition of Fair Market Value in Section 2 of the Plan. 5. TERMINATION OF EMPLOYMENT. (a) If Optionee shall cease to be a Director of the Company, or to be in the employ of, or a consultant to or an officer of the Company, or any Subsidiary for any reason other than a Special Terminating Event (as hereinafter defined), Optionee shall have the right to exercise the Option at any time within 80 days after the date Optionee ceased to be a Director of the Company, or to be employed by, or to be a consultant to the Company, or any Subsidiary and prior to the date of termination of the Option under Paragraph 2 of this Option Agreement with respect to all shares with respect to which the Option was exercisable at the date Optionee's employment or relationship terminated as to which the Option had not previously been exercised; and to the extent unexercised at the end of this 80 day period, the Option shall terminate. The Administrator, in its sole and absolute discretion, shall determine whether or not authorized leaves of absence shall constitute termination of employment for purposes of this Option Agreement. As used herein the term "Special Terminating Event" shall mean Optionee's death, permanent disability, or retirement. Page 2 ScanSoft, Inc. (b) Upon the termination of Optionee "for cause" as an employee, consultant, officer or director by the Company, or any Subsidiary, the Option shall terminate and cease to be exercisable as provided in Section 5(d). (c) If a Special Terminating Event occurs while Optionee is an employee, officer, director or consultant to or of the Company, or any Subsidiary, then Optionee, Optionee's guardians, executors or administrators or any person or persons acquiring the Option directly from Optionee by will or the laws of descent and distribution, shall have the right to exercise the entire Option at any time within one year after such retirement, death or permanent disability, but not later than the Option Expiration Date; to the extent the Option is unexercised at the end of that one-year period, the Option will terminate. (d) Upon the termination of Optionee for "cause" as defined in 5(d)(1) Optionee shall have the right to exercise the Option at any time within 30 days after such termination, and prior to the date of termination of the Option under Paragraph 2 of this Option Agreement, with respect to all Shares with respect to which the Option was exercisable on the date of such termination and as to which the Option had not previously been exercised. Upon the termination of Optionee for "cause" as defined in 5(d)(2) the Option shall immediately terminate and cease to be exercisable. For purposes of this Option Agreement, "cause" means: (1) with respect to any Optionees of the Company: (i) the failure or refusal by Optionee to perform his duties to the Company; or (ii) Optionee's willful disobedience of any lawful orders or directives of the Board or any officers thereof acting under the authority thereof or Optionee's deliberate interference with the compliance by other employees of the Company with any such orders or directives; or (iii) the failure or refusal of Optionee to abide by or comply with the written policies, standard procedures or regulations of the Company; or (iv) any willful or continued act or course of conduct by Optionee which the Board determines might reasonably be expected to have a material detrimental effect on the Company or the business, operations, affairs or financial position thereof, or Page 3 ScanSoft, Inc. (v) the determination by the Board of Directors of the Company, in the exercise of reasonable discretion, that Optionee is not competent to perform his duties of employment; or (vi) with respect to consultants, any material breach of the consulting agreement with the Company, or any Subsidiary. (2) With respect to any Optionees of the Company: good cause for the termination of employment as recognized under applicable law including, without limitation, the committing by the Optionee of any fraud, theft, embezzlement or other dishonest act against the Company, a parent, any Subsidiary or any customer, supplier or other person with a business relationship with the Company. (e) For purposes of this Option Agreement, "permanent disability" shall mean permanent and total disability as defined and determined by the Administrator in its sole and absolute discretion. Optionee shall not be considered permanently disabled unless he furnishes proof of such disability in such form and manner, and at such times, as the Administrator of the Plan may from time to time require. 