-----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, L7DRBOJq4Uox4dZqR+3l0Tv+zAbM1QSmu7hWzCdX5L9HWxpUmqXIavB+nG5wiUco xIMXA/CEkzu1D3HYYRwXAg== 0000950135-01-501522.txt : 20010531 0000950135-01-501522.hdr.sgml : 20010531 ACCESSION NUMBER: 0000950135-01-501522 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20010530 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCANSOFT INC CENTRAL INDEX KEY: 0001002517 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 943156479 STATE OF INCORPORATION: DE FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-61862 FILM NUMBER: 1650538 BUSINESS ADDRESS: STREET 1: 9 CENTENNIAL DRIVE CITY: PEABODY STATE: MA ZIP: 01960 BUSINESS PHONE: 9789772000 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-3 1 b39548sis-3.txt SCANSOFT INC. 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 30, 2001 REGISTRATION NO. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-3 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 (IRS EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
SCANSOFT, INC. 9 CENTENNIAL DRIVE PEABODY, MA 01960 (978) 977-2000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ RICHARD S. PALMER SCANSOFT, INC. 9 CENTENNIAL DRIVE PEABODY, MA 01960 (978) 977-2000 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ With copies of all orders, notices and communications to: KATHARINE MARTIN KEITH L. JOHNSON WILSON SONSINI GOODRICH & ROSATI CHIEF LEGAL COUNSEL PROFESSIONAL CORPORATION STATE OF WISCONSIN INVESTMENT BOARD 650 PAGE MILL ROAD 121 EAST WILSON STREET PALO ALTO, CA 94304 MADISON, WI 53702 (650) 493-9300 (608) 266-2381
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC -- From time to time after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, check the following box. [ ] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 (the "Securities Act"), other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ------------------------ CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE - ----------------------------------------------------------------------------------------------------------------------------- Common Stock, $.001 par value................... 4,761,905 $1.215 $5,785,714.58 $1,446.43 - ----------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of determining the registration fee and calculated in accordance with Rule 457(c) under the Securities Act on the basis of the average of the high and low prices of ScanSoft's common stock on May 29, 2001 as quoted on the Nasdaq National Market. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING STOCKHOLDERS NAMED HEREIN MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES, AND THE SELLING STOCKHOLDERS ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. Subject to Completion dated: PROSPECTUS SCANSOFT, INC. 4,761,905 SHARES OF COMMON STOCK This prospectus is part of a registration statement that we filed with the SEC relating to the public offering of 4,761,905 shares (the "Shares") of our common stock that are held by one of our current stockholders. The sale of the Shares is not being underwritten. The selling stockholders listed on page 8 of this prospectus may sell or distribute the shares through underwriters, dealers, brokers or other agents, or directly to one or more purchasers. The price may be the market price prevailing at the time of sale or a privately negotiated price. We will not receive any of the proceeds from the sale of the shares. However, we will pay substantially all expenses incident to their registration. ------------------------ Our common stock is quoted on the Nasdaq National Market under the symbol "SSFT." On May 29, 2001, the last reported sale price of our common stock was $1.20 per share. ------------------------ INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS TO READ ABOUT CERTAIN FACTORS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK. ------------------------ NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE SCANSOFT COMMON STOCK TO BE ISSUED IN CONNECTION WITH THIS PROSPECTUS OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is , 2001 3 TABLE OF CONTENTS
PAGE ---- Where You Can Find More Information......................... 1 Special Note Regarding Forward-Looking Statements........... 3 ScanSoft, Inc............................................... 3 Risk Factors................................................ 4 Use of Proceeds............................................. 8 Selling Stockholder......................................... 8 Plan of Distribution........................................ 8 Legal Matters............................................... 10 Experts..................................................... 10
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. The Selling Stockholders are offering to sell, and seeking offers to buy shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. In this prospectus, "ScanSoft," "we," "us," and "our" refer to ScanSoft, Inc., its predecessors and its consolidated subsidiaries. WHERE YOU CAN FIND MORE INFORMATION ScanSoft files annual, quarterly and current reports, proxy and information statements and other information with the Securities and Exchange Commission. You can inspect and copy these reports, proxy and information statements and other information concerning ScanSoft at the Commission's public reference facilities at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; and at the Commission's regional offices at Suite 1400, 500 West Madison Street, Chicago, Illinois 60661 and Seven World Trade Center, New York, New York 10048. Information on the operation of the Public Reference Room is available by calling the Commission at 1-800-SEC-0330. The SEC also maintains a site on the World Wide Web at http://www.sec.gov that contains reports, proxy and information statements and other information about ScanSoft. This prospectus is part of the Registration Statement on Form S-3 that ScanSoft filed with the commission to register shares of its common stock. This prospectus does not contain all of the information contained in the Registration Statement. Parts of documents are incorporated by reference into this prospectus. You should read these documents in their entirety rather than relying just on the parts incorporated by reference. Some of these documents are exhibits to the Registration Statement. The Registration Statement together with its exhibits can be inspected and copied at the public reference facilities and regional offices of the Commission referred to above. 1 4 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents, which have been filed by ScanSoft with the Commission pursuant to the Exchange Act, are incorporated by reference and made a part of this prospectus to the extent statements in this prospectus do not modify or supersede them: 1. ScanSoft's Annual Report on Form 10-K for the fiscal year ended December 31, 2000; 2. ScanSoft's Quarterly Report on Form 10-Q for the fiscal quarter ended on March 31, 2001; 3. ScanSoft's Definitive Proxy Statement on Schedule 14A, filed with the Commission on May 16, 2001; 4. ScanSoft's Current Report on Form 8-K/A dated May 30, 2001; and 5. The description of ScanSoft's Common Stock contained in the 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. You may request a copy of any and all of the documents or information referred to above that has been or may be incorporated by reference in this prospectus (excluding exhibits to such documents unless such exhibits are specifically incorporated by reference). Requests should be directed in writing or by phone to: ScanSoft, Inc. Investor Relations 9 Centennial Drive Peabody, MA 01960 Telephone Number: (978) 977-2477 ScanSoft will provide these documents and information to you without charge. 2 5 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements deal with our current plans, intentions, beliefs and expectations and statements of future economic performance. Statements containing terms such as "believes," "does not believe," "plans," "expects," "intends," "estimates," "anticipates" and other phrases of similar meaning are considered to contain uncertainty and are forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from what is currently anticipated. We make cautionary statements in certain sections of this prospectus, including under "Risk Factors." You should read these cautionary statements as being applicable to all related forward-looking statements wherever they appear in this prospectus, in the materials referred to in this prospectus, in the materials incorporated by reference into this prospectus, or in our press releases. No forward-looking statement is a guarantee of future performance, and you should not place undue reliance on any forward-looking statement. The risks set out below are not the only risks we face. If any of the following risks occur, our business, financial condition and results of operations could be materially adversely affected. In such case, the trading price of our common stock could decline. SCANSOFT, INC. ScanSoft, Inc. was incorporated as Visioneer, Inc. in March 1992 and through December 1998, developed and sold scanner hardware and software products. In 1993, Xerox Imaging Systems, Inc. ("XIS") a wholly owned subsidiary of Xerox Corporation, established a software business unit called "ScanSoft". On September 16, 1996, XIS formed a wholly owned subsidiary, ScanSoft, Inc., in order to focus on the software business. On January 6, 1999, Visioneer sold the hardware business and the Visioneer brand name to Primax Electronics, Ltd., and on March 2, 1999, Visioneer acquired ScanSoft, in a cash election merger, from Xerox Corporation. The corporate entity "Visioneer" survived the merger, but changed its name to "ScanSoft, Inc." In addition, Visioneer changed the ticker symbol for its common stock that trades on the Nasdaq, to "SSFT." On March 13, 2000, ScanSoft acquired Caere Corporation ("Caere"). Caere designed, developed, manufactured and marketed a range of OCR software tools. ScanSoft, Inc. is a leading provider of digital imaging software products for retail, OEM and corporate markets. ScanSoft's products capture and convert paper documents and photos into digital documents and images, and enhance a user's ability to organize and share digital documents and images in the office, at home and on the Internet. Generally, ScanSoft's products are based on proprietary or patented optical character recognition ("OCR") and/or image processing technologies designed to address the needs of a broad group of users ranging from consumers and small office to medium-sized businesses and large corporations. ScanSoft maintains executive offices and principal facilities at 9 Centennial Drive, Peabody, MA 01960. Our telephone number is (978) 977-2000. We maintain a World Wide Web site at www.scansoft.com. NEW ACCOUNTING PRONOUNCEMENTS During 2000, the Company adopted Staff Accounting Bulletin (SAB) No.101, "Revenue Recognition in Financial Statements." SAB No. 101 did not have a material impact on the Company's financial position and results of operations. 3 6 RISK FACTORS Keep these risk factors in mind when you read "forward-looking" statements elsewhere in this Prospectus and in the documents incorporated herein by reference. These are statements that relate to our expectations for future events and time periods. Generally, the words, "anticipate," "expect," "intend' and similar expressions identify forward-looking statements. Forward-looking statements involve risks and uncertainties, and future events and circumstances could differ significantly from those anticipated in the forward-looking statements. THE PRICE OF OUR SECURITIES MAY BE AFFECTED BY A WIDE RANGE OF FACTORS. Some of the factors that may cause volatility in the price of our securities include: - quarterly variations in our financial results; - business and product market cycles; - the timing of new product introductions; and - our ability to develop, implement and successfully market new products and technologies. The price of our securities may also be affected by the estimates and projections of the investment community, general economic and market conditions, and the cost of operations in one or more of our product markets. While we cannot predict the individual effect that these factors may have on the price or our securities, these factors, either individually or in the aggregate, could result in significant variations in price during any given period of time. THE DIGITAL IMAGING SOFTWARE MARKET IS HIGHLY COMPETITIVE. We compete in the digital imaging market. The market for these products and services is highly competitive. This competition could adversely affect our operating results by reducing the volume of products we sell or the prices we can charge for our products. Some of our competitors or potential competitors have significantly greater financial, technical and marketing resources than we do. These competitors may be able to respond more rapidly than we can to new or emerging technologies or changes in customer requirements. They may also devote greater resources to the development, promotion and sale of their products than we do. There is no assurance that the price and performance of our products will be superior relative to the products of our competitors. As a result, we may experience a loss of competitive position that could result in lower prices, fewer customer orders, reduced revenues, reduced gross margins, and loss of market share. Our future competitive performance depends on a number of factors, including our ability to: - properly identify target markets; - accurately identify emerging technological trends and demand for product features and performance characteristics; - develop and maintain competitive products; - enhance our products by adding innovative features that differentiate our products from those of our competitors; - bring products to market on a timely basis at competitive prices; - respond effectively to new technological changes or new product announcements by others; - adapt products and processes to technological changes; and - adopt and/or set emerging industry standards. We may not meet our design, development, and introduction schedules for new products or enhancements to our existing and future products. In addition, our products may not achieve market acceptance or sell at favorable prices which could hurt our revenues, results of operations and the price of our common stock. WE DEPEND ON SALES THROUGH