Exhibit 4.1
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF
SCANSOFT, INC.,
A Delaware Corporation
THIS WARRANT HAS BEEN, AND THE SHARES OF COMMON WHICH MAY BE PURCHASED PURSUANT
TO THE EXERCISE OF THIS WARRANT (THE "WARRANT SHARES") WILL BE, ACQUIRED SOLELY
FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH ANY
DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE WARRANT SHARES (TOGETHER, THE
"SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS
COUNSEL THAT SUCH DISPOSITION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND OF ANY APPLICABLE STATE
SECURITIES LAWS.
NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED
PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "WARRANT SHARES") HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT
BE TRANSFERRED, SOLD OR OFFERED FOR SALE, PLEDGED OR OTHERWISE DISPOSED OF,
DIRECTLY OR INDIRECTLY, UNLESS SUCH SECURITIES ARE TRANSFERRED PURSUANT TO (I) A
REGISTRATION UNDER THE ACT OR (II) REGULATION S OR OTHER EXEMPTION FROM
REGISTRATION UNDER THE ACT, AND THERE IS AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT. HEDGING
TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED HEREBY MAY NOT BE CONDUCTED
UNLESS IN ACCORDANCE WITH THE ACT.
Warrant No.: W-3
Issuance Date: November 15, 2004.
THIS CERTIFIES THAT, for value received, Magnum Communications Fund L.P., as
designee for and acting on behalf of the Shareholders as Shareholder
Representative (the "Shareholder Representative") pursuant to Section 8.4 of
that certain Agreement and Plan of Merger, dated as of November 15, 2004 (the
"Merger Agreement"), by and among Phonetics Systems Ltd., Phonetics Acquisition
Ltd., the Company (as defined below), and the Shareholder Representative is
entitled to subscribe for and purchase from ScanSoft, Inc., a Delaware
corporation (the "Company"), up to Two Hundred Fifty Thousand (250,000) fully
paid and nonassessable shares (as adjusted pursuant to Section 3 hereof) (the
"Warrant Shares") of Common Stock of the Company (the "Common Stock") at the
purchase price of $4.46 per share (as adjusted pursuant to Section 3 hereof)
(the "Exercise Price"); upon the terms and subject to the conditions hereinafter
1
set forth. The Shareholder Representative and any Shareholder to whom this
Warrant shall be transferred pursuant to Section 5 hereof, shall be referred to
as "Holder" hereunder. Any capitalized term not otherwise defined in this
Warrant shall have the meaning assigned to such term in the Merger Agreement.
1. EXERCISE RIGHTS.
(a) Cash Exercise. The purchase rights represented by this Warrant may be
exercised by the Holder at any time and from time to time, subject to Section 2
and Section 8 herein, in whole or in part, by delivery to the principal offices
of the Company, of this Warrant and a completed and duly executed Notice of Cash
Exercise, in the form attached as Exhibit A hereto accompanied by payment to the
Company of an amount equal to the Exercise Price then in effect multiplied by
the number of Warrant Shares to be purchased by the Holder in connection with
such cash exercise of this Warrant, which amount may be paid, at the election of
the Holder, by wire, transfer or delivery of a certified check payable to the
order of the Company.
(b) Net Issue Exercise.
(i) In lieu of exercising the purchase rights represented by this
Warrant on a cash basis pursuant to Section 1(a), the Holder may, subject to
Section 2 and Section 8 herein, elect to exercise such rights represented by
this Warrant, in whole or in part, on a net-issue basis by electing to receive
the number of Warrant Shares which are equal in value to the value of this
Warrant (or any portion hereof to be cancelled in connection with such net-issue
exercise) at the time of any such net-issue exercise, by delivery to the
principal offices of the Company of this Warrant and a completed and duly
executed Notice of Net-Issue Exercise, in the form attached as Exhibit B hereto,
properly marked to indicate (A) the number of Warrant Shares to be delivered to
the Holder in connection with such net-issue exercise, (B) the number of Warrant
Shares with respect to which the Warrant is being surrendered in payment of the
aggregate Exercise Price for the Warrant Shares to be delivered to the Holder in
connection with such net-issue exercise, and (C) the number of Warrant Shares
which remain subject to the Warrant after such net-issue exercise, if any (each
as determined in accordance with Section 1(b)(ii) hereof).
(ii) In the event that the Holder shall elect to exercise the rights
represented by this Warrant in whole or in part on a net-issue basis pursuant to
this Section 1(b) the Company shall issue to the Holder the number of Warrant
Shares determined in accordance with the following formula:
X = Y(A-B)
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A
X = the number of Warrant Shares to be issued to the Holder in connection
with such net-issue exercise.
Y = the number of Warrant Shares purchasable under this Warrant or the
portion of the Warrant being exercised in connection with such net-issue
exercise.
A = the Fair Market Value (as defined below) of one share of Common Stock.
B = the Exercise Price in effect as of the date of such net-issue exercise
(as adjusted pursuant to Section 3 hereof).
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(c) Fair Market Value. For purposes of this Section 1, the "Fair Market
Value" of the Common Stock shall have the following meaning:
If the Common Stock is listed for trading on a national securities
exchange or admitted for trading on a national market system, or closing bid and
asked prices therefor are published in the Over-the-Counter Summary in The Wall
Street Journal, then the per share Fair Market Value of the Common Stock for
which the Warrant is being exercised shall be deemed to be the closing price
quoted on such national securities exchange or such national market system, or
the average of the closing bid and asked prices for the Common Stock quoted on
the Over-the-Counter Summary, as applicable, for the ten (10) trading days prior
to the date of determination of Fair Market Value in accordance herewith. If the
Common Stock is not listed for trading on a national securities exchange or
admitted for trading on a national market system, or closing bid and asked
prices therefor are not published in the Over-the-Counter Summary in The Wall
Street Journal, then the Fair Market Value shall be the fair market value per
share of Common Stock, as determined in good faith by the Board of Directors of
the Company.