6. RESTRICTIONS ON PURCHASED SHARES. (a) MARKET STAND-OFF. i) In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company's initial public offering, Optionee shall not sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose or transfer for value or otherwise agree to engage in any of the foregoing transactions with respect to any Purchased Shares or any securities the value of which is derived by reference to the value of the Purchased Shares without the prior written consent of the Company or its underwriters, for such period of time from and after the effective date of such registration statement as may be requested by the Company or such underwriters; provided, however, that in no event shall such period exceed one hundred-eighty (180) days. Optionee agrees to execute and deliver to the Company such further documents or instruments as the Company reasonably determines to be necessary or appropriate to effect the provisions of this Section 6(a). This Section 6(a)(i) shall only remain in effect for the two-year period immediately following the effective date of the Company's initial public offering and shall thereafter terminate and cease to be in force or effect. ii) In the event of any stock dividend, stock split, recapitalization, or other change affecting the Company's outstanding Common Stock Page 4 ScanSoft, Inc. effected without receipt of consideration, then any new, substituted, or additional securities distributed with respect to the Purchased Shares shall be immediately subject to the provisions of this Section 6(a), to the same extent the Purchased Share are at such time covered by such provisions. iii) In order to enforce the provisions of Section 6(a), the corporation may impose stop-transfer instructions with respect to the Purchased Shares until the end of the applicable stand-off period. (b) RESTRICTION ON TRANSFER. i) Optionee shall not sell, transfer, assign, encumber, or otherwise dispose of ("Transfer") any of the Purchased Shares that are subject to the Company's Repurchase Right under Section 6(c). In addition, Purchased Shares that are released from the Repurchase Right shall not be Transferred in contravention of the Company's First Refusal Right under Section 6(d) or the provisions of Section 6(e). The restrictions contained in Section 6(d) shall not be applicable to (i) a transfer of the Purchased Shares made without consideration to the Optionee's spouse or issue, including adopted children, or to a trust for the exclusive benefit of the Optionee or the Optionee's spouse or issue or (ii) a transfer of title to the Purchased Shares effected pursuant to the Optionee's will or the laws of descent and distribution. ii) Each person to whom the Purchased Shares are transferred by means of one of the permitted transfers specified in Section 6(b)(i) must, as a condition precedent to the validity of such transfer, acknowledge in writing to the Company that such person is bound by the provisions of this Agreement including that the transferred shares are subject to (i) both the Company's Repurchase Right (Section 6(c)) and the Company's First Refusal Right (Section 6(b)) granted hereunder and (ii) the market stand-off provisions of Section 6(a), to the same extent such shares would be so subject if retained by the Optionee. iii) For purposes of Sections 6(b), 6(c) and 6(d) of this Agreement, the term "Owner" shall include the Optionee and all subsequent holders of the Purchased Shares who derive their chain of ownership through a permitted transfer from the Optionee in accordance with Section 6(b)(i). (c) REPURCHASE RIGHT. i) GRANT. The Company is hereby granted the right (the "Repurchase Right") exercisable (A) if the Options have been fully exercised prior to termination of Optionee's employment, consultancy, officership or directorship with the Company or any Subsidiary, within the sixty (60) day period following such termination, or (B) if the Options have not been fully exercised prior to such, at any time during the thirty (30) day period following the last day upon which Optionee or Optionee's Page 5 ScanSoft, Inc. guardians, executors or administrators or any person or persons acquiring the Option directly from Optionee by will or the laws of descent and distribution, is permitted to exercise the Option pursuant to the provisions of Section 5 above, to repurchase all of the Purchased Shares at Fair Market Value as of the date of termination. ii) Exercise of the Repurchase Right. The Repurchase Right shall be exercisable by written notice delivered to the Owner of the Purchased Shares prior to the expiration of the applicable period specified in Section 6(c)(i). The notice shall indicate the number of Purchased Shares to be repurchased and the date on which the repurchase is to be effected, such date to be not more than thirty (30) days after the date of notice. Owner shall, prior to the close of business on the date specified for the repurchase, deliver to the Secretary of the Company the certificates representing the Purchased Shares to be repurchased, each certificate to be properly endorsed for transfer. The Company shall, concurrently with the receipt of such stock certificates from Owner, pay to Owner in cash or cash equivalents (including the cancellation of any purchase money indebtedness of the Optionee to the Company), an amount equal to the Fair Market Value of the Purchased Shares that are to be repurchased. iii) Termination of the Repurchase Right. The Repurchase Rights and First Refusal Rights shall lapse and cease to have effect upon the earlier to occur of (1) the first date on which shares of the Company's Common Stock are held of record by more than five hundred (500) persons, (2) a determination by the Company's Board of Directors that a public market exists for the outstanding shares of the Company's Common Stock or (3) the closing of a public offering pursuant to an effective registration statement under the Securities Act, covering the offer and sale of Common Stock by the Company with aggregate proceeds to the Company of $10,000,000 or more. (d) RIGHT OF FIRST REFUSAL i) GRANT. The Company is hereby granted the right of first refusal (the "First Refusal Right"), exercisable in connection with any proposed Transfer of the Purchased Shares. For purposes of this Section 6(d), the term "Transfer" shall not include any of the permitted transfers under Section 6(b)(i). ii) NOTICE OF INTENDED DISPOSITION. In the event the Owner desires to accept a bona fide third-party offer for any or all of the Purchased Shares (the shares subject to such offer to be hereinafter called, solely for the purposes of this Section 6(d), the "Target Shares"), Owner shall promptly (i) deliver to the Secretary of the Company written notice (the "Disposition Notice") of the offer and the basic terms and conditions thereof, including the proposed purchase price, and (ii) provide satisfactory proof that the disposition of the Target Shares to the third-party offeror Page 6 ScanSoft, Inc. would not be in contravention of the provisions set forth in Sections 6(b), 6(c) and 6(e) of this Agreement. iii) Exercise of Right. The Company (or its assignees) shall, for a period of thirty (30) days following receipt of the Disposition Notice, have the right to repurchase all of the Target Shares specified in the Disposition Notice upon substantially the same terms and conditions specified therein. Such right shall be exercisable by written notice (the "Exercise Notice") delivered to Owner prior to the expiration of the thirty (30) day exercise period. The Company (or its assignees) shall effect the repurchase of the Target Shares, including payment of the purchase price, not more than five (5) business days after delivery of the Exercise Notice; and at such time Owner shall deliver to the Company the certificates representing the Target Shares to be repurchased, each certificate to be properly endorsed for transfer. The Target Shares so purchased shall thereupon be canceled and cease to be issued and outstanding shares of the Company's Common Stock. Should the purchase price specified in the Disposition Notice be payable in property other than cash or evidences of indebtedness, the Company (or its assignees) shall have the right to pay the purchase price in the form of cash equal in amount to the value of such property. If the Owner and the Company (or its assignees) cannot agree on such cash value within ten (10) days after the Company's receipt of the Disposition Notice, the valuation shall be made by an appraiser of recognized standing selected by the Owner and the Company (or its assignees), or, if they cannot agree on an appraiser within twenty (20) days after the Company's receipt of the Disposition Notice, each shall select an appraiser of recognized standing and the two appraisers shall designate a third appraiser of recognized standing, whose appraisal shall be determinative of such value. The cost of such appraisal shall be paid equally by the Company and the Owner. The closing shall then be held on the later of (i) the fifth business day following delivery of the Exercise Notice or (ii) the 15th day after such cash valuation shall have been made. iv) NON-EXERCISE OF RIGHT. In the event the Exercise Notice is not given to Owner within thirty (30) days following the date of the Company's receipt of the Disposition Notice, Owner shall have a period of thirty (30) days thereafter, in which to sell or otherwise dispose of the Target Shares upon terms and conditions (including the purchase price) no more favorable to the third-party purchaser than those specified in the Disposition Notice; provided, however, that any such sale or disposition must not be effected in contravention of the provisions of Section 6(e) of this Agreement. The third-party purchaser shall acquire the Target Shares free and clear of all the terms and provisions of this Agreement (including the Company's Repurchase Right under Section 6(d) and the Company's First Refusal Right hereunder). In the event Owner does not sell or otherwise dispose of the Target Shares within the specified thirty (30) day period, the Company's First Refusal Right shall continue to be applicable to any Page 7 ScanSoft, Inc. subsequent disposition of the Target Shares by Owner until such right lapses in accordance with Section 6(d)(v). v) TERMINATION OF THE FIRST REFUSAL RIGHT. The First Refusal Right under this Section 6(d) shall lapse and cease to have effect upon the earlier to occur of (1) the first date on which shares of the Company's Common Stock are held of record by more than five hundred (500) persons, (2) a determination by the Company's Board of Directors that a public market exists for the outstanding shares of the Company's Common Stock or (3) the closing of a public offering pursuant to an effective registration statement under the Securities Act, covering the offer and sale of Common Stock by the Company with aggregate proceeds to the Company of $10,000,000 or more. However, the market standoff provisions of 6(a) shall continue to remain in full force and effect following the lapse of the First Refusal Right hereunder. vi) LEGEND. All certificates representing Purchased Shares subject to the Right of First Refusal shall be endorsed with the following legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE." (e) RECAPITALIZATION. i) In the event of any stock dividend, stock split, reverse stock split, recapitalization or other transaction affecting the Company's outstanding Common Stock as a class effected without receipt of consideration, then any new, substituted or additional securities or other property which is by reason of such transaction distributed with respect to the Purchased Shares shall be immediately subject to the provisions of this Option Agreement, but only to the extent the Purchased Shares are at that time covered by any such provisions. ii) In the event of a Reorganization Event (as defined in Paragraph 7(c)), the Company's Repurchase Right and First Refusal Right shall remain in full force and effect and shall apply to the new capital stock or other property received in exchange for the Purchased Shares in consummation of the Page 8 ScanSoft, Inc. Corporate Transaction, but only to the extent the Purchased Shares are at the time covered by such rights. (f) SECURITIES LAW RESTRICTIONS. None of the Purchased Shares shall be Transferred (with or without consideration) and the Company shall not be required to register any such Transfer and the Company may instruct its transfer agent not to register any such Transfer, unless and until all of the following events shall have occurred: (i) the Purchased Shares are Transferred pursuant to and in conformity with (1) (x) an effective registration statement filed with the SEC pursuant to the Securities Act, as amended (the "Act"), or (y) an exemption from registration under the Act, and (2) the securities laws of any state of the United States; and (ii) Optionee has, prior to the Transfer of such Purchased Shares, and if requested by the Company, provided all relevant information to the Company and Company's legal counsel so that upon Company's request, Company's legal counsel is able to, and actually prepares and delivers to the Company a written opinion that the proposed Transfer (1) (x) is pursuant to a registration statement which has been filed with the SEC and is then effective, or (y) is exempt from registration under the Securities Act as then in effect, and (2) is either qualified or registered under any applicable state securities laws, or exempt from such qualification or registration. The Company shall bear all costs of preparing such opinion. (g) NONCOMPLYING TRANSFERS INVALID. Any attempted Transfer which is not in full compliance with this Paragraph 6 shall be null and void ab initio, and of no force or effect. 7. ADJUSTMENTS UPON RECAPITALIZATION. Subject to any required action by the shareholders of the Company: (a) If the outstanding shares of the Common Stock shall be subdivided into a greater number of shares of the Common Stock or a dividend in shares of Common Stock or other securities of the Company convertible into or exchangeable for shares of the Common Stock (in which latter event the number of shares of Common Stock issuable upon the conversion or exchange of such securities shall be deemed to have been distributed) shall be paid in respect of the shares of Common Stock, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall, simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend, be proportionately reduced, and conversely, if the outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Exercise Price in effect immediately Page 9 ScanSoft, Inc. prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased. (b) When any adjustment is required to be made in the Exercise Price, the number of Shares purchasable upon the exercise of the Option shall be adjusted to that number of Shares determined by (i) multiplying an amount equal to the number of Shares purchasable on the exercise of the Option immediately prior to such adjustment by the Exercise Price in effect immediately prior to such adjustment, and then (ii) dividing that product by the Exercise Price in effect immediately after such adjustment. (c) In case of any capital reorganization, any reclassification of the Common Stock (other than a change in par value or recapitalization described in Paragraph 7(a) of this Option Agreement), or the consolidation of the Company with, or a sale of substantially all of the assets of the Company to (which sale is followed by a liquidation or dissolution of the Company), or merger of the Company with another person (a "Reorganization Event"), the Administrator shall be obligated to determine whether the Reorganization Event shall constitute a "Liquidity Event," and to deliver to Optionee at least 15 days prior to such Reorganization Event a notice which shall (i) indicate whether the Reorganization Event is a Liquidity Event and (ii) advise Optionee of his or her rights pursuant to this Option Agreement. If the Reorganization Event is determined to be a Liquidity Event, in its sole and absolute discretion, the surviving corporation may, but shall not be obligated to, (i) tender to Optionee Stock Options with respect to the surviving corporation which shall contain terms and provisions that substantially preserve the rights and benefits of this Option, and (ii) in the event that no Stock Options have been tendered by the surviving corporation pursuant to the terms of item "(i)" immediately above, Optionee shall have the right exercisable during a ten-day period ending on the fifth day prior to the Reorganization Event to exercise his or her Stock Options, to the extent that such Stock Options are then exercisable, in whole or in part, on the condition, however, that the Reorganization Event is actually effected; and if the Reorganization Event is actually effected, such exercise shall be deemed effective (and, if applicable, the Optionee shall be deemed a shareholder with respect to the Stock Options exercised) immediately preceding the effective time of the Reorganization Event (or on the date of record for shareholders entitled to share in the securities or property distributed in the Reorganization Event, if a record date is set). If the Reorganization Event is not determined to be a Liquidity Event, Optionee shall thereafter be entitled upon exercise of the Option to purchase the kind and number of shares of stock or other securities, cash or other property of the surviving corporation receivable upon such event by a holder of the number of shares of the Common Stock which the Option entities Optionee to purchase from the Company immediately prior to such event, and in any such case, appropriate adjustment shall be made in the application of the provisions set forth in this Option Agreement with respect to Optionee's rights and interests thereafter, to the end that the provisions set forth in this Option Agreement (including the specified changes and Page 10 ScanSoft, Inc. other adjustments to the Exercise Price) shall thereafter be applicable in relation to any shares or other property thereafter purchasable upon exercise of the Option. (d) In the event of the proposed dissolution or liquidation of the Company, or in the event of any corporate separation or division, including, but not limited to, a split-up, split-off or spin-off (each, a "Liquidating Event"), the Administrator may provide that the holder of any Stock Option then exercisable shall have the right to exercise such Stock Option (at the price provided in the Stock Option Agreement) subsequent to the Liquidating Event, and for the balance of its term, solely for the kind and amount of shares of Stock and other securities, cash or other property or any combination thereof receivable upon such Liquidating Event by a holder of the number of shares of Stock for or with respect to which such Stock Option might have been exercised immediately prior to such Liquidating Event; or, in the alternative, that each Stock Option granted under the Plan shall terminate as of a date to be fixed by the Board; provided, however, that not less than 30 days written notice of the date so fixed shall be given to each Option Holder and if such notice is given, each Option Holder shall have the right, during the period of 30 days preceding such termination, to exercise the Stock Option as to all or any part of the shares of Stock covered thereby, to the extent that such Stock Option is then exercisable, on the condition, however, that the Liquidating Event actually occurs; and if the Liquidating Event actually occurs, such exercise shall be deemed effective (and, if applicable, the Option Holder shall be deemed a shareholder with respect to the Stock Options exercised) immediately preceding the occurrence of the Liquidating Event, or the date of record for shareholders entitled to share in such Liquidating Event, if a record date is set. (e) To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Administrator of the Plan, and its determination shall be final, binding and conclusive. (f) The provisions of this Paragraph 7 are intended to be exclusive, and Optionee shall have no other rights upon the occurrence of any of the events described in this Paragraph 7. (g) The grant of the Option shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes in its capital or business structure, or to merge, consolidate, dissolve or liquidate, or to sell or transfer all or any part of its business or assets. 8. INVESTMENT INTENT. Optionee represents and agrees that if he or she exercises the Option in whole or in part and if at the time of such exercise the Plan and/or the Purchased Shares have not been registered under the Securities Act, he or she will acquire the Shares upon such exercise for the purpose of investment and not with a view to the Page 11 ScanSoft, Inc. distribution of such Shares, and that upon each exercise of the Option he or she will furnish to the Company a written statement to such effect in a form prescribed by the Administrator. 9. LEGEND ON STOCK CERTIFICATES. Optionee agrees that all certificates representing the Purchased Shares will be subject to such stock transfer orders and other restrictions (if any) as the Company or Administrator may deem advisable under the rules, regulations and other requirements of the SEC, any stock exchange upon which the Common Stock is then listed and any applicable federal or state securities laws, and the Company or Administrator may cause a legend or legends to be put on such certificates to make appropriate reference to such restrictions. 10. NO RIGHTS AS SHAREHOLDER. Except as provided in Article 7 of the Plan, Optionee shall have no rights as a shareholder with respect to the Shares until the date of the issuance to Optionee of a stock certificate or stock certificates evidencing such Shares. Except as may be provided in Paragraph 7 of this Option Agreement, no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued. 11. INTERPRETATION. The Administrator shall have the authority to interpret the Plan and this Option Agreement and to take whatever administrative actions, correction of administrative errors in the Certificate, this Agreement or the award of options under the Plan, as the Administrator in its sole good faith judgment shall determine to be advisable. All decisions, interpretations and administrative actions made by the Administrator hereunder or under the Plan shall be binding on the Company and the Optionee (including successors and assigns). 12. WITHHOLDING. The Company shall be entitled to require as a condition of delivery of any Purchased Shares upon exercise of any Option that the Optionee agree to remit, at the time of such delivery or at such later date as the Company may determine, an amount sufficient to satisfy all federal, state and local withholding tax requirements relating thereto, and Optionee agrees to take such other action required by the Company to satisfy such withholding requirements. 13. CHARACTER OF OPTION. Page 12 ScanSoft, Inc. The Option is not intended to qualify as an "incentive stock option" as that term is defined in Section 422 of the Code. 14. GENERAL PROVISIONS. (a) Further Assurances. Optionee shall promptly take all actions and execute all documents requested by the Company or Administrator which they deem to be reasonably necessary to effectuate the terms and intent of this Option Agreement. (b) Notices. All notices, requests, demands and other communications under this Option Agreement shall be in writing and shall be given to the parties hereto as follows: i) If to the Company, to: ScanSoft, Inc. Corporate Secretary P.O. Box 1600 800 Long Ridge Road Stamford, Connecticut 06904 ii) If to Optionee, to the address set forth in the records of the Company, or at such other address or addresses as may have been furnished by such either party in writing to the other party hereto. Any such notice, request, demand or other communication shall be effective (i) if given by mail, 72 hours after such communication is deposited in the mail by first-class certified mail, return receipt requested, postage prepaid, addressed as aforesaid, or (ii) if given by any other means, when delivered at the address specified in this subparagraph (b). (c) TRANSFER OF RIGHTS UNDER THIS OPTION AGREEMENT. The Company may at any time transfer and assign its rights and delegate its obligations under this Option Agreement to any other person, corporation, firm or entity, including its officers, directors and stockholders, with or without consideration. (d) OPTION NON-TRANSFERABLE. Optionee may not sell, transfer, assign or otherwise dispose of the Option except by will or the laws of descent and distribution as permitted herein and Stock Options may be exercised during the lifetime of the Option Holder only by the Option Holder or by his or her guardian or legal representative. (e) SUCCESSORS AND ASSIGNS. Except to the extent specifically limited by the terms and provisions of this Option Agreement, this Option Agreement shall be Page 13 ScanSoft, Inc. binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs and personal representatives. (f) GOVERNING LAW. THIS OPTION AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE IN, AND TO BE PERFORMED WITHIN, THAT STATE. (g) THE PLAN. This Option Agreement is made pursuant to the Plan, and it is intended, and shall be interpreted in a manner, to comply therewith. Any provision of this Option Agreement inconsistent with the Plan shall be superseded and governed by the Plan. (h) MISCELLANEOUS. Titles and captions contained in this Option Agreement are inserted for convenience of reference only and do not constitute a part of this Option Agreement for any other purpose. Capitalized terms used in this Option Agreement and not otherwise defined herein have the meaning defined in the Plan. Except as specifically provided herein, neither this Option Agreement nor any right pursuant hereto or interest herein shall be assignable by any of the parties hereto without the prior written consent of the other party hereto. ScanSoft, Inc. By:____________________________ Michael K. Tivnan, President Page 14 ScanSoft, Inc. Exhibit "A" NOTICE OF EXERCISE (To be signed only upon exercise of the Option) TO: ScanSoft, Inc. The undersigned, the holder of the enclosed Stock Option Agreement (Non-Statutory Stock Option), hereby irrevocably elects to exercise the purchase rights represented by the Option and to purchase thereunder __________* shares of Common Stock of ScanSoft, Inc. (the "Company"), and herewith encloses payment of $_________ in full payment of the purchase price of such shares being purchased. Date signed: _______________ ______________________________________ (Signature must conform in all respects to name of holder as specified on the face of the Option) ______________________________________ (Please Print Name) ______________________________________ (Address) *Insert here the number of shares called for on the face of the Option (or, in the case of a partial exercise, the number of shares being exercised), in either case without making any adjustment for additional Common Stock of the Company, other securities or property which, pursuant to the adjustment provisions of the Option, may be deliverable upon exercise. Page 15 -----END PRIVACY-ENHANCED MESSAGE-----