DISTRIBUTION CHANNELS FOR A MAJORITY OF OUR REVENUE. A substantial majority of our revenue is derived from the sale of our software products through a variety of distribution 4 7 channels, including traditional software distributors, VARs, OEMs, hardware and software superstores, retail dealers, and direct sales. Domestically, our products are sold primarily through distributors, VARs, and OEMs. In particular, one distributor, Ingram Micro, Inc., accounted for 27% of revenues in fiscal year 2000. Our resellers generally offer products of several different companies, including in some cases, products that are competitive with our products. There can be no assurance that our software resellers will continue to purchase our products or provide them with adequate levels of support. In addition, we believe that certain distributors are reducing their inventory in the channel and returning unsold products to better manage their inventories. Distributors are increasingly seeking to return unsold product, particularly when a new version or upgrade of a product has superseded such products. If our distributors were to seek to return increasing amounts of products, such returns could have a material adverse effect on our revenues and results of operations. The loss of, or a significant reduction in sales volume to, a significant reseller could have a material adverse effect on our results of operations. OUR TRADITIONAL DISTRIBUTORS ARE SUBJECT TO ECONOMIC AND COMPETITIVE RISK. Our traditional distributors in the retail channel are experiencing extreme competition both among themselves and from the shift to electronic commerce. A failure by any one of our distributors could result in: - material bad debts; - loss of associated sales values; - disruption of revenue from the retail channel; and - significant costs incurred in connection with establishing new product distribution channels. OUR PRODUCT DEVELOPMENT ACTIVITIES OCCUR IN A HIGHLY COMPETITIVE ENVIRONMENT. The business segments in which we conduct business are characterized by rapid technological change, short product cycles, and evolving industry standards. We believe our future success depends, in part, on our ability to improve on existing products and technologies and to develop and implement new ones. We must also be able to adopt and implement emerging industry standards and to adapt our products to technological changes. If we are not able to implement new technologies successfully our operating results and financial condition will be adversely impacted. In addition, we must continue to develop and introduce new products that compete effectively on the basis of price and performance and that satisfy customer requirements. Development of new products often requires long-term forecasting of market trends, development and implementation of new or changing technologies and a substantial capital commitment. We cannot assure you that standards and products that we select for investment of our financial and engineering resources will be developed or acquired in a timely manner or will enjoy market acceptance. We also have limited resources and must make strategic decisions as to how to best allocate our resources to position ourselves for changes in our markets. We may from time to time allocate resources to projects or markets that do not develop as rapidly or fully as we expect. Delays in new product releases could adversely affect our revenue. Further, as existing products reach the end of their life cycle, demand for those products tends to fall in anticipation of new replacement products. Consequently, our customers may defer purchasing existing products, and we may be forced to lower the prices of older products in anticipation of new releases. This may result in distributors claiming price protection credits or returning older products to us, and as a result, our revenues, operating results and stock price may decline. OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO FLUCTUATIONS AND SEASONALITY, AND IF WE FAIL TO MEET THE EXPECTATIONS OF SECURITIES ANALYSTS OR INVESTORS, OUR SHARE PRICE MAY DECREASE SIGNIFICANTLY. ScanSoft revenue and operating results have fluctuated in the past. Our future quarterly operating results may fluctuate significantly and may not meet the expectations of securities analysts or investors. If this occurs, the price of our stock would likely decline. Factors that may cause fluctuations in our operating results include the following: - volume, timing and fulfillment of customer orders; - reduction in the prices of our products in response to competition or market conditions; 5 8 - increased expenditures incurred in connection with the pursuit of new product or market opportunities; - inability to adjust our operating expenses to compensate for shortfalls in revenue against forecast; - returns and allowance charges in excess of recorded amounts; - demand for products; - seasonality; - general economic trends as they affect retail sales; - customers delaying their purchase decisions in anticipation of new versions of products including new operating systems; - introduction of new products by us or our competitors; and - timing of significant marketing and sales promotions. Due to the foregoing factors, among others, our revenue and operating results are difficult to forecast. We intend to base our expense levels in significant part on our expectations of future revenue. Our failure to meet revenue expectations would have a material adverse effect on our business, operating results and financial condition. Further, an unanticipated decline in revenue for a particular quarter may disproportionately affect our net income because a relatively small amount of our expenses are intended to vary with our revenue in the short term. ScanSoft had net losses for 1998, 1999 and 2000, and may never become profitable or sustain profitability. OUR REVENUE HAS BEEN DEPENDENT ON DEMAND FOR A FEW PRODUCTS. We have historically had a substantial portion of our revenue generated from a few products. For the year ended December 31, 2000, ScanSoft's OmniPage product family represented approximately 41% of revenue, the TextBridge product family represented approximately 20% of revenue, PaperPort represented approximately 8% of revenue and Pagis represented approximately 7% of revenue. The reduction in revenue contribution from any of these products could have a material adverse impact upon our business, results of operations, financial condition and consequently our stock price. WE HAVE GROWN, AND MAY CONTINUE TO GROW THROUGH ACQUISITIONS, WHICH GIVES RISE TO A NUMBER OF RISKS. We have acquired several companies within the last two fiscal years and may complete material acquisitions in the future. Acquisitions involve significant risks including difficulties in the assimilation of the operations, services, technologies and corporate culture of the acquired companies. Furthermore, integrating acquired businesses into our existing business may distract our management focus from other opportunities and challenges. Our past acquisitions have given rise to, and future acquisitions may result in, substantial levels of goodwill and other intangible assets that will be amortized in future years and our future operating results will be adversely affected if we do not achieve benefits from these acquisitions commensurate with these charges. In addition, our recent acquisitions have included substantial write-offs of acquired in-process research and development costs and this also may occur as a result of future acquisitions. Moreover, we may issue equity for future acquisitions that could be dilutive to our existing stockholders. WE DEPEND ON CONTINUED DEMAND FOR OUR PRODUCTS FROM ORIGINAL EQUIPMENT MANUFACTURERS AND ON THE CONTINUED GROWTH OF SCANNER SALES. ScanSoft has OEM relationships with a number of companies that provide scanners and other digital imaging hardware. OEM revenue has historically represented approximately 15-28% of our revenue. Our agreements with OEMs do not obligate them to bundle our software and they may choose to bundle software products of our competitors. Also, because many of our products are sold bundled with third party products, a significant reduction in scanner sales or other digital imaging hardware sales may adversely impact our revenues. A decline in OEM revenue would hurt our results of operations and would likely have a negative impact our stock price. OUR FUTURE RESULTS COULD BE HARMED BY ECONOMIC, POLITICAL, REGULATORY AND OTHER RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS. Since we sell our products worldwide, our business is subject to risks associated with doing business internationally. We anticipate that revenue from international operations will 6 9 represent an increasing portion of our total revenue. In addition, some of our products are manufactured outside the United States. Accordingly, our future results could be harmed by a variety of factors, including: - changes in a specific country's or region's political or economic conditions; - trade protection measures and import or export licensing requirements; - potentially negative consequences from changes in tax laws; - difficulty in managing widespread sales and manufacturing operations; and - less effective protection of intellectual property. WE ARE EXPOSED TO FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES. Because we have international subsidiaries and distributors that operate and sell our products outside the U.S., we are exposed to the risk of changes in foreign currency exchange rates or declining economic conditions in these countries. We do not routinely engage in hedging transactions to manage our exposure to currency fluctuations. Our exposure to currency rate fluctuations could affect our operations and/or cash flows. In addition, a new European currency, the Euro, was implemented in January 1999 to replace the separate currencies of eleven western European countries. Although a three-year transition period is expected during which transactions may also be made in the old currencies, this is requiring dual currency processes for our operations. There can be no assurances that all problems associated with the Euro will be foreseen and controlled without any adverse impact on our operating results or financial condition. THE PROTECTION OF OUR PROPRIETARY TECHNOLOGY AND INTELLECTUAL PROPERTY IS KEY TO OUR SUCCESS. ScanSoft relies heavily on our proprietary software technology, trade secrets and other intellectual property. Unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. Policing unauthorized use of our products is difficult and we may not be able to protect our technology from unauthorized use. Additionally, our competitors may independently develop technologies that are substantially the same or superior to ours. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States. Although the source code for our proprietary software is protected both as a trade secret and as a copyrighted work, litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. Litigation, regardless of the outcome, can be very expensive and can divert management efforts. XEROX'S AND SWIB'S STOCKHOLDINGS MAY ENABLE THEM TO INFLUENCE MATTERS REQUIRING STOCKHOLDER APPROVAL. Xerox currently owns approximately 23% of ScanSoft's outstanding common stock and all of ScanSoft's outstanding nonvoting Series B Preferred Stock. In addition, Xerox has the opportunity to acquire additional shares of ScanSoft common stock pursuant to a warrant. Xerox is currently ScanSoft's largest stockholder followed by SWIB, which currently owns approximately 17% of our common stock. Because of their large holdings of our common stock relative to other shareholders, either Xerox, SWIB, or both entities acting together, could have a strong influence over matters requiring approval by ScanSoft's stockholders. OUR EARNINGS AND STOCK PRICE HAVE HISTORICALLY BEEN AND MAY CONTINUE TO BE VOLATILE. Due to the factors noted throughout this section, our earnings and stock price have been and may continue to be subject to significant volatility. There have been previous quarters in which we have experienced shortfalls in revenue and earnings from levels expected by securities analysts and investors, which have had an immediate and significant adverse effect on the trading price of our common stock. This may occur again in the future. As a result of the risks outlined in this section and other risks, our business, financial condition or operating results could be materially adversely affected. This could cause the trading price of our common stock to decline, and you may lose part or all of your investment. We may become subject to additional risks in the future. We will include these risks in future Annual and Quarterly Reports we file with the Securities and Exchange Commission. These reports are incorporated into this prospectus by reference on page 1. If you are making an investment decision after the date of this prospectus and any of these reports have been filed, you should also consult and carefully consider the risk 7 10 factors and other information in these reports. In addition, you should note that the fact that certain risks are endemic to the industry does not lessen the significance of the risk. USE OF PROCEEDS We will not receive any proceeds from the sale of the shares covered by this prospectus. We will, however, pay substantially all expenses related to the registration of the shares. SELLING STOCKHOLDERS The shares of common stock to be sold by the selling stockholders pursuant to this prospectus represent shares issued and sold to a single institutional investor in a private placement by us pursuant to the Share Purchase Agreement dated as of April 25, 2001, between ScanSoft and the State of Wisconsin Investment Board ("SWIB"). The aggregate number of shares of common stock registered by this Registration Statement that may offered and sold are set out in the table below. All of the shares offered are issued and outstanding as of the date of this prospectus. Because SWIB may sell or distribute all or a portion of the shares at any time and from time to time after the date of this prospectus, we cannot estimate the number of shares of common stock that SWIB may have upon completion of this offering. Other than SWIB's share holdings, SWIB has not had any position, office, or other material relationship within the past three years with ScanSoft or any of its predecessors or affiliates.
NUMBER OF SHARES NUMBER OF SHARES NUMBER OF SHARES BENEFICIALLY REGISTERED FOR OWNED AFTER SALE OF NAME OF SELLING STOCKHOLDER OWNED(1)(2) SALE HEREBY(1) REGISTERED SHARES(3) - --------------------------- ---------------- ---------------- -------------------- State of Wisconsin Investment Board....... 8,629,101 4,761,905 3,867,196 --------- --------- --------- Total................................ 8,629,101 4,761,905 3,867,196 ========= ========= =========
- --------------- (1) This registration statement also shall cover any additional shares of common stock which become issuable in connection with the shares registered for sale hereby by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration which results in an increase in the number of ScanSoft's outstanding shares of common stock. (2) Based upon 50,894,193 shares of common stock outstanding as of May 29, 2001, SWIB currently owns 17% of our outstanding common stock. (3) The number presented assumes the sale of all of the shares registered hereunder and that SWIB acquires no additional shares of common stock before the completion of the offering. After completion of the offering SWIB will own 7.6% of our outstanding common stock, based upon 50,894,193 shares outstanding on May 29, 2001. PLAN OF DISTRIBUTION ScanSoft is registering all 4,761,905 shares of common stock (the "Shares") on behalf of SWIB. All of the Shares were issued by ScanSoft in a private placement transaction pursuant to the terms of the Share Purchase Agreement dated as of April 25, 2001, between ScanSoft and SWIB. ScanSoft will receive no proceeds from this offering. SWIB (the selling stockholder named in the table above) or pledgees, donees, transferees or other successors-in-interest selling shares received from SWIB as a gift or other non-sale-related transfer after the date of this prospectus (collectively, the "Selling Stockholders") may sell the shares from time to time. The Selling Stockholders will act independently of ScanSoft in making decisions with respect to the timing, manner and size of each sale. The sales may be made on one or more exchanges or in the over-the-counter market or otherwise, at prices and at terms then prevailing or at prices related to the then current market price, or in negotiated transactions. The Selling Stockholders may effect such transactions by selling 8 11 the shares to or through broker-dealers. The Shares may be sold by one or more of, or a combination of, the following: - a block trade in which the broker-dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction, - purchases by a broker-dealer as principal and resale by such broker-dealer for its account pursuant to this prospectus, - an exchange distribution in accordance with the rules of such exchange, - ordinary brokerage transactions and transactions in which the broker solicits purchasers, and - in privately negotiated transactions. To the extent required, this prospectus may be amended or supplemented from time to time to describe a specific plan of distribution. In effecting sales, broker-dealers engaged by the Selling Stockholders may arrange for other broker-dealers to participate in the resales. In connection with distributions of such shares or otherwise, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions. In connection with such transactions, broker-dealers or other financial institutions may engage in short sales of our common stock in the course of hedging the positions they assume with the Selling Stockholders. The Selling Stockholders may also sell our common stock short and redeliver the shares to close out such short positions. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions which require the delivery to such broker-dealer or other financial institution of the shares offered hereby, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). The Selling Stockholders may also pledge such shares to a broker-dealer or other financial institution, and, upon a default, such broker-dealer or other financial institution may effect sales of such pledged shares pursuant to this prospectus (as supplemented or amended to reflect such transaction). In addition, any such shares that qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this prospectus. In effecting sales, brokers, dealers or agents engaged by the selling stockholder may arrange for other brokers or dealers to participate. Brokers, dealers or agents may receive commissions, discounts or concessions from the Selling Stockholders in amounts to be negotiated prior to the sale. Such brokers or dealers and any other participating brokers or dealers may be deemed to be "underwriters" within the meaning of the Securities Act of 1933 in connection with such sales, and any such commissions, discounts or concessions may be deemed to be underwriting discounts or commissions under the Securities Act of 1933. We will pay all reasonable expenses incident to the registration of the Shares being offered hereby other than any commissions and discounts of underwriters, dealers or agents. In order to comply with the securities laws of certain states, if applicable, the Shares being offered hereby must be sold in such jurisdictions only through registered or licensed brokers or dealers. In addition, in certain states such Shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and there has been compliance thereof. At the time a particular offer of shares is made, if required, a prospectus supplement will be distributed that will set forth the number of shares being offered and the terms of the offering, including the name of any underwriter, dealer or agent, the purchase price paid by any underwriter, any discount, commission and other item constituting compensation, any discount, commission or concession allowed or reallowed or paid to any dealer, and the proposed selling price to the public. We have agreed to indemnify the Selling Stockholders and persons controlling the Selling Stockholders against certain liabilities, including liabilities under the Securities Act of 1933. The Selling Stockholders have agreed to indemnify us and certain related persons against certain liabilities, including liabilities under the Securities Act of 1933. 9 12 We have agreed with the Selling Stockholders to keep the registration statement of which this prospectus constitutes a part effective until the earlier of (i) the date on which the Shares may be resold by the Selling Stockholders without registration and without regard to any volume limitations by reason of Rule 144(k) under the Securities Act or any other rule of similar effect or (ii) when all of the Shares have been sold pursuant to the Registration Statement or Rule 144 under the Securities Act or any other rule of similar effect. LEGAL MATTERS The validity of the shares offered hereby will be passed upon for ScanSoft by its General Counsel. EXPERTS The financial statements incorporated in this Prospectus by reference to the Annual Report on Form 10-K of ScanSoft, Inc. for the year ended December 31, 2000 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The consolidated financial statements of Caere Corporation and subsidiaries as December 31, 1999 and 1998 and for each of the years in the three-year period ended December 31, 1999, have been incorporated by reference herein and in the registration statement in reliance upon the report of KPMG LLP, independent certified public accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. 10 13 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 4,761,905 SHARES SCANSOFT, INC. ------------------------ COMMON STOCK ------------------------ PROSPECTUS ------------------------ , 2001 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 14 SCANSOFT, INC. REGISTRATION STATEMENT ON FORM S-3 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the expenses payable by the Registrant in connection with the filing of this Registration Statement(1). Securities and Exchange Commission Filing Fee............... $ 1,500 Printing and Engraving Expenses............................. $15,000 Legal Fees and Expenses..................................... $15,000 Accounting Fees and Expenses................................ $35,000 Blue Sky Fees and Expenses.................................. $ 200 Transfer Agent and Registration Fees........................ $ 5,000 Miscellaneous expenses...................................... $ 2,000 Total............................................. $73,700
- --------------- (1) All of such expenses, other than the filing fee for the Commission, are estimates and are subject to future contingencies. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Certificate of Incorporation of ScanSoft eliminates the liability of directors to ScanSoft for monetary damages for breach of fiduciary duty as a director to the fullest extent permissible under Delaware law, as such law exists currently or as it may be amended in the future. Under Delaware law, such provision may not eliminate or limit director monetary liability for: (a) breaches of the director's duty of loyalty to ScanSoft or its stockholders; (b) acts or omissions not in good faith or involving intentional misconduct or knowing violations of law; (c) the payment of unlawful dividends or unlawful stock repurchases or redemptions; or (d) transactions in which the director received an improper personal benefit. Such limitation of liability provisions also may not limit a director's liability for violation of, or otherwise relieve ScanSoft or its directors from the necessity of complying with, federal or state securities laws, or affect the availability of non-monetary remedies such as injunctive relief or rescission. ScanSoft's Bylaws provide that ScanSoft shall indemnify its directors and officers and may indemnify its employees and other agents to the fullest extent permitted by law. ScanSoft believes that indemnification under its Bylaws covers at least negligence and gross negligence on the part of indemnified parties. ScanSoft's Bylaws also permit ScanSoft to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether ScanSoft would have the power to indemnify him or her against such liability under the General Corporation Law of Delaware. ScanSoft currently has secured such insurance on behalf of its officers and directors. ScanSoft has entered into agreements to indemnify its directors and officers, in addition to indemnification provided for in ScanSoft's Bylaws. Subject to certain conditions, these agreements, among other things, indemnify ScanSoft's directors and officers for certain expenses (including attorney's fees), judgments, fines and settlement amounts incurred by any such person in any action or proceeding, including any action by or in the right of ScanSoft, arising out of such person's services as a director or officer of ScanSoft, any subsidiary of ScanSoft or any other company or enterprise to which the person provides services at the request of ScanSoft. II-1 15 ITEM 16. EXHIBITS The following exhibits are filed as part of this Registration Statement:
NUMBER EXHIBIT DESCRIPTION - ------ ------------------- 4.1 Share Purchase Agreement between ScanSoft, Inc. and the State of Wisconsin Investment Board, dated as of April 25, 2001. 5.1 Opinion of Counsel as to the validity of the Shares. 23.1 Consent of Counsel (included in Exhibit 5.1 above). 23.2 Consent of PricewaterhouseCoopers LLP. 23.3 Consent of KPMG LLP.
ITEM 17. UNDERTAKINGS. (a) The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act"); (ii) To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement. Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do not apply if the information required to be included in a post-effective amendment by these paragraphs is contained in periodic reports filed with or furnished by the Registrant pursuant to Section 13 or 15(d) of the Exchange Act of 1934, as amended (the "Exchange Act") that are incorporated by reference in this Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, 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 this offering. (b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered herein, 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 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 Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being II-2 16 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 Securities Act and will be governed by the final adjudication of such issue. II-3 17 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in Boston, Massachusetts, on May 30, 2001. ScanSoft, Inc. By: /s/ PAUL A. RICCI ------------------------------------ Paul A. Ricci, Chairman of the Board, and Chief Executive Officer (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Paul A. Ricci, Richard S. Palmer and Gerald C. Kent, Jr., jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Registration Statement on Form S-3, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Date: May 29, 2001 /s/ PAUL A. RICCI -------------------------------------------------------- Paul A. Ricci, Chief Executive Officer and Chairman of the Board (Principal Executive Officer) Date: May 29, 2001 /s/ MICHAEL K. TIVNAN -------------------------------------------------------- Michael K. Tivnan, President, Chief Operating Officer and Director Date: May 29, 2001 /s/ RICHARD S. PALMER -------------------------------------------------------- Richard S. Palmer, Senior Vice President and Chief Financial Officer, (Principal Financial Officer) Date: May 29, 2001 /s/ GERALD C. KENT, JR. -------------------------------------------------------- Gerald C. Kent, Jr., Chief Accounting Officer and Corporate Controller (Principal Accounting Officer) Date: May 29, 2001 /s/ J. LARRY SMART -------------------------------------------------------- J. Larry Smart, Director Date: May 29, 2001 /s/ MARK B. MYERS -------------------------------------------------------- Mark B. Myers, Director
II-4 18 Date: May 29, 2001 /s/ KATHARINE A. MARTIN -------------------------------------------------------- Katharine A. Martin, Director Date: May 29, 2001 /s/ ROBERT G. TERESI -------------------------------------------------------- Robert G. Teresi, Director Date: May 29, 2001 /s/ ROBERT J. FRANKENBERG -------------------------------------------------------- Robert J. Frankenberg, Director
II-5 19 EXHIBIT INDEX
NUMBER EXHIBIT DESCRIPTION - ------ ------------------- 4.1 Share Purchase Agreement between ScanSoft, Inc. and the State of Wisconsin Investment Board, dated as of April 25, 2001. 5.1 Opinion of Counsel as to the validity of the Shares. 23.1 Consent of Counsel (Included in Exhibit 5.1 above) 23.2 Consent of PricewaterhouseCoopers LLP. 23.3 Consent of KPMG LLP.
EX-4.1 2 b39548siex4-1.txt SHARE PURCHASE AGREEMENT 1 EXHIBIT 4.1 SCANSOFT, INC. SHARE PURCHASE AGREEMENT This SHARE PURCHASE AGREEMENT (this "Agreement") is made and entered into as of April 25, 2001, by and among SCANSOFT, INC., a Delaware corporation (the "Company"), and the purchasers listed on Schedule A attached hereto (collectively, the "Purchasers" and individually, a "Purchaser"). 1. AUTHORIZATION OF SALE OF THE SHARES Subject to the terms and conditions of this Agreement, the Company has authorized the sale of up to 4,761,905 shares (the "Shares") of common stock, par value $0.001 per share (the "Common Stock"), of the Company. 2. AGREEMENT TO SELL AND PURCHASE THE SHARES 2.1 PURCHASE AND SALE Subject to the terms and conditions of this Agreement, each Purchaser severally agrees to purchase, and the Company agrees to sell and issue to each Purchaser, at the Closing (as defined below) that number of Shares set forth opposite such Purchaser's name on Schedule A attached hereto. 2.2 PURCHASE PRICE The purchase price of each Share shall be $1.05 (the "Per Share Price"). The Company shall not, during the period beginning on the date of this Agreement and ending ninety (90) days after the Closing Date (as defined below), without adjusting the price per Share hereunder accordingly, sell (i) Shares at a price per Share of less than the Per Share Price, or (ii) options, warrants or any other securities that can be converted into, or otherwise exchanged for, shares of the Company's common stock at a conversion, exchange or exercise price per Share of less than the Per Share Price (excluding (x) all securities of the Company outstanding on the date hereof, including outstanding options and warrants, and (y) option grants to new employees granted in the ordinary course of business at 100% of the fair market value of the Common Stock). In the event the Company shall, during the period beginning on the date of this Agreement and ending ninety (90) days after the Closing Date, sell any such shares of the Company's common stock at, or any such instruments that can be converted into or otherwise exchanged for the Company's common stock (the "Subsequent Sale") exercisable at, a price per Share (the "Subsequent Purchase Price") of less than the Per Share Price, the Company shall, within ten (10) business days of the Subsequent Sale, pay to the Purchaser a cash amount equal to the number of Shares times the difference between the Per Share Price and the Subsequent Purchase Price. 3. DELIVERY OF THE SHARES AT THE CLOSING (a) The completion of the purchase and sale of the Shares (the "Closing") shall occur at the offices of the Company, at 9 Centennial Drive, Peabody, MA 01960 at 9:00 a.m. local 1. 2 time on April 26, 2001 or such other time and date as may be agreed by the parties (the "Closing Date"). (b) At the Closing, the Company shall authorize its transfer agent (the "Transfer Agent") to issue to each Purchaser one or more stock certificates registered in the name of such Purchaser, or in such nominee name(s) as designated by such Purchaser in writing, representing the number of Shares set forth in Section 2 above and bearing an appropriate legend referring to the fact that the Shares were sold in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Rule 506 under the Securities Act. The Company will deliver one certificate representing 3,809,524 Shares and one certificate representing 952,381 Shares (the "Certificates") against delivery of payment for the Shares by the Purchasers. Prior to the Purchasers' delivery of payment for the Shares, the Company will deliver via facsimile a copy of the Certificates to be delivered upon Closing to the office of the Purchasers (at the fax number indicated on the signature pages attached hereto). (c) The Company's obligation to complete the purchase and sale of the Shares shall be subject to the following conditions, any one or more of which may be waived by the Company: (i) receipt by the Company from stockholders holding rights to require the Company to register the sale of any securities owned by such holder in the Registration Statement (as defined below) of waivers of such rights (including the waiver of any notice requirements related to such rights); (ii) receipt by the Company of same-day funds in the full amount of the purchase price for the Shares being purchased under this Agreement; and (iii) the accuracy in all material respects of the representations and warranties made by the Purchasers and the fulfillment in all material respects of those undertakings of the Purchasers to be fulfilled before the Closing. (d) The Purchasers' obligations to accept delivery of such stock certificates and to pay for the Shares evidenced by the certificates shall be subject to the following conditions, any one or more of which may be waived by a Purchaser with respect to such Purchaser's obligation: (i) the representations and warranties made by the Company in this Agreement shall be accurate in all material respects and the undertakings of the Company shall have been fulfilled in all material respects on or before the Closing; (ii) the Company shall have delivered to the Purchasers a certificate executed by the chairman of the board or president and the chief financial or accounting officer of the Company, dated the Closing Date, in form and substance reasonably satisfactory to the Purchasers, to the effect that the representations and warranties of the Company set forth in Section 4 hereof are true and correct in all material respects as of the date of this Agreement and as of the Closing Date, and that the Company has complied with all the agreements and satisfied all the conditions in this Agreement on its part to be performed or satisfied on or before the Closing Date; and 2. 3 (iii) the Company shall have delivered to Purchasers a legal opinion in substantially the form attached hereto as Exhibit A. (iv) the Company shall have obtained gross proceeds of at least $5,000,000 from the sale of the Shares at the Closing. 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY Except as set forth on the Schedule of Exceptions attached hereto as Exhibit B, the Company hereby represents and warrants to the Purchasers as follows (which representations and warranties shall be deemed to apply, where appropriate, to each subsidiary of the Company): 4.1 ORGANIZATION AND QUALIFICATION The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware. The Company has the corporate power and authority to own, lease and operate its properties and to conduct its business as currently conducted and to enter into and perform its obligations under this Agreement. The Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify would not, singly or in the aggregate, have a material adverse effect on the condition, financial or otherwise, or the earnings, assets, business affairs or business prospects of the Company. 4.2 CAPITALIZATION (a) The authorized capital stock of the Company consists of 140,000,000 shares of Common Stock and 40,000,000 shares of Preferred Stock. (b) As of March 31, 2001, the issued and outstanding capital stock of the Company consists of 46,132,288 shares of Common Stock and 3,562,238 shares of Preferred Stock. The shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable and have not been issued in violation of or are not otherwise subject to any preemptive or other similar rights. (c) The Company has reserved 1,000,000 shares of Common Stock for issuance under the Company's employee stock purchase plan and 16,769,553 shares of Common Stock for issuance upon the exercise of stock options granted or available for future grant under the Company's stock option plans. (d) As of March 31, 2001 the Company has reserved 526,919 shares of Common Stock for issuance upon the exercise of outstanding warrants to purchase Common Stock. With the exception of the foregoing, there are no outstanding subscriptions, options, warrants, convertible or exchangeable securities or other rights granted to or by the Company to purchase shares of Common Stock or other securities of the Company and there are no commitments, plans or arrangements to issue any shares of Common Stock or any security convertible into or exchangeable for Common Stock. 3. 4 4.3 ISSUANCE, SALE AND DELIVERY OF THE SHARES (a) The Shares have been duly authorized for issuance and sale to the Purchasers pursuant to this Agreement and, when issued and delivered by the Company pursuant to this Agreement against payment of the consideration set forth in this Agreement, will be validly issued and fully paid and nonassessable and free and clear of all pledges, liens and encumbrances. The certificates evidencing the Shares are in due and proper form under Delaware law. (b) The issuance of the Shares is not subject to preemptive or other similar rights. No further approval or authority of the shareholders or the Board of Directors of the Company will be required for the issuance and sale of the Shares to be sold by the Company as contemplated in this Agreement. (c) Subject to the accuracy of the Purchasers' representations and warranties in Section 5 of this Agreement, the offer, sale, and issuance of the Shares in conformity with the terms of this Agreement constitute transactions exempt from the registration requirements of Section 5 of the Securities Act and from the registration or qualification requirements of the laws of any applicable state or United States jurisdiction. 4.4 FINANCIAL STATEMENTS The financial statements included (as exhibits or otherwise) in the Company Documents (as defined below) present fairly the financial position of the Company as of the dates indicated and the results of their operations for the periods specified. Except as otherwise stated in such Company Documents, such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis, and any supporting schedules included with the financial statements present fairly the information stated in the financial statements. The financial and statistical data set forth in the Company Documents were prepared on an accounting basis consistent with such financial statements. 4.5 NO MATERIAL CHANGE Since March 31, 2001, (a) there has been no material adverse change or any development involving a prospective material adverse change in or affecting the condition, financial or otherwise, or in the earnings, assets, business affairs or business prospects of the Company, whether or not arising in the ordinary course of business; (b) there have been no transactions entered into by the Company other than those in the ordinary course of business, which are material with respect to the Company; and (c) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. The Company has no material contingent obligations. 4. 5 4.6 ENVIRONMENTAL Except as would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the condition, financial or otherwise, or the earnings, assets, business affairs or business prospects of the Company, (a) the Company is in compliance with all applicable Environmental Laws (as defined below); (b) the Company has all permits, authorizations and approvals required under any applicable Environmental Laws and is in compliance with the requirements of such permits authorizations and approvals; (c) there are no pending or, to the best knowledge of the Company, threatened Environmental Claims (as defined below) against the Company; and (d) under applicable law, there are no circumstances with respect to any property or operations of the Company that are reasonably likely to form the basis of an Environmental Claim against the Company. For purposes of this Agreement, the following terms shall have the following meanings: "Environmental Law" means any United States (or other applicable jurisdiction's) Federal, state, local or municipal statute, law, rule, regulation, ordinance, code, policy or rule of common law and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, health, safety or any chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority. "Environmental Claims" means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations or proceedings relating in any way to any Environmental Law. 4.7 NO DEFAULTS The Company is not in violation of its certificate of incorporation or bylaws or in material default in the performance or observance of any obligation, agreement, covenant or condition contained in any material contract, indenture, mortgage, loan agreement, deed, trust, note, lease, sublease, voting agreement, voting trust, or other instrument or material agreement to which the Company is a party or by which it may be bound, or to which any of the property or assets of the Company is subject. 4.8 LABOR MATTERS No labor dispute with the employees of the Company exists or, to the best knowledge of the Company, is imminent. 4.9 NO ACTIONS There is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened, 5. 6 against or affecting the Company which, singly or in the aggregate, might result in any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company, or which, singly or in the aggregate, might materially and adversely affect the properties or assets thereof or which might materially and adversely affect the consummation of this Agreement, nor, to the best knowledge of the Company, is there any reasonable basis therefor. The Company is not in default with respect to any judgment, order or decree of any court or governmental agency or instrumentality which, singly or in the aggregate, would have a material adverse effect on the assets, properties or business of the Company. 4.10 INTELLECTUAL PROPERTY (a) The Company, to the best of its knowledge, owns or is licensed to use all patents, patent applications, inventions, trademarks, trade names, applications for registration of trademarks, service marks, service mark applications, copyrights, know-how, manufacturing processes, formulae, trade secrets, licenses and rights in any thereof and any other intangible property and assets that are material to the business of the Company as now conducted and as proposed to be conducted (in this Agreement called the "Proprietary Rights"), or is seeking, or will seek, to obtain rights to use such Proprietary Rights that are material to the business of the Company as proposed to be conducted. (b) The Company does not have any knowledge of, and the Company has not given or received any notice of, any pending conflicts with or infringement of the rights of others with respect to any Proprietary Rights or with respect to any license of Proprietary Rights which are material to the business of the Company. (c) No action, suit, arbitration, or legal, administrative or other proceeding, or investigation is pending, or, to the best knowledge of the Company, threatened, which involves any Proprietary Rights, nor, to the best knowledge of the Company, is there any reasonable basis therefor. (d) The Company is not subject to any judgment, order, writ, injunction or decree of any court or any Federal, state, local, foreign or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, or any arbitrator, and has not entered into or is not a party to any contract which restricts or impairs the use of any such Proprietary Rights in a manner which would have a material adverse effect on the use of any of the Proprietary Rights. (e) The Company has not received written notice of any pending conflict with or infringement upon such third-party proprietary rights. (f) The Company has not entered into any consent, indemnification, forbearance to sue or settlement agreement with respect to Proprietary Rights other than in the ordinary course of business. No claims have been asserted by any person with respect to the validity of the Company's ownership or right to use the Proprietary Rights and, to the best knowledge of the Company, there is no reasonable basis for any such claim to be successful. 6. 7 (g) The Company has complied, in all material respects, with its obligations relating to the protection of the Proprietary Rights which are material to the business of the Company used pursuant to licenses. (h) To the best knowledge of the Company, no person is infringing on or violating the Proprietary Rights. 4.11 PERMITS The Company possesses and is operating in compliance with all material licenses, certificates, consents, authorities, approvals and permits from all state, federal, foreign and other regulatory agencies or bodies necessary to conduct the businesses now operated by it, and the Company has not received any notice of proceedings relating to the revocation or modification of any such permit or any circumstance which would lead it to believe that such proceedings are reasonably likely which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would materially and adversely affect the condition, financial or otherwise, or the earnings, assets, business affairs or business prospects of the Company. 4.12 DUE EXECUTION, DELIVERY AND PERFORMANCE (a) This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. (b) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated in this Agreement and the fulfillment of the terms of this Agreement, including the sale, issuance and delivery of the Shares, (i) have been duly authorized by all necessary corporate action on the part of the Company, its directors and stockholders; (ii) will not conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to, any contract, indenture, mortgage, loan agreement, deed, trust, note, lease, sublease, voting agreement, voting trust or other instrument or agreement to which the Company is a party or by which it may be bound, or to which any of the property or assets of the Company is subject; (iii) will not trigger anti-dilution rights or other rights to acquire additional equity securities of the Company; and (iv) will not result in any violation of the provisions of the articles of incorporation or bylaws of the Company or any applicable statute, law, rule, regulation, ordinance, decision, directive or order. 4.13 PROPERTIES The Company has good and marketable title to its properties, free and clear of all material security interests, mortgages, pledges, liens, charges, encumbrances and claims of record. The properties of the Company are, in the aggregate, in good repair (reasonable wear and tear excepted), and suitable for their respective uses. Any real property held under lease by the Company is held under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the conduct of the business of the Company. The Company owns or leases all such properties as are necessary to its business or operations as now conducted. 7. 8 4.14 COMPLIANCE The Company has conducted and is conducting its business in compliance with all applicable Federal, state, local and foreign statutes, laws, rules, regulations, ordinances, codes, decisions, decrees, directives and orders, except where the failure to do so would not, singly or in the aggregate, have a material adverse effect on the condition, financial or otherwise, or on the earnings, assets, business affairs or business prospects of the Company. 4.15 SECURITY MEASURES The Company takes security measures designed to enable the Company to assert trade secret protection in its non-patented technology. 4.16 CONTRIBUTIONS To the best of the Company's knowledge, neither the Company nor any employee or agent of the Company has made any payment of funds of the Company or received or retained any funds in violation of any law, rule or regulation. 4.17 USE OF PROCEEDS; INVESTMENT COMPANY The Company intends to use the proceeds from the sale of the Shares for working capital and other general corporate purposes. The Company is not now, and after the sale of the Shares under this Agreement and under all other agreements and the application of the net proceeds from the sale of the Shares described in the proceeding sentence will not be, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 4.18 PRIOR OFFERINGS All offers and sales of capital stock of the Company before the date of this Agreement were at all relevant times duly registered or exempt from the registration requirements of the Securities Act and were duly registered or subject to an available exemption from the registration requirements of the applicable state securities or Blue Sky laws. 4.19 TAXES The Company has filed all material tax returns required to be filed, which returns are true and correct in all material respects, and the Company is not in default in the payment of any taxes, including penalties and interest, assessments, fees and other charges, shown thereon due or otherwise assessed, other than those being contested in good faith and for which adequate reserves have been provided or those currently payable without interest which were payable pursuant to said returns or any assessments with respect thereto. 4.20 OTHER GOVERNMENTAL PROCEEDINGS To the Company's knowledge, there are no rulemaking or similar proceedings before any Federal, state, local or foreign government bodies that involve or affect the Company, which, if the subject of an action unfavorable to the Company, could involve a prospective material 8. 9 adverse change in or effect on the condition, financial or otherwise, or in the earnings, assets, business affairs or business prospects of the Company. 4.21 NON-COMPETITION AGREEMENTS To the knowledge of the Company, any full-time employee who has entered into any non-competition, non-disclosure, confidentiality or other similar agreement with any party other than the Company is neither in violation of nor is expected to be in violation of that agreement as a result of the business currently conducted or expected to be conducted by the Company or such person's performance of his or her obligations to the Company. The Company has not received written notice that any consultant or scientific advisor of the Company is in violation of any non-competition, non-disclosure, confidentiality or similar agreement. 4.22 TRANSFER TAXES On the Closing Date, all stock transfer or other taxes (other than income taxes) that are required to be paid in connection with the sale and transfer of the Shares to be sold to the Purchasers under this Agreement will be, or will have been, fully paid or provided for by the Company and all laws imposing such taxes will be or will have been fully complied with. 4.23 INSURANCE The Company maintains insurance of the type and in the amount that the Company reasonably believes is adequate for its business, including, but not limited to, insurance covering all real and personal property owned or leased by the Company against theft, damage, destruction, acts of vandalism and all other risks customarily insured against by similarly situated companies, all of which insurance is in full force and effect. 4.24 GOVERNMENTAL/REGULATORY CONSENTS No registration, authorization, approval, qualification or consent with or required by any court or governmental/regulatory authority or agency is necessary in connection with the execution and delivery of this Agreement or the offering, issuance or sale of the Shares under this Agreement. 4.25 SECURITIES AND EXCHANGE COMMISSION FILINGS The Company has timely filed with the Securities and Exchange Commission (the "Commission") all documents required to be filed by the Company under the Securities Exchange Act of 1934, as amended (the "Exchange Act.") 4.26 ADDITIONAL INFORMATION The Company represents and warrants that the information contained in the following documents (the "Company Documents"), which will be provided to Purchaser before the Closing, is or will be true and correct in all material respects as of their respective final dates: 9. 10 (a) the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000; (b) the Company's Proxy Statement for its 2000 Annual Meeting of Shareholders; and (c) all other documents, if any, filed by the Company with the Commission since December 31, 2000 pursuant to the reporting requirements of the Securities Exchange Act. 4.27 CONTRACTS The contracts described in the Company Documents or incorporated by reference therein are in full force and effect on the date hereof, except for contracts the termination or expiration of which would not, singly or in the aggregate, have a material adverse effect on the business, properties or assets of the Company. Neither the Company nor, to the best knowledge of the Company, any other party is in material breach of or default under any such contracts. 4.28 NO INTEGRATED OFFERING Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the Securities Act of the issuance of the Shares to the Purchasers. The issuance of the Shares to the Purchasers will not be integrated with any other issuance of the Company's securities (past, current or future) for purposes of the Securities Act or any applicable rules of Nasdaq (or of any national securities exchange on which the Company's Common Stock is then traded). The Company will not make any offers or sales of any security (other than the Shares) that would cause the offering of the Shares to be integrated with any other offering of securities by the Company for purposes of any registration requirement under the Securities Act or any applicable rules of Nasdaq (or of any national securities exchange on which the Company's Common Stock is then traded). 4.29 LISTING OF SHARES The Company agrees to promptly secure the listing of the Shares upon each national securities exchange or automated quotation system upon which shares of Common Stock are then listed and, so long as any Purchaser owns any of the Shares, shall maintain such listing of all Shares. The Company has taken no action designed to delist, or which is likely to have the effect of delisting, the Common Stock from any of the national securities exchange or automated quotation system upon which the shares of Common Stock are then listed. 4.30 NO MANIPULATION OF STOCK The Company has not taken and will not, in violation of applicable law, take any action outside the ordinary course of business designed to or that might reasonably be expected to cause or result in unlawful manipulation of the price of the Common Stock to facilitate the sale or resale of the Shares. 10. 11 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS 5.1 SECURITIES LAW REPRESENTATIONS AND WARRANTIES Each Purchaser represents, warrants and covenants to the Company as follows: (a) The Purchaser is knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments in shares representing an investment decision like that involved in the purchase of the Shares, including investments in securities issued by the Company, and has requested, received, reviewed and considered all information it deems relevant in making an informed decision to purchase the Shares. (b) The Purchaser is acquiring the number of Shares set forth in Section 2 above in the ordinary course of its business and for its own account for investment (as defined for purposes of the Hart-Scott-Rodino Antitrust Improvement Act of 1976 and the regulations thereunder) only, and has no present intention of distributing any of the Shares nor any arrangement or understanding with any other persons regarding the distribution of such Shares within the meaning of Section 2(11) of the Securities Act, other than as contemplated in Section 7 of this Agreement. (c) The Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Shares except in compliance with the Securities Act and the rules and regulations promulgated thereunder (the "Rules and Regulations"). (d) The Purchaser has completed or caused to be completed the Stock Certificate Questionnaire and the Registration Statement Questionnaire, attached to this Agreement as Appendices I and II, for use in preparation of the Registration Statement (as defined in Section 7.3 below), and the answers to the Questionnaires are true and correct as of the date of this Agreement and will be true and correct as of the effective date of the Registration Statement; provided that the Purchasers shall be entitled to update such information by providing notice thereof to the Company before the effective date of such Registration Statement. (e) The Purchaser has, in connection with its decision to purchase the number of Shares set forth in Section 2 above, relied solely upon the Company Documents and the representations and warranties of the Company contained in this Agreement. (f) The Purchaser is an "accredited investor" within the meaning of Rule 501 of Regulation D promulgated under the Securities Act. 5.2 RESALES OF SHARES (a) The Purchaser hereby covenants with the Company not to make any sale of the Shares without satisfying the requirements of the Securities Act and the Rules and Regulations, including, in the event of any resale under the Registration Statement, the prospectus delivery requirements under the Securities Act, and the Purchaser acknowledges and agrees that such Shares are not transferable on the books of the Company pursuant to a resale under the 11. 12 Registration Statement unless the certificate submitted to the transfer agent evidencing the Shares is accompanied by a separate officer's certificate (i) in the form of Appendix III to this Agreement; (ii) executed by an officer of, or other authorized person designated by, the Purchaser; and (iii) to the effect that (A) the Shares have been sold in accordance with the Registration Statement and (B) the requirement of delivering a current prospectus has been satisfied. (b) The Purchaser acknowledges that there may occasionally be times when the Company determines, in good faith following consultation with its Board of Directors or a committee thereof, the use of the prospectus forming a part of the Registration Statement (the "Prospectus," as further defined in Section 7.3.1 below) should be suspended until such time as an amendment or supplement to the Registration Statement or the Prospectus has been filed by the Company and any such amendment to the Registration Statement is declared effective by the Commission, or until such time as the Company has filed an appropriate report with the Commission pursuant to the Exchange Act. The Purchaser hereby covenants that it will not sell any Shares pursuant to the Prospectus during the period commencing at the time at which the Company gives the Purchaser written notice of the suspension of the use of the Prospectus and ending at the time the Company gives the Purchaser written notice that the Purchaser may thereafter effect sales pursuant to the Prospectus. The Company may, upon written notice to the Purchasers, suspend the use of the Prospectus for up to thirty (30) days in any 365-day period based on the reasonable determination of the Company's Board of Directors that there is a significant business purpose for such determination, such as pending corporate developments, public filings with the SEC or similar events. The Company shall in no event be required to disclose the business purpose for which it has suspended the use of the Prospectus if the Company determines in its good faith judgment that the business purpose should remain confidential. In addition, the Company shall notify each Purchaser (i) of any request by the SEC for an amendment or any supplement to such Registration Statement or any related prospectus, or any other information request by any other governmental agency directly relating to the offering, and (ii) of the issuance by the SEC of any stop order suspending the effectiveness of such Registration Statement or of any order preventing or suspending the use of any related prospectus or the initiation or threat of any proceeding for that purpose. (c) The Purchaser further covenants to notify the Company promptly of the sale of any of its Shares, other than sales pursuant to a Registration Statement contemplated in Section 7 of this Agreement or sales upon termination of the transfer restrictions pursuant to Section 7.4 of this Agreement. 5.3 DUE EXECUTION, DELIVERY AND PERFORMANCE (a) This Agreement has been duly executed and delivered by the Purchaser and constitutes a valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms. 12. 13 (b) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated in this Agreement and the fulfillment of the terms of this Agreement have been duly authorized by all necessary corporate action and will not conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Purchaser pursuant to, any contract, indenture, mortgage, loan agreement, deed, trust, note, lease, sublease, voting agreement, voting trust or other instrument or agreement to which the Purchaser is a party or by which it or any of them may be bound, or to which any of the property or assets of the Purchaser is subject, nor will such action result in any violation of the provisions of the charter or bylaws of the Purchaser or any applicable statute, law, rule, regulation, ordinance, decision, directive or order. 6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Notwithstanding any investigation made by any party to this Agreement, all covenants, agreements, representations and warranties made by the Company and the Purchasers in this Agreement and in the certificates for the Shares delivered pursuant to this Agreement shall survive the execution of this Agreement, the delivery to the Purchasers of the Shares being purchased and the payment therefor. 7. FORM D FILING; REGISTRATION; COMPLIANCE WITH THE SECURITIES ACT; COVENANTS 7.1 FORM D FILING; REGISTRATION OF SHARES 7.1.1 REGISTRATION STATEMENT; EXPENSES The Company shall: (a) file in a timely manner a Form D relating to the sale of the Shares under this Agreement, pursuant to Securities and Exchange Commission Regulation D. (b) as soon as practicable after the Closing Date, but in no event later than the 20th day following the Closing Date, prepare and file with the Commission a Registration Statement on Form S-3 (or, if the Company is ineligible to use Form S-3, then on Form S-1) relating to the sale of the Shares by the Purchasers from time to time on the Nasdaq National Market (or the facilities of any national securities exchange on which the Company's Common Stock is then traded) or in privately negotiated transactions (the "Registration Statement"); (c) provide to Purchasers any information required to permit the sale of the Shares under Rule 144A of the Securities Act; (d) subject to receipt of necessary information from the Purchasers, use its best efforts to cause the Commission to notify the Company of the Commission's willingness to declare the Registration Statement effective on or before 90 days after the Closing Date; (e) notify Purchasers promptly upon the Registration Statement, and any post-effective amendment thereto, being declared effective by the Commission; 13. 14 (f) prepare and file with the Commission such amendments and supplements to the Registration Statement and the Prospectus (as defined in Section 7.3.1 below) and take such other action, if any, as may be necessary to keep the Registration Statement effective until the earlier of (i) the date on which the Shares may be resold by the Purchasers without registration and without regard to any volume limitations by reason of Rule 144(k) under the Securities Act or any other rule of similar effect or (ii) all of the Shares have been sold pursuant to the Registration Statement or Rule 144 under the Securities Act or any other rule of similar effect; (g) promptly furnish to the Purchasers with respect to the Shares registered under the Registration Statement such reasonable number of copies of the Prospectus, including any supplements to or amendments of the Prospectus, in order to facilitate the public sale or other disposition of all or any of the Shares by the Purchasers; (h) during the period when copies of the Prospectus are required to be delivered under the Securities Act or the Exchange Act, will file all documents required to be filed with the Commission pursuant to Section 13, 14 or 15 of the Exchange Act within the time periods required by the Exchange Act and the rules and regulations promulgated thereunder; (i) file documents required of the Company for customary Blue Sky clearance in all states requiring Blue Sky clearance; provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented; and (j) bear all expenses in connection with the procedures in paragraphs (a) through (i) of this Section 7.1.1 and the registration of the Shares pursuant to the Registration Statement. 7.1.2 DELAY IN EFFECTIVENESS OF REGISTRATION STATEMENT In the event that the Registration Statement is not declared effective on or before the 90th day following the Closing Date (the "Penalty Date"), the Company shall pay to each Purchaser liquidated damages in an amount equal to 0.25% of the total purchase price of the Shares purchased by such Purchaser pursuant to this Agreement for each week after the Penalty Date that the Registration Statement is not declared effective. 7.2 TRANSFER OF SHARES AFTER REGISTRATION Each Purchaser agrees that it will not effect any disposition of the Shares or its right to purchase the Shares that would constitute a sale within the meaning of the Securities Act, except as contemplated in the Registration Statement referred to in Section 7.1 or as otherwise permitted by law, and that it will promptly notify the Company of any changes in the information set forth in the Registration Statement regarding the Purchaser or its plan of distribution. 7.3 INDEMNIFICATION For the purpose of this Section 7.3, the term "Registration Statement" shall include any preliminary or final prospectus, exhibit, supplement or amendment included in or relating to the Registration Statement referred to in Section 7.1. 14. 15 7.3.1 INDEMNIFICATION BY THE COMPANY The Company agrees to indemnify and hold harmless each of the Purchasers and each person, if any, who controls any Purchaser within the meaning of the Securities Act, against any losses, claims, damages, liabilities or expenses, joint or several, to which such Purchasers or such controlling person may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company, which consent shall not be unreasonably withheld), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, including the Prospectus, financial statements and schedules, and all other documents filed as a part thereof, as amended at the time of effectiveness of the Registration Statement, including any information deemed to be a part thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 434, of the Rules and Regulations, or the Prospectus, in the form first filed with the Commission pursuant to Rule 424(b) of the Regulations, or filed as part of the Registration Statement at the time of effectiveness if no Rule 424(b) filing is required (the "Prospectus"), or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state in any of them a material fact required to be stated therein or necessary to make the statements in any of them, in light of the circumstances under which they were made, not misleading, or arise out of or are based in whole or in part on any inaccuracy in the representations and warranties of the Company contained in this Agreement, or any failure of the Company to perform its obligations under this Agreement or under law, and will reimburse each Purchaser and each such controlling person for any legal and other expenses as such expenses are reasonably incurred by such Purchaser or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, the Prospectus or any amendment or supplement of the Registration Statement or Prospectus in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Purchaser expressly for use in the Registration Statement or the Prospectus, or (ii) the failure of such Purchaser to comply with the covenants and agreements contained in Sections 5.2 or 7.2 of this Agreement respecting resale of the Shares, or (iii) the inaccuracy of any representations made by such Purchaser in this Agreement or (iv) any untrue statement or omission of a material fact required to make such statement not misleading in any Prospectus that is corrected in any subsequent Prospectus that was delivered to the Purchaser before the pertinent sale or sales by the Purchaser. 7.3.2 INDEMNIFICATION BY THE PURCHASER Each Purchaser will severally and not jointly indemnify and hold harmless the Company, each of its directors, each of its officers who signed the Registration Statement and each person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages, liabilities or expenses to which the Company, each of its directors, each of its officers who signed the Registration Statement or controlling person may become subject, under 15. 16 the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Purchaser, which consent shall not be unreasonably withheld) insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon (i) any failure on the part of such Purchaser to comply with the covenants and agreements contained in Sections 5.2 or 7.2 of this Agreement respecting the sale of the Shares or (ii) the inaccuracy of any representation made by such Purchaser in this Agreement or (iii) any untrue or alleged untrue statement of any material fact contained in the Registration Statement, the Prospectus, or any amendment or supplement to the Registration Statement or Prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, the Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Purchaser expressly for use therein; provided, however, that the Purchaser shall not be liable for any such untrue or alleged untrue statement or omission or alleged omission of which the Purchaser has delivered to the Company in writing a correction before the occurrence of the transaction from which such loss was incurred, and the Purchaser will reimburse the Company, each of its directors, each of its officers who signed the Registration Statement or controlling person for any legal and other expense reasonably incurred by the Company, each of its directors, each of its officers who signed the Registration Statement or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. 7.3.3 INDEMNIFICATION PROCEDURE (a) Promptly after receipt by an indemnified party under this Section 7.3 of notice of the threat or commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 7.3, promptly notify the indemnifying party in writing of the claim; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise under the indemnity agreement contained in this Section 7.3 or to the extent it is not prejudiced as a result of such failure. (b) In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with all other indemnifying parties similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be a conflict between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it or other indemnified parties that are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon 16. 17 receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 7.3 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless: (i) the indemnified party shall have employed such counsel in connection with the assumption of legal defenses in accordance with the proviso to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel, approved by such indemnifying party representing all of the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of action, in each of which cases the reasonable fees and expenses of counsel shall be at the expense of the indemnifying party. Notwithstanding the provisions of this Section 7.3, the Purchaser shall not be liable for any indemnification obligation under this Agreement in excess of the amount of gross proceeds received by the Purchaser from the sale of the Shares. 7.3.4 CONTRIBUTION If the indemnification provided for in this Section 7.3 is required by its terms but is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party under this Section 7.3 in respect to any losses, claims, damages, liabilities or expenses referred to in this Agreement, then each applicable indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any losses, claims, damages, liabilities or expenses referred to in this Agreement (a) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Purchaser from the placement of Common Stock or (b) if the allocation provided by clause (a) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (a) above but the relative fault of the Company and the Purchaser in connection with the statements or omissions or inaccuracies in the representations and warranties in this Agreement that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The respective relative benefits received by the Company on the one hand and each Purchaser on the other shall be deemed to be in the same proportion as the amount paid by such Purchaser to the Company pursuant to this Agreement for the Shares purchased by such Purchaser that were sold pursuant to the Registration Statement bears to the difference (the "Difference") between the amount such Purchaser paid for the Shares that were sold pursuant to the Registration Statement and the amount received by such Purchaser from such sale. The relative fault of the Company and each Purchaser shall be determined by reference to, among other things, whether the untrue or alleged statement of a material fact or the omission or alleged 17. 18 omission to state a material fact or the inaccurate or the alleged inaccurate representation or warranty relates to information supplied by the Company or by such Purchaser and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 7.3.3, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 7.3.3 with respect to the notice of the threat or commencement of any threat or action shall apply if a claim for contribution is to be made under this Section 7.3.4; provided, however, that no additional notice shall be required with respect to any threat or action for which notice has been given under Section 7.3 for purposes of indemnification. The Company and each Purchaser agree that it would not be just and equitable if contribution pursuant to this Section 7.3 were determined solely by pro rata allocation (even if the Purchaser were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this paragraph. Notwithstanding the provisions of this Section 7.3, no Purchaser shall be required to contribute any amount in excess of the amount by which the Difference exceeds the amount of any damages that such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Purchasers' obligations to contribute pursuant to this Section 7.3 are several and not joint. 7.4 TERMINATION OF CONDITIONS AND OBLIGATIONS The restrictions imposed by Section 5 or this Section 7 upon the transferability of the Shares shall cease and terminate as to any particular number of the Shares upon the passage of two years from the Closing Date or at such time as an opinion of counsel satisfactory in form and substance to the Company shall have been rendered to the effect that such conditions are not necessary in order to comply with the Securities Act. 7.5 INFORMATION AVAILABLE From the date of this Agreement through the date the Registration Statement covering the resale of Shares owned by any Purchaser is no longer effective, the Company will furnish to such Purchaser: (a) as soon as practicable after available (but in the case of the Company's Annual Report to Shareholders, within 90 days after the end of each fiscal year of the Company), one copy of (i) its Annual Report to Shareholders (which Annual Report shall contain financial statements audited in accordance with generally accepted accounting principles by a national firm of certified public accountants); (ii) if not included in substance in the Annual Report to Shareholders, its Annual Report on Form 10-K; 18. 19 (iii) if not included in substance in its Quarterly Reports to Shareholders, its quarterly reports on Form 10-Q; and (iv) a full copy of the particular Registration Statement covering the Shares (the foregoing, in each case, excluding exhibits); (b) upon the request of the Purchaser, a reasonable number of copies of the Prospectus to supply to any other party requiring the Prospectus. 7.6 RULE 144 INFORMATION Until the earlier of (i) the date on which the Shares may be resold by the Purchasers without registration and without regard to any volume limitations by reason of Rule 144(k) under the Securities Act or any other rule of similar effect or (ii) all of the Shares have been sold pursuant to the Registration Statement or Rule 144 under the Securities Act or any other rule of similar effect, the Company shall file all reports required to be filed by it under the Securities Act, the Rules and Regulations and the Exchange Act and shall take such further action to the extent required to enable the Purchasers to sell the Shares pursuant to Rule 144 under the Securities Act (as such rule may be amended from time to time). 7.7 STOCK OPTION MATTERS AND PROHIBITION ON TOXICS The Company shall, within thirty (30) days of the Closing Date, adopt such amendments to, with respect to (i) and (ii) below, the Company's stock option plans and By-laws, and, with respect to (iii) and (iv) below, the Company's By-laws (together, the "Stock Option Plan and By-law Amendments") to provide that, unless approved by the holders of a majority of the shares present and entitled to vote at a duly convened meeting of shareholders, the company shall not: (i) grant any stock options with an exercise price that is less than 100% of the fair market value of the underlying stock on the date of grant; (ii) reduce the exercise price of any stock option granted under any existing or future stock option plan; (iii) sell or issue any security of the Company convertible, exercisable or exchangeable into shares of Common Stock, having a conversion, exercise or exchange price per share which is subject to downward adjustment based on the market price of the Common Stock at the time of conversion, exercise or exchange of such security into Common Stock (except for appropriate adjustments made to give effect to any stock splits or stock dividends); or (iv) enter into (a) any equity line or similar agreement or arrangement; or (b) any agreement to sell Common Stock (or any security convertible, exercisable or exchangeable into shares of Common Stock ("Common Stock Equivalent")) at a per share price (or, with respect to a Common Stock Equivalent, at a conversion, exercise or exchange price, as the case may be ("Equivalent Price")) that is fixed after the execution date of the agreement, whether or not based on any predetermined price-setting formula or calculation method. Notwithstanding the foregoing, however, a price protection clause shall be permitted in an agreement for sale of Common Stock or Common Stock Equivalent, if such clause provides for an adjustment to the 19. 20 price per share of Common Stock or, with respect to a Common Stock Equivalent, to the Equivalent Price (provided that such price or Equivalent Price is fixed on or before the execution date of the agreement)(the "Fixed Price") in the event that the Company, during the period beginning on the date of the agreement and ending no later than 90 days after the closing date of the transaction, sells shares of Common Stock or Common Stock Equivalent to another investor at a price or Equivalent Price, as the case may be, below the Fixed Price. The Stock Option Plan and By-law Amendments may not be further amended or repealed without the affirmative vote of the holders of a majority of the shares present and entitled to vote at a duly convened meeting of shareholders. Upon the adoption of the Stock Option Plan and By-law Amendments, the Company shall promptly furnish a copy of such amendments to the Purchasers. The Company agrees that, prior to the adoption of the Stock Option Plan and By-law Amendments by all necessary corporate action of the Company as described above, the Company shall not conduct any of the actions specified in (i), (ii), (iii) or (iv) above of this Section 7.7. 8. LEGAL FEES AND OTHER TRANSACTION EXPENSES At the Closing, the Company agrees to pay a flat fee of $5,000 to the State of Wisconsin Investment Board for their legal and other transaction expenses (whether internal or external) arising in connection with the transactions contemplated by this Agreement. 9. BROKER'S FEE Each of the parties to this Agreement hereby represents that, on the basis of any actions and agreements by it, there are no brokers or finders entitled to compensation in connection with the sale of the Shares to the Purchasers. The Company shall indemnify and hold harmless the Purchasers from and against all fees, commissions or other payments owing by the Company to any other person or firm acting on behalf of the Company hereunder. 10. NOTICES All notices, requests, consents and other communications under this Agreement shall be in writing, shall be mailed by first-class registered or certified airmail, confirmed facsimile or nationally recognized overnight express courier postage prepaid, and shall be delivered as addressed as follows: (a) if to the Company, to: ScanSoft, Inc. 9 Centennial Drive Peabody, MA 01960 Attention: Chief Financial Officer Telephone: 978-977-2041 Facsimile: 977-978-2436 or to such other person at such other place as the Company shall designate to the Purchaser in writing; and 20. 21 (b) if to a Purchaser, at its address as set forth on the signature page to this Agreement, or at such other address or addresses as may have been furnished to the Company in writing. Such notice shall be deemed effectively given upon confirmation of receipt by facsimile, one business day after deposit with such overnight courier or three days after deposit of such registered or certified airmail with the U.S. Postal Service, as applicable. 11. MODIFICATION; AMENDMENT This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and each of the Purchasers. 12. TERMINATION This Agreement may be terminated as to any Purchaser, at the option of such Purchaser, if the Closing has not occurred on or before thirty (30) days from the date of this Agreement. 13. HEADINGS The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement. 14. SEVERABILITY If any provision contained in this Agreement should be held to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Agreement shall not in any way be affected or impaired thereby. 15. GOVERNING LAW; JURISDICTION This Agreement shall be governed by and construed in accordance with the laws of the state of Delaware and the federal law of the United States of America. The parties hereto hereby submit to the jurisdiction of the courts of the State of Wisconsin, or of the United States of America sitting in the State of Wisconsin, over any action, suit, or proceeding arising out of or relating to this Agreement. Nothing herein shall affect the right of the Purchaser to serve process in any manner permitted by law or limit the right of the Purchaser to bring proceedings against the Company in the competent courts of any other jurisdiction or jurisdictions. 16. NO CONFLICTS OF INTEREST. The Company represents, warrants, and covenants that, to the best of its knowledge, no trustee or employee of the State of Wisconsin Investment Board identified on the attached list, either directly or indirectly (a) currently holds, except as may be specifically set forth below, a personal interest in the Company or any of its affiliates (together, the "Entity") or the Entity's property or securities, or (b) will, in connection with the investment made pursuant to this Agreement, receive (i) a personal interest in the Entity or the Entity's property or securities or (ii) anything of substantial economic value for his or her private benefit from the Entity or anyone 21. 22 acting on its behalf. As to ownership of an interest in the Entity's publicly traded securities, "knowledge" hereunder is based on an examination of record holders of the Entity's securities and actual knowledge of the undersigned. 17. COUNTERPARTS This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party to this Agreement and delivered to the other parties. [Signature pages follow] 22. 23 SHARE PURCHASE AGREEMENT SIGNATURE PAGE IN WITNESS WHEREOF, the parties to this Agreement have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written. SCANSOFT, INC. By: /s/ Paul Ricci ------------------------------------- Name: Paul Ricci ------------------------------------ Its: CEO & Chairman ------------------------------------ STATE OF WISCONSIN INVESTMENT BOARD By: /s/ John F. Nelson ------------------------------------- Name: John Nelson ------------------------------------ Title: Investment Director ---------------------------------- Address: 121 East Wilson Street Madison, WI 53702 Facsimile: (608) 266-2436 SHARE PURCHASE AGREEMENT SIGNATURE PAGE 24 SCHEDULE A PURCHASERS State of Wisconsin Investment Board 121 East Wilson Street Madison, WI 53702 Facsimile: (608) 266-2436 25 EXHIBIT A April ____, 2001 To the Purchasers of Common Stock of ScanSoft, Inc. listed on Exhibit A attached hereto Ladies and Gentlemen: I am General Counsel of ScanSoft, Inc., a Delaware corporation (the "Company") and rendering this opinion in connection with the issuance and sale to you of 4,761,905 shares of the Company's Common Stock (the "Shares") pursuant to the Share Purchase Agreement dated as of April ____, 2001 between the Company and each of the Purchasers listed on Exhibit A hereto (the "Agreement"). I am rendering this opinion pursuant to Section 3(d)(iii) of the Agreement. Except as otherwise defined herein, capitalized terms used but not defined herein have the respective meanings given to them in the Agreement. In connection with this opinion, I have examined and relied upon the representations and warranties as to factual matters contained in and made pursuant to the Agreement by the various parties and originals or copies certified to our satisfaction, of such records, documents, certificates, opinions, memoranda and other instruments as in our judgment are necessary or appropriate to enable us to render the opinion expressed below. Where I render an opinion "to the best of my knowledge" or concerning an item "known to me" or my opinion otherwise refers to my knowledge, it is based solely upon investigation, if any, that I specifically set forth herein. In rendering this opinion, I have assumed: the genuineness and authenticity of all signatures on original documents; the authenticity of all documents submitted to me as originals; the conformity to originals of all documents submitted to me as copies; the accuracy, completeness and authenticity of certificates of public officials; and the due authorization, execution and delivery of all documents (except the due authorization, execution and delivery by the Company of the Agreement), where authorization, execution and delivery are prerequisites to the effectiveness of such documents. I have also assumed: that all individuals executing and delivering documents on behalf of the Purchasers had the legal capacity to so execute and deliver; that you have received all documents you were to receive under the Agreement; and that the Agreement is an obligation binding upon you. In rendering this opinion I have also assumed that there are no extrinsic agreements or understandings among the parties to the Agreement that would modify or interpret the terms of the Agreement or the respective rights or obligations of the parties thereunder. My opinion is expressed only with respect to the federal laws of the United States of America, the laws of the State of Delaware and the General Corporation Law of the State of Delaware. I express no opinion as to whether the laws of any particular jurisdiction apply, and no opinion to the extent that the laws of any jurisdiction other than those identified above are applicable to the 26 subject matter hereof. I am not rendering any opinion as to compliance with any antifraud law, rule or regulation relating to securities, or to the sale or issuance thereof. On the basis of the foregoing, in reliance thereon and with the foregoing qualifications, I am of the opinion that: 1. The Company has been duly incorporated and is validly existing in good standing under the laws of the State of Delaware. The Company is duly qualified or licensed as a foreign corporation to do business, and is in good standing (with respect to jurisdictions that recognize such concept), in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except for such failures to be so duly qualified or licensed and in good standing that would not, either individually or in the aggregate, be material to the Company. The Company has the requisite corporate power to own or lease its property and assets and to conduct its business as currently conducted. 2. The execution, delivery and performance of the Agreement have been duly authorized by all necessary corporate action on the part of the Company, its directors and stockholders. The Agreement has been duly executed and delivered on behalf of the Company and constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws of general applicability relating to or affecting creditors' rights, and (ii) as limited by equitable principles generally and limitations on the availability of equitable remedies, whether such enforceability is considered in a proceeding in equity or at law. 3. As of the date hereof, the authorized capital stock of the Company consists of 180,000,000 shares. The issued and outstanding capital stock of the Company consists of 140,000,000 shares of Common Stock, of which 46,132,287 shares are issued and outstanding, and 40,000,000 shares of Preferred Stock, of which 3,562,238 are issued and outstanding. 4. The sale, issuance and delivery of the Shares have been duly authorized all necessary corporate action on the part of the Company, its directors and stockholders. When issued, delivered and paid for in accordance with the terms of the Agreement, the Shares will be validly issued, fully paid and non-assessable and free of any pre-emptive or similar rights. 5. Except as set forth in the Agreement, to our knowledge there is no action, proceeding or investigation pending or overtly threatened in writing against the Company which could reasonably be anticipated to result, either individually or in the aggregate, in any material adverse change in the assets, financial condition or operations of the Company, or which questions the validity or enforceability of, or seeks to enjoin or invalidate, the Agreement or any action to be taken by the Company in connection therewith. 6. The offer and sale of the Shares by the Company to the Purchasers is exempt from the registration requirements of the Securities Act of 1933, as amended, subject to timely filing of a Form D pursuant to Securities and Exchange Commission Regulation D, and the qualification and registration requirements of all applicable state securities and "blue sky" laws. 27 7. The execution, delivery and performance of the Agreement by the Company and the consummation of the sale, issuance and delivery of the Shares by the Company as contemplated therein do not conflict with or violate any provisions of the Company's Certificate of Incorporation or By-laws; or any provision of any applicable federal or state law, statute, rule or regulation; or any material agreements to which the Company is a party. 8. All consents, approvals, authorizations, or orders of, and filings, registrations and qualifications with or required by any regulatory or governmental body or authority in the United States necessary for the issuance by the Company of the Shares as contemplated by the Agreements, have been made or obtained, except for (i) the filing of a Form D pursuant to Securities and Exchange Commission Regulation D, and (ii) the filing of a Form D with the Securities Commissioners of the state of Wisconsin. This opinion is intended solely for your benefit and is not to be made available to or be relied upon by any other person, firm, or entity without my prior written consent. I disclaim any obligation to advise you of any change of law that occurs, or any facts of which I become aware, after the date of this opinion. Very truly yours, Jo-Anne Sinclair General Counsel 28 EXHIBIT B SCHEDULE OF EXCEPTIONS Section numbers correspond to those in the Agreement. SECTION 4.10(f) On December 17, 1999, Caere Corporation entered into a Release and Settlement Agreement and License Agreement with Horst Froessl in connection with a claim of patent infringement. In connection therewith, Caere Corporation paid Mr. Froessl $1,500,000. In September 1999, ScanSoft, Inc. entered into a Mutual Release and Settlement Agreement with Vivid Details, Inc. in connection with a claim of patent infringement regarding the Kai products purchased from MetaCreations, Inc. In connection therewith, ScanSoft, Inc. paid Vivid Details $45,000. SECTION 4.13 Fleet Bank has a general security interest in all of the Company's assets. 29 EXHIBIT C TRUSTEES OF THE STATE OF WISCONSIN INVESTMENT BOARD Jon D. Hammes Wayne McCaffery John Petersen III George F. Lightbourn Eric O. Stanchfield James R. Nelsen Andrea Steen Crawford William R. Sauey James A. Senty RELEVANT EMPLOYEES OF THE STATE OF WISCONSIN INVESTMENT BOARD All Transactions Patricia Lipton Executive Director Joseph Gorman Chief Investment Officer - Equities Keith Johnson Chief Legal Counsel Teresa Lau Assistant Legal Counsel Cynthia Richson Assistant Legal Counsel Jon Traver Chief Investment Officer - Fixed Income For Real Estate Transactions Robert Severance Investment Director Chuck Carpenter Assistant Investment Director Dave Lewandowski Investment Officer Steve Spiekerman Investment Officer For Private Placement Loans Jim Gannon Investment Director Eve Hennessee Portfolio Manager Monica Jaehnig Portfolio Manager For Private Placement Funds & Equity Investments Jim Gannon Investment Director Jon Vanderploeg Portfolio Manager Carrie Thome Assistant Portfolio Manager Tom Olson Investment Officer For Non-traditional Investments Mike Wagner Investment Director Tom Drake Securities Analyst For Small Cap Portfolio Direct Placements John Nelson Investment Director Chad Neumann Assistant Portfolio Manager Jackie Doeler Securities Analyst Mark Traster Securities Analyst Dan Kane Securities Analyst 30 APPENDIX I [COMPANY] STOCK CERTIFICATE QUESTIONNAIRE Pursuant to Section 3 of the Agreement, please provide us with the following information: 1. The exact name that your Shares are to be registered in (this is the name that will appear on your stock certificate(s)). You may use a nominee name if appropriate: ---------------------------------- 2. The relationship between the Purchaser of the Shares and the Registered Holder listed in response to item 1 above: ---------------------------------- 3. The mailing address of the Registered Holder listed in response to item 1 above: ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- 4. The Social Security Number or Tax Identification Number of the Registered Holder listed in response to item 1 above: ----------------------------------- 31 APPENDIX II [COMPANY] REGISTRATION STATEMENT QUESTIONNAIRE In connection with the preparation of the Registration Statement, please provide us with the following information: 5. Pursuant to the "Selling Shareholder" section of the Registration Statement, please state your or your organization's name exactly as it should appear in the Registration Statement: ------------------------------------------------------- 6. Please provide the number of shares that you or your organization will own immediately after Closing, including those Shares purchased by you or your organization pursuant to this Purchase Agreement and those shares purchased by you or your organization through other transactions: ------------------------------------------------------- 7. Have you or your organization had any position, office or other material relationship within the past three years with the Company or its affiliates? _____ Yes _____ No If yes, please indicate the nature of any such relationships below: ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- 32 APPENDIX III PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE The undersigned, an officer of, or other person duly authorized by - -------------------------------------------------------------------------------- [fill in official name of individual or institution] hereby certifies that he/she/it is the Purchaser of the shares evidenced by the attached certificate, and as such, sold such shares on ________________, 200__ in accordance with Registration Statement number 333-________________, and complied with the requirement of delivering a current prospectus in connection with such sale. PRINT OR TYPE: Name of Purchaser (Individual or Institution): - -------------------------------------------------------------------------------- Name of Individual representing Purchaser (if an Institution) - -------------------------------------------------------------------------------- Title of Individual representing Purchaser (if an Institution): - -------------------------------------------------------------------------------- SIGNATURE: Individual Purchaser or Individual representing Purchaser: - -------------------------------------------------------------------------------- EX-5.1 3 b39548siex5-1.txt OPINION OF COUNSEL 1 EXHIBITS 5.1 and 23.1 [SCANSOFT LOGO] May 30, 2001 ScanSoft, Inc. 9 Centennial Drive Peabody, Massachusetts 01960 Re: Registration Statement on Form S-3 Gentlemen & Ladies: I am General Counsel of ScanSoft, Inc., a Delaware corporation (the "Company"). This opinion is given in connection with the Registration Statement on Form S-3 under the Securities Act of 1933 relating to the sale by the persons named therein to the public of up to 4,761,905 shares of your Common Stock, $0.001 par value per share ("Shares"). I am of the opinion that the issuance of the Shares has been duly authorized by your Board of Directors, and the Shares are validly issued, fully paid and nonassessable. I hereby consent to the filing of the opinion as an exhibit to the Registration Statement. Sincerely, /s/ Jo-Anne Sinclair Jo-Anne Sinclair General Counsel EX-23.2 4 b39548siex23-2.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our reports dated February 9, 2001 relating to the consolidated financial statements and the financial statement schedule, which appear in ScanSoft, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers LLP May 30, 2001 Boston, Massachusetts EX-23.3 5 b39548siex23-3.txt CONSENT OF KPMG LLP 1 Exhibit 23.3 Consent of KPMG LLP The Board of Directors and Stockholders Caere Corporation: We consent to the incorporation by reference in the registration statement on Form S-3 of ScanSoft, Inc. of our report dated January 31, 2000, except as to Note 15, which is as of March 13, 2000, with respect to the consolidated balance sheets of Caere Corporation and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1999, which report appears in the Form 8-K/A of ScanSoft, Inc. dated May 30, 2001 and to the reference to our firm under the heading "Experts" in the prospectus. /s/ KPMG LLP Mountain View, California May 30, 2001
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