(d) Additional Conditions to Exercise of Warrant. Each certificate
evidencing the Warrant Shares to be issued upon the exercise of the rights
represented by this Warrant shall be stamped or imprinted with a legend or
legends, as applicable, substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND ARE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED UNDER THE
SECURITIES ACT. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE DISTRIBUTED EXCEPT (i) PURSUANT TO A
REGISTRATION STATEMENT DECLARED OR ORDERED EFFECTIVE BY THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT COVERING SUCH SECURITIES, OR
(ii) IN COMPLIANCE WITH RULE 144, OR (iii) PURSUANT TO AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER OF SUCH SECURITIES THAT SUCH
REGISTRATION OR RULE 144 COMPLIANCE IS NOT REQUIRED UNDER THE SECURITIES
ACT AS TO SUCH SALE, OFFER OF SALE, PLEDGE, HYPOTHECATION OR OTHER
DISTRIBUTION. THIS CERTIFICATE MUST SE SURRENDERED TO THE ISSUER HEREOF OR
ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE TRANSFER OF ANY
INTEREST IN THE SECURITIES REPRESENTED HEREBY; or
NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK WHICH MAY BE
PURCHASED PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "WARRANT SHARES")
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("THE
ACT") AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE, PLEDGED OR
OTHERWISE DISPOSED OF, DIRECTLY OR INDIRECTLY, UNLESS SUCH SECURITIES ARE
TRANSFERRED PURSUANT TO (I) A REGISTRATION UNDER THE ACT OR (II)
REGULATION S OR OTHER EXEMPTION FROM REGISTRATION UNDER THE ACT, AND THERE
IS AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT. HEDGING
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TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED HEREBY MAY NOT BE
CONDUCTED UNLESS IN ACCORDANCE WITH THE ACT.
(e) Fractional Shares. Upon the exercise of the rights represented by this
Warrant the Company shall not be obligated to issue fractional shares of Common
Stock, and in lieu thereof, the Company shall pay to the Holder an amount in
cash equal to the Fair Market Value per share of Common Stock immediately prior
to such exercise multiplied by such fraction (rounded to the nearest cent).
(f) Record Ownership of Warrant Shares. The Warrant Shares shall be deemed
to have been issued, and the person in whose name any certificate representing
Warrant Shares shall be issuable upon the exercise of the rights represented by
this Warrant (as indicated in the appropriate Notice of Exercise) shall be
deemed to have become the holder of record of (and shall be treated for all
purposes as the record holder of) the Warrant Shares represented thereby,
immediately prior to the close of business on the date or dates upon which the
rights represented by this Warrant are exercised in accordance with the terms
hereof.
(g) Stock Certificates. In the event of any exercise of the rights
represented by this Warrant, certificates for the Warrant Shares so purchased
pursuant hereto shall be delivered to the Holder (or Holder's designee) within
the normal settlement period and, unless this Warrant has been fully exercised
or has expired, a new Warrant representing the Warrant Shares with respect to
which this Warrant shall not have been exercised shall also be issued to the
Holder within such time.
(h) Issue Taxes. The issuance of certificates for shares of Common Stock
upon the exercise of the rights represented by this Warrant shall be made
without charge to the Holder for any issuance tax in respect thereof, provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the Holder of the Warrant.
2. EXERCISABILITY OF WARRANT SHARES. Notwithstanding anything to the contrary in
this Warrant, this Warrant shall only be exercisable, and the Holder may
subscribe for the purchase of Warrant Shares as follows: (i) for One Hundred
Twenty-Five Thousand (125,000) Warrant Shares upon the payment of the 2007
Automation Earnout in accordance with Section 9.3 of the Merger Agreement, and
(ii) for up to an additional One Hundred Twenty-Five Thousand 125,000 Warrant
Shares, calculated on a linear scale in proportion to the percentage of the 2007
Automation Earnout Bonus earned in accordance with Section 9.3 of the Merger
Agreement. In the event this Warrant shall not become exercisable in accordance
with the foregoing due to the fact that the conditions to the payment of the
2007 Automation Earnout have not been satisfied, this Warrant shall immediately
terminate.
3. ADJUSTMENT RIGHTS.
(a) Right to Adjustment. The number of Warrant Shares purchasable upon the
exercise of the rights represented by this Warrant, and the Exercise Price
therefor, shall be subject to adjustment from time to time upon the occurrence
of certain events as follows:
(i) Reclassifications. In the event of a reclassification of the
Common Stock other than by stock split, subdivision, consolidation or
combination thereof, the Company shall execute a new Warrant, the terms of which
provide that the holder of this Warrant shall have the right to exercise the
rights represented by such new Warrant, and procure upon such exercise and
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payment of the same aggregate Exercise Price then in effect, in lieu of the
shares of Common Stock theretofore issuable upon exercise of the rights
represented by this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification by a holder
of an equivalent number of shares of Common Stock. Such new Warrant shall
provide for adjustments, which are as equivalent as practicable to the
adjustments provided for in this Section 3. The provisions of this Section
3(a)(i) shall apply with equal force and effect to all successive
reclassifications of the Common Stock.
(ii) Stock Splits, Dividends, Combinations and Consolidations. In
the event of a stock split, stock dividend or subdivision of or in respect of
the outstanding shares of Common Stock, the number of Warrant Shares issuable
upon the exercise of the rights represented by this Warrant immediately prior to
such stock split, stock dividend or subdivision shall be proportionately
increased and the Exercise Price then in effect shall be proportionately
decreased, effective at the close of business on the record date of such stock
split, stock dividend or subdivision, as the case may be. In the event of a
reverse stock sprit, consolidation, combination or other similar event of or in
respect of the outstanding shares of Common Stock, the number of Warrant Shares
issuable upon the exercise of the rights represented by this Warrant immediately
prior to such reverse stock split, consolidation combination or other similar
event shall be proportionately decreased and the Exercise Price shall be
proportionately increased, effective at the close of business on the record date
of such reverse stock split, consolidation, combination or other similar event,
as the case may be.
(iii) Requirement to Deliver a Prospectus under Israeli Law. In the
event the distribution of this Warrant to any Shareholder pursuant to Section 5
hereof would require the publication of a prospectus pursuant to Israeli
securities laws, then (i) the number of Warrant Shares issuable upon the
exercise of this Warrant shall be reduced by the number of such Warrant Shares
that would otherwise have been allocated upon distribution of the Warrants by
the Shareholder Representative pursuant to Section 5 below to any Shareholder
that counts towards the maximum number of holders which if exceeded would
require the publication of a prospectus under Israeli securities laws and (ii)
any such Shareholder shall be entitled to receive cash consideration in lieu of
such distribution of Warrants in accordance with Section 1.6(c)(ii) of the
Merger Agreement. (b) Notices. Upon any adjustment of the Exercise Price, and
any increase or decrease in the number of Warrant Shares subject to this
Warrant, in accordance with this Section 3, the Company, within thirty (30) days
thereafter, shall give written notice thereof to the Holder at the address of
such Holder as shown on the books of the Company, which notice shall state the
Exercise Price as adjusted and, if applicable, the increased or decreased number
of Warrant Shares subject to this Warrant, setting forth in reasonable detail
the method of calculation of each such adjustment.
4. TRANSFER OF WARRANT.
This Warrant and the rights represented hereby are not transferable,
except in accordance with Section 5 below.
5. DISTRIBUTION BY SHAREHOLDER REPRESENTATIVE. Notwithstanding anything to the
contrary contained herein, upon the achievement of the 2007 Automation Earnout
pursuant to Article IX of the Merger Agreement, the Shareholder Representative
shall distribute (such date of distribution, the "Distribution Date") the
Warrants then exercisable in accordance with Section 2 hereof to the
Shareholders in accordance with the liquidation rights and
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preferences afforded such Shareholders under the Articles of Association of
Polaris; provided, however, that if the distribution of the Warrant to any
Shareholder would require the publication of a prospectus pursuant to Israeli
securities laws, (i) the number of Warrant Shares into which this Warrant is
exercisable shall be reduced, in accordance with Section 3(a)(iii) hereof, by
the number of such Warrant Shares that would have been allocated upon
distribution of the Warrants by the Shareholder Representative pursuant to this
Section 5 to any Shareholder that counts towards the maximum number of holders
which if exceeded would require the publication of a prospectus under Israeli
securities laws and (ii) any such Shareholder shall be entitled to receive cash
consideration in lieu of such distribution of Warrants in accordance with
Section 1.6(c)(ii) of the Merger Agreement. It is agreed and understood that for
purposes of determining whether liquidation preferences have been satisfied and
for the payment of cash in lieu of the Warrants, each share subject to the
Warrants shall have a value of $1.33.
6. [INTENTIONALLY OMITTED]
7. NO STOCKHOLDER RIGHTS. The holder of this warrant (and any transferee hereof)
shall not be entitled to vote on matters submitted for the approval or consent
of the stockholders of the Company or to receive dividends declared on or in
respect of shares of Common Stock, or otherwise be deemed to be the holder of
Common Stock or any other capital stock or other securities of the Company which
may at any time be issuable upon the exercise of the rights represented hereby
for any purpose, nor shall anything contained herein be construed to confer upon
the holder (or any transferee hereof) any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted for the approval or consent of the stockholders, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, merger or consolidation,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until this Warrant shall have been
exercised and the Warrant Shares issuable upon the exercise of the rights
represented hereby shall have become deliverable as provided herein.
8. EXPIRATION OF WARRANT. This Warrant shall expire, and the rights represented
hereby may no longer be exercised as of the close of business on the second
(2nd) anniversary of the Distribution Date relating to the 2007 Automation
Earnout (or, if there is no such distribution, on the date that would have been
the Distribution Date had the 2007 Automation Earnout been earned); provided,
however, that, notwithstanding anything to the contrary contained herein, in the
event the portion of the Israeli Income Tax Ruling set forth in Section
6.4(b)(i)(B) of the Merger Agreement is not obtained prior to the Effective
Date, this Warrant shall immediately terminate as of the Closing of the Merger
and shall be of no further force and effect; and provided further, however, that
this Warrant shall immediately terminate upon the termination of the Merger
Agreement in accordance with Article XI thereof.
9. [INTENTIONALLY OMITTED].
10. MISCELLANEOUS.
(a) Governing Law. This Warrant is being delivered in the State of New
York, and shall be construed and enforced in accordance with and governed by the
laws of such State. The parties expressly stipulate that any litigation under
this Warrant shall be brought in the courts of the State of New York. The
parties agree to submit to the jurisdiction and venue of such courts.
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(b) Notice Procedures. Unless otherwise provided, any notice required or
permitted under this Warrant shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified, one day
after deposit with a nationally recognized overnight courier, transmission by
confirmed facsimile or three days after deposit with the United States Post
Office, by registered or certified mail, postage prepaid and addressed to the
party to be notified at the address indicated for such party on the signature
page hereof, or at such other address as such party may designate by ten (10)
days' advance written notice to the other parties. A copy of any notices to the
Company shall simultaneously be sent to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (fax)
(c) Successors and Assigns. The terms of this Warrant shall be binding
upon and shall inure to the benefit of any successors or assigns of the Company
and of the Holder.
(d) Entire Agreement. This Warrant constitutes the full and entire
understanding and agreement between the parties with respect to the subject
matter hereof and supersedes in their entirety any prior or contemporaneous
agreements by and between the Company and the Holder with respect to such
matters.
(e) Further Assurances: No Impairment. The Company shall not by amendment
of its Certificate of Incorporation or through any other means, directly or
indirectly, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant and shall at all times in good faith assist in the
carrying out of such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment. The Company shall at no time close its transfer
books against the transfer of this Warrant or of any Warrant Shares issued or
issuable upon the exercise of the rights represented by this Warrant in any
manner which interferes with a timely exercise of such rights. The Company shall
not, by any action, seek to avoid the observance or performance of any of the
terms of this Warrant, but shall at all times in good faith seek to carry out
all such terms and take all such actions as may be necessary or appropriate in
order to protect the rights of the Holder under this Warrant against impairment.
(f) Lost Warrant. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation upon surrender and cancellation of such Warrant, the
Company at the Holder's expense shall execute and deliver to the Holder, in lieu
thereof, a new Warrant of like date and tenor.
(g) Amendments. This Warrant and any provision hereof may be amended,
waived or terminated (either generally or in a particular instance,
retroactively or prospectively and for a specified period of time or
indefinitely) only by a written instrument signed by the Company and the Holder.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly
authorized officer.
Issued this 15th day of November 2004.
SCANSOFT, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer and
Director
Address:
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Acknowledged and Accepted:
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By: /s/ Yahal ▇▇▇▇▇
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Name:
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Title:
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Address:
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Date: November 15, 2004
[SIGNATURE PAGE TO WARRANT]
EXHIBIT A
NOTICE OF CASH EXERCISE
To: SCANSOFT, INC.
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---------------------
1. The undersigned hereby elects to purchase __________ shares of Common
Stock of ScanSoft, Inc., a Delaware corporation (the "Company"), pursuant to the
terms of Warrant No. __ issued on November 15, 2004, to and in the name of
____________, a copy of which is attached hereto (the "Warrant"), and tenders
herewith full payment of the aggregate Exercise Price for such shares in
accordance with the terms of the Warrant.
2. Please issue a certificate or certificates representing said shares of
Common Stock in such name or names as specified below:
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3. The undersigned hereby represents and warrants that the aforesaid
shares of Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares and all representations and warranties of
the undersigned set forth in attached Warrant are true and correct as of the
date hereof. In support thereof, the undersigned has executed an Investment
Representation Statement, in the form attached as Exhibit C to the Warrant,
concurrently herewith.
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By:
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Name:
-----------------------------------
Title:
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Date:
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EXHIBIT B
NOTICE OF NET-ISSUE EXERCISE
To: SCANSOFT, INC.
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1. The undersigned hereby elects to purchase __________ shares of Common
Stock of ScanSoft, Inc., a Delaware corporation (the "Company"), on a net-issue
basis pursuant to the terms of Warrant No. __ issued on November 15, 2004, to
and in the name of ____________, a copy of which is attached hereto (the
"Warrant").
2. Net-issue Information:
(a) Number of Shares of Common Stock to be Delivered:_____________
(b) Number of Shares of Common Stock Surrendered:_________________
(c) Number of Shares Remaining Subject to Warrant:________________
3. Please issue a certificate or certificates representing said shares of
Common Stock in such name or names as specified below:
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4. The undersigned hereby represents and warrants that the aforesaid
shares of Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares and all representations and warranties of
the undersigned set forth in attached Warrant are true and correct as of the
date hereof. In support thereof, the undersigned has executed an Investment
Representation Statement, in the form attached as Exhibit C to the Warrant,
concurrently herewith.
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By:
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Name:
-----------------------------------
Title:
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Date:
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WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF
SCANSOFT, INC.,
A Delaware Corporation
THIS WARRANT HAS BEEN, AND THE SHARES OF COMMON WHICH MAY BE PURCHASED PURSUANT
TO THE EXERCISE OF THIS WARRANT (THE "WARRANT SHARES") WILL BE, ACQUIRED SOLELY
FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH ANY
DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE WARRANT SHARES (TOGETHER, THE
"SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS
COUNSEL THAT SUCH DISPOSITION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND OF ANY APPLICABLE STATE
SECURITIES LAWS.
NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED
PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "WARRANT SHARES") HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT
BE TRANSFERRED, SOLD OR OFFERED FOR SALE, PLEDGED OR OTHERWISE DISPOSED OF,
DIRECTLY OR INDIRECTLY, UNLESS SUCH SECURITIES ARE TRANSFERRED PURSUANT TO (I) A
REGISTRATION UNDER THE ACT OR (II) REGULATION S OR OTHER EXEMPTION FROM
REGISTRATION UNDER THE ACT, AND THERE IS AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT. HEDGING
TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED HEREBY MAY NOT BE CONDUCTED
UNLESS IN ACCORDANCE WITH THE ACT.
Warrant No.: W-1
Issuance Date: November 15, 2004.
THIS CERTIFIES THAT, for value received, Magnum Communications Fund L.P., as
designee for and acting on behalf of the Shareholders as Shareholder
Representative (the "Shareholder Representative") pursuant to Section 8.4 of
that certain Agreement and Plan of Merger, dated as of November 15, 2004 (the
"Merger Agreement"), by and among Phonetics Systems Ltd., Phonetics Acquisition
Ltd., the Company (as defined below), and the Shareholder Representative is
entitled to subscribe for and purchase from ScanSoft, Inc., a Delaware
corporation (the "Company"), up to Two Hundred Fifty Thousand (250,000) fully
paid and nonassessable shares (as adjusted pursuant to Section 3 hereof) (the
"Warrant Shares") of Common Stock of the Company (the "Common Stock") at the
purchase price of $4.46 per share (as adjusted pursuant to Section 3 hereof)
(the "Exercise Price"); upon the terms and subject to the conditions hereinafter
1
set forth. The Shareholder Representative and any Shareholder to whom this
Warrant shall be transferred pursuant to Section 5 hereof, shall be referred to
as "Holder" hereunder. Any capitalized term not otherwise defined in this
Warrant shall have the meaning assigned to such term in the Merger Agreement.
1. EXERCISE RIGHTS.
(a) Cash Exercise. The purchase rights represented by this Warrant may be
exercised by the Holder at any time and from time to time, subject to Section 2
and Section 8 herein, in whole or in part, by delivery to the principal offices
of the Company, of this Warrant and a completed and duly executed Notice of Cash
Exercise, in the form attached as Exhibit A hereto accompanied by payment to the
Company of an amount equal to the Exercise Price then in effect multiplied by
the number of Warrant Shares to be purchased by the Holder in connection with
such cash exercise of this Warrant, which amount may be paid, at the election of
the Holder, by wire, transfer or delivery of a certified check payable to the
order of the Company.
(b) Net Issue Exercise.
(i) In lieu of exercising the purchase rights represented by this
Warrant on a cash basis pursuant to Section 1(a), the Holder may, subject to
Section 2 and Section 8 herein, elect to exercise such rights represented by
this Warrant, in whole or in part, on a net-issue basis by electing to receive
the number of Warrant Shares which are equal in value to the value of this
Warrant (or any portion hereof to be cancelled in connection with such net-issue
exercise) at the time of any such net-issue exercise, by delivery to the
principal offices of the Company of this Warrant and a completed and duly
executed Notice of Net-Issue Exercise, in the form attached as Exhibit B hereto,
properly marked to indicate (A) the number of Warrant Shares to be delivered to
the Holder in connection with such net-issue exercise, (B) the number of Warrant
Shares with respect to which the Warrant is being surrendered in payment of the
aggregate Exercise Price for the Warrant Shares to be delivered to the Holder in
connection with such net-issue exercise, and (C) the number of Warrant Shares
which remain subject to the Warrant after such net-issue exercise, if any (each
as determined in accordance with Section 1(b)(ii) hereof).
(ii) In the event that the Holder shall elect to exercise the rights
represented by this Warrant in whole or in part on a net-issue basis pursuant to
this Section 1(b) the Company shall issue to the Holder the number of Warrant
Shares determined in accordance with the following formula:
X = Y(A-B)
------
A
X = the number of Warrant Shares to be issued to the Holder in connection
with such net-issue exercise.
Y = the number of Warrant Shares purchasable under this Warrant or the
portion of the Warrant being exercised in connection with such net-issue
exercise.
A = the Fair Market Value (as defined below) of one share of Common Stock.
B = the Exercise Price in effect as of the date of such net-issue exercise
(as adjusted pursuant to Section 3 hereof).
2
(c) Fair Market Value. For purposes of this Section 1, the "Fair Market
Value" of the Common Stock shall have the following meaning:
If the Common Stock is listed for trading on a national securities
exchange or admitted for trading on a national market system, or closing bid and
asked prices therefor are published in the Over-the-Counter Summary in The Wall
Street Journal, then the per share Fair Market Value of the Common Stock for
which the Warrant is being exercised shall be deemed to be the closing price
quoted on such national securities exchange or such national market system, or
the average of the closing bid and asked prices for the Common Stock quoted on
the Over-the-Counter Summary, as applicable, for the ten (10) trading days prior
to the date of determination of Fair Market Value in accordance herewith. If the
Common Stock is not listed for trading on a national securities exchange or
admitted for trading on a national market system, or closing bid and asked
prices therefor are not published in the Over-the-Counter Summary in The Wall
Street Journal, then the Fair Market Value shall be the fair market value per
share of Common Stock, as determined in good faith by the Board of Directors of
the Company.
(d) Additional Conditions to Exercise of Warrant. Each certificate
evidencing the Warrant Shares to be issued upon the exercise of the rights
represented by this Warrant shall be stamped or imprinted with a legend or
legends, as applicable, substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND ARE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED UNDER THE
SECURITIES ACT. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE DISTRIBUTED EXCEPT (i) PURSUANT TO A
REGISTRATION STATEMENT DECLARED OR ORDERED EFFECTIVE BY THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT COVERING SUCH SECURITIES, OR
(ii) IN COMPLIANCE WITH RULE 144, OR (iii) PURSUANT TO AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER OF SUCH SECURITIES THAT SUCH
REGISTRATION OR RULE 144 COMPLIANCE IS NOT REQUIRED UNDER THE SECURITIES
ACT AS TO SUCH SALE, OFFER OF SALE, PLEDGE, HYPOTHECATION OR OTHER
DISTRIBUTION. THIS CERTIFICATE MUST SE SURRENDERED TO THE ISSUER HEREOF OR
ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE TRANSFER OF ANY
INTEREST IN THE SECURITIES REPRESENTED HEREBY; or
NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK WHICH MAY BE
PURCHASED PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "WARRANT SHARES")
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("THE
ACT") AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE, PLEDGED OR
OTHERWISE DISPOSED OF, DIRECTLY OR INDIRECTLY, UNLESS SUCH SECURITIES ARE
TRANSFERRED PURSUANT TO (I) A REGISTRATION UNDER THE ACT OR (II)
REGULATION S OR OTHER EXEMPTION FROM REGISTRATION UNDER THE ACT, AND THERE
IS AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT. HEDGING
3
TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED HEREBY MAY NOT BE
CONDUCTED UNLESS IN ACCORDANCE WITH THE ACT.
(e) Fractional Shares. Upon the exercise of the rights represented by this
Warrant the Company shall not be obligated to issue fractional shares of Common
Stock, and in lieu thereof, the Company shall pay to the Holder an amount in
cash equal to the Fair Market Value per share of Common Stock immediately prior
to such exercise multiplied by such fraction (rounded to the nearest cent).
(f) Record Ownership of Warrant Shares. The Warrant Shares shall be deemed
to have been issued, and the person in whose name any certificate representing
Warrant Shares shall be issuable upon the exercise of the rights represented by
this Warrant (as indicated in the appropriate Notice of Exercise) shall be
deemed to have become the holder of record of (and shall be treated for all
purposes as the record holder of) the Warrant Shares represented thereby,
immediately prior to the close of business on the date or dates upon which the
rights represented by this Warrant are exercised in accordance with the terms
hereof.
(g) Stock Certificates. In the event of any exercise of the rights
represented by this Warrant, certificates for the Warrant Shares so purchased
pursuant hereto shall be delivered to the Holder (or Holder's designee) within
the normal settlement period and, unless this Warrant has been fully exercised
or has expired, a new Warrant representing the Warrant Shares with respect to
which this Warrant shall not have been exercised shall also be issued to the
Holder within such time.
(h) Issue Taxes. The issuance of certificates for shares of Common Stock
upon the exercise of the rights represented by this Warrant shall be made
without charge to the Holder for any issuance tax in respect thereof, provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the Holder of the Warrant.
2. EXERCISABILITY OF WARRANT SHARES. Notwithstanding anything to the contrary in
this Warrant, this Warrant shall only be exercisable, and the Holder may
subscribe for the purchase of Warrant Shares as follows: (i) for One Hundred
Twenty-Five Thousand (125,000) Warrant Shares upon the payment of the 2005
Automation Earnout in accordance with Section 9.3 of the Merger Agreement, and
(ii) for up to an additional One Hundred Twenty-Five Thousand 125,000 Warrant
Shares, calculated on a linear scale in proportion to the percentage of the 2005
Automation Earnout Bonus earned in accordance with Section 9.3 of the Merger
Agreement. In the event this Warrant shall not become exercisable in accordance
with the foregoing due to the fact that the conditions to the payment of the
2005 Automation Earnout have not been satisfied, this Warrant shall immediately
terminate.
3. ADJUSTMENT RIGHTS.
(a) Right to Adjustment. The number of Warrant Shares purchasable upon the
exercise of the rights represented by this Warrant, and the Exercise Price
therefor, shall be subject to adjustment from time to time upon the occurrence
of certain events as follows:
(i) Reclassifications. In the event of a reclassification of the
Common Stock other than by stock split, subdivision, consolidation or
combination thereof, the Company shall execute a new Warrant, the terms of which
provide that the holder of this Warrant shall have the right to exercise the
rights represented by such new Warrant, and procure upon such exercise and
4
payment of the same aggregate Exercise Price then in effect, in lieu of the
shares of Common Stock theretofore issuable upon exercise of the rights
represented by this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification by a holder
of an equivalent number of shares of Common Stock. Such new Warrant shall
provide for adjustments, which are as equivalent as practicable to the
adjustments provided for in this Section 3. The provisions of this Section
3(a)(i) shall apply with equal force and effect to all successive
reclassifications of the Common Stock.
(ii) Stock Splits, Dividends, Combinations and Consolidations. In
the event of a stock split, stock dividend or subdivision of or in respect of
the outstanding shares of Common Stock, the number of Warrant Shares issuable
upon the exercise of the rights represented by this Warrant immediately prior to
such stock split, stock dividend or subdivision shall be proportionately
increased and the Exercise Price then in effect shall be proportionately
decreased, effective at the close of business on the record date of such stock
split, stock dividend or subdivision, as the case may be. In the event of a
reverse stock sprit, consolidation, combination or other similar event of or in
respect of the outstanding shares of Common Stock, the number of Warrant Shares
issuable upon the exercise of the rights represented by this Warrant immediately
prior to such reverse stock split, consolidation combination or other similar
event shall be proportionately decreased and the Exercise Price shall be
proportionately increased, effective at the close of business on the record date
of such reverse stock split, consolidation, combination or other similar event,
as the case may be.
(iii) Requirement to Deliver a Prospectus under Israeli Law. In the
event the distribution of this Warrant to any Shareholder pursuant to Section 5
hereof would require the publication of a prospectus pursuant to Israeli
securities laws, then (i) the number of Warrant Shares issuable upon the
exercise of this Warrant shall be reduced by the number of such Warrant Shares
that would otherwise have been allocated upon distribution of the Warrants by
the Shareholder Representative pursuant to Section 5 below to any Shareholder
that counts towards the maximum number of holders which if exceeded would
require the publication of a prospectus under Israeli securities laws and (ii)
any such Shareholder shall be entitled to receive cash consideration in lieu of
such distribution of Warrants in accordance with Section 1.6(c)(ii) of the
Merger Agreement.
(b) Notices. Upon any adjustment of the Exercise Price, and any increase
or decrease in the number of Warrant Shares subject to this Warrant, in
accordance with this Section 3, the Company, within thirty (30) days thereafter,
shall give written notice thereof to the Holder at the address of such Holder as
shown on the books of the Company, which notice shall state the Exercise Price
as adjusted and, if applicable, the increased or decreased number of Warrant
Shares subject to this Warrant, setting forth in reasonable detail the method of
calculation of each such adjustment.
4. TRANSFER OF WARRANT.
This Warrant and the rights represented hereby are not transferable,
except in accordance with Section 5 below.
5. DISTRIBUTION BY SHAREHOLDER REPRESENTATIVE. Notwithstanding anything to the
contrary contained herein, upon the achievement of the 2005 Automation Earnout
pursuant to Article IX of the Merger Agreement, the Shareholder Representative
shall distribute (such date of distribution, the "Distribution Date") the
Warrants then exercisable in accordance with Section 2 hereof to the
Shareholders in accordance with the liquidation rights and
5
preferences afforded such Shareholders under the Articles of Association of
Polaris; provided, however, that if the distribution of the Warrant to any
Shareholder would require the publication of a prospectus pursuant to Israeli
securities laws, (i) the number of Warrant Shares into which this Warrant is
exercisable shall be reduced, in accordance with Section 3(a)(iii) hereof, by
the number of such Warrant Shares that would have been allocated upon
distribution of the Warrants by the Shareholder Representative pursuant to this
Section 5 to any Shareholder that counts towards the maximum number of holders
which if exceeded would require the publication of a prospectus under Israeli
securities laws and (ii) any such Shareholder shall be entitled to receive cash
consideration in lieu of such distribution of Warrants in accordance with
Section 1.6(c)(ii) of the Merger Agreement. It is agreed and understood that for
purposes of determining whether liquidation preferences have been satisfied and
for the payment of cash in lieu of the Warrants, each share subject to the
Warrants shall have a value of $1.33.
6. [INTENTIONALLY OMITTED]
7. NO STOCKHOLDER RIGHTS. The holder of this warrant (and any transferee hereof)
shall not be entitled to vote on matters submitted for the approval or consent
of the stockholders of the Company or to receive dividends declared on or in
respect of shares of Common Stock, or otherwise be deemed to be the holder of
Common Stock or any other capital stock or other securities of the Company which
may at any time be issuable upon the exercise of the rights represented hereby
for any purpose, nor shall anything contained herein be construed to confer upon
the holder (or any transferee hereof) any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted for the approval or consent of the stockholders, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, merger or consolidation,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until this Warrant shall have been
exercised and the Warrant Shares issuable upon the exercise of the rights
represented hereby shall have become deliverable as provided herein.
8. EXPIRATION OF WARRANT. This Warrant shall expire, and the rights represented
hereby may no longer be exercised as of the close of business on the second
(2nd) anniversary of the Distribution Date relating to the 2005 Automation
Earnout (or, if there is no such distribution, on the date that would have been
the Distribution Date had the 2005 Automation Earnout been earned); provided,
however, that, notwithstanding anything to the contrary contained herein, in the
event the portion of the Israeli Income Tax Ruling set forth in Section
6.4(b)(i)(B) of the Merger Agreement is not obtained prior to the Effective
Date, this Warrant shall immediately terminate as of the Closing of the Merger
and shall be of no further force and effect; and provided further, however, that
this Warrant shall immediately terminate upon the termination of the Merger
Agreement in accordance with Article XI thereof.
9. [INTENTIONALLY OMITTED].
10. MISCELLANEOUS.
(a) Governing Law. This Warrant is being delivered in the State of New
York, and shall be construed and enforced in accordance with and governed by the
laws of such State. The parties expressly stipulate that any litigation under
this Warrant shall be brought in the courts of the State of New York. The
parties agree to submit to the jurisdiction and venue of such courts.
6
(b) Notice Procedures. Unless otherwise provided, any notice required or
permitted under this Warrant shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified, one day
after deposit with a nationally recognized overnight courier, transmission by
confirmed facsimile or three days after deposit with the United States Post
Office, by registered or certified mail, postage prepaid and addressed to the
party to be notified at the address indicated for such party on the signature
page hereof, or at such other address as such party may designate by ten (10)
days' advance written notice to the other parties. A copy of any notices to the
Company shall simultaneously be sent to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (fax)
(c) Successors and Assigns. The terms of this Warrant shall be binding
upon and shall inure to the benefit of any successors or assigns of the Company
and of the Holder.
(d) Entire Agreement. This Warrant constitutes the full and entire
understanding and agreement between the parties with respect to the subject
matter hereof and supersedes in their entirety any prior or contemporaneous
agreements by and between the Company and the Holder with respect to such
matters.
(e) Further Assurances: No Impairment. The Company shall not by amendment
of its Certificate of Incorporation or through any other means, directly or
indirectly, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant and shall at all times in good faith assist in the
carrying out of such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment. The Company shall at no time close its transfer
books against the transfer of this Warrant or of any Warrant Shares issued or
issuable upon the exercise of the rights represented by this Warrant in any
manner which interferes with a timely exercise of such rights. The Company shall
not, by any action, seek to avoid the observance or performance of any of the
terms of this Warrant, but shall at all times in good faith seek to carry out
all such terms and take all such actions as may be necessary or appropriate in
order to protect the rights of the Holder under this Warrant against impairment.
(f) Lost Warrant. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation upon surrender and cancellation of such Warrant, the
Company at the Holder's expense shall execute and deliver to the Holder, in lieu
thereof, a new Warrant of like date and tenor.
(g) Amendments. This Warrant and any provision hereof may be amended,
waived or terminated (either generally or in a particular instance,
retroactively or prospectively and for a specified period of time or
indefinitely) only by a written instrument signed by the Company and the Holder.
7
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly
authorized officer.
Issued this 15th day of November 2004.
SCANSOFT, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer and
Director
Address:
--------------------------------
----------------------------------------
Acknowledged and Accepted:
-----------------
By: /s/ Yahal ▇▇▇▇▇
----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address:
------------------------------------
--------------------------------------------
Date: November 15, 2004
[SIGNATURE PAGE TO WARRANT]
EXHIBIT A
NOTICE OF CASH EXERCISE
To: SCANSOFT, INC.
--------------
--------------
1. The undersigned hereby elects to purchase __________ shares of Common
Stock of ScanSoft, Inc., a Delaware corporation (the "Company"), pursuant to the
terms of Warrant No. __ issued on November 15, 2004, to and in the name of
____________, a copy of which is attached hereto (the "Warrant"), and tenders
herewith full payment of the aggregate Exercise Price for such shares in
accordance with the terms of the Warrant.
2. Please issue a certificate or certificates representing said shares of
Common Stock in such name or names as specified below:
--------------------------
--------------------------
3. The undersigned hereby represents and warrants that the aforesaid
shares of Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares and all representations and warranties of
the undersigned set forth in attached Warrant are true and correct as of the
date hereof. In support thereof, the undersigned has executed an Investment
Representation Statement, in the form attached as Exhibit C to the Warrant,
concurrently herewith.
----------------------------------------
----------------------------------------
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Date:
-----------------------------------
EXHIBIT B
NOTICE OF NET-ISSUE EXERCISE
To: SCANSOFT, INC.
--------------
--------------
1. The undersigned hereby elects to purchase __________ shares of Common
Stock of ScanSoft, Inc., a Delaware corporation (the "Company"), on a net-issue
basis pursuant to the terms of Warrant No. __ issued on November 15, 2004, to
and in the name of ____________, a copy of which is attached hereto (the
"Warrant").
2. Net-issue Information:
(a) Number of Shares of Common Stock to be Delivered:_____________
(b) Number of Shares of Common Stock Surrendered:_________________
(c) Number of Shares Remaining Subject to Warrant:________________
3. Please issue a certificate or certificates representing said shares of
Common Stock in such name or names as specified below:
-------------------------------
-------------------------------
4. The undersigned hereby represents and warrants that the aforesaid
shares of Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares and all representations and warranties of
the undersigned set forth in attached Warrant are true and correct as of the
date hereof. In support thereof, the undersigned has executed an Investment
Representation Statement, in the form attached as Exhibit C to the Warrant,
concurrently herewith.
----------------------------------------
----------------------------------------
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Date:
-----------------------------------
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF
SCANSOFT, INC.,
A Delaware Corporation
THIS WARRANT HAS BEEN, AND THE SHARES OF COMMON WHICH MAY BE PURCHASED PURSUANT
TO THE EXERCISE OF THIS WARRANT (THE "WARRANT SHARES") WILL BE, ACQUIRED SOLELY
FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH ANY
DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE WARRANT SHARES (TOGETHER, THE
"SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS
COUNSEL THAT SUCH DISPOSITION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND OF ANY APPLICABLE STATE
SECURITIES LAWS.
NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED
PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "WARRANT SHARES") HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT
BE TRANSFERRED, SOLD OR OFFERED FOR SALE, PLEDGED OR OTHERWISE DISPOSED OF,
DIRECTLY OR INDIRECTLY, UNLESS SUCH SECURITIES ARE TRANSFERRED PURSUANT TO (I) A
REGISTRATION UNDER THE ACT OR (II) REGULATION S OR OTHER EXEMPTION FROM
REGISTRATION UNDER THE ACT, AND THERE IS AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT. HEDGING
TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED HEREBY MAY NOT BE CONDUCTED
UNLESS IN ACCORDANCE WITH THE ACT.
Warrant No.: W-2
Issuance Date: November 15, 2004.
THIS CERTIFIES THAT, for value received, Magnum Communications Fund L.P., as
designee for and acting on behalf of the Shareholders as Shareholder
Representative (the "Shareholder Representative") pursuant to Section 8.4 of
that certain Agreement and Plan of Merger, dated as of November 15, 2004 (the
"Merger Agreement"), by and among Phonetics Systems Ltd., Phonetics Acquisition
Ltd., the Company (as defined below), and the Shareholder Representative is
entitled to subscribe for and purchase from ScanSoft, Inc., a Delaware
corporation (the "Company"), up to Two Hundred Fifty Thousand (250,000) fully
paid and nonassessable shares (as adjusted pursuant to Section 3 hereof) (the
"Warrant Shares") of Common Stock of the Company (the "Common Stock") at the
purchase price of $4.46 per share (as adjusted pursuant to Section 3 hereof)
(the "Exercise Price"); upon the terms and subject to the conditions hereinafter
1
set forth. The Shareholder Representative and any Shareholder to whom this
Warrant shall be transferred pursuant to Section 5 hereof, shall be referred to
as "Holder" hereunder. Any capitalized term not otherwise defined in this
Warrant shall have the meaning assigned to such term in the Merger Agreement.
1. EXERCISE RIGHTS.
(a) Cash Exercise. The purchase rights represented by this Warrant may be
exercised by the Holder at any time and from time to time, subject to Section 2
and Section 8 herein, in whole or in part, by delivery to the principal offices
of the Company, of this Warrant and a completed and duly executed Notice of Cash
Exercise, in the form attached as Exhibit A hereto accompanied by payment to the
Company of an amount equal to the Exercise Price then in effect multiplied by
the number of Warrant Shares to be purchased by the Holder in connection with
such cash exercise of this Warrant, which amount may be paid, at the election of
the Holder, by wire, transfer or delivery of a certified check payable to the
order of the Company.
(b) Net Issue Exercise.
(i) In lieu of exercising the purchase rights represented by this
Warrant on a cash basis pursuant to Section 1(a), the Holder may, subject to
Section 2 and Section 8 herein, elect to exercise such rights represented by
this Warrant, in whole or in part, on a net-issue basis by electing to receive
the number of Warrant Shares which are equal in value to the value of this
Warrant (or any portion hereof to be cancelled in connection with such net-issue
exercise) at the time of any such net-issue exercise, by delivery to the
principal offices of the Company of this Warrant and a completed and duly
executed Notice of Net-Issue Exercise, in the form attached as Exhibit B hereto,
properly marked to indicate (A) the number of Warrant Shares to be delivered to
the Holder in connection with such net-issue exercise, (B) the number of Warrant
Shares with respect to which the Warrant is being surrendered in payment of the
aggregate Exercise Price for the Warrant Shares to be delivered to the Holder in
connection with such net-issue exercise, and (C) the number of Warrant Shares
which remain subject to the Warrant after such net-issue exercise, if any (each
as determined in accordance with Section 1(b)(ii) hereof).
(ii) In the event that the Holder shall elect to exercise the rights
represented by this Warrant in whole or in part on a net-issue basis pursuant to
this Section 1(b) the Company shall issue to the Holder the number of Warrant
Shares determined in accordance with the following formula:
X = Y(A-B)
------
A
X = the number of Warrant Shares to be issued to the Holder in connection
with such net-issue exercise.
Y = the number of Warrant Shares purchasable under this Warrant or the
portion of the Warrant being exercised in connection with such net-issue
exercise.
A = the Fair Market Value (as defined below) of one share of Common Stock.
B = the Exercise Price in effect as of the date of such net-issue exercise
(as adjusted pursuant to Section 3 hereof).
2
(c) Fair Market Value. For purposes of this Section 1, the "Fair Market
Value" of the Common Stock shall have the following meaning:
If the Common Stock is listed for trading on a national securities
exchange or admitted for trading on a national market system, or closing bid and
asked prices therefor are published in the Over-the-Counter Summary in The Wall
Street Journal, then the per share Fair Market Value of the Common Stock for
which the Warrant is being exercised shall be deemed to be the closing price
quoted on such national securities exchange or such national market system, or
the average of the closing bid and asked prices for the Common Stock quoted on
the Over-the-Counter Summary, as applicable, for the ten (10) trading days prior
to the date of determination of Fair Market Value in accordance herewith. If the
Common Stock is not listed for trading on a national securities exchange or
admitted for trading on a national market system, or closing bid and asked
prices therefor are not published in the Over-the-Counter Summary in The Wall
Street Journal, then the Fair Market Value shall be the fair market value per
share of Common Stock, as determined in good faith by the Board of Directors of
the Company.
(d) Additional Conditions to Exercise of Warrant. Each certificate
evidencing the Warrant Shares to be issued upon the exercise of the rights
represented by this Warrant shall be stamped or imprinted with a legend or
legends, as applicable, substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND ARE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED UNDER THE
SECURITIES ACT. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE DISTRIBUTED EXCEPT (i) PURSUANT TO A
REGISTRATION STATEMENT DECLARED OR ORDERED EFFECTIVE BY THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT COVERING SUCH SECURITIES, OR
(ii) IN COMPLIANCE WITH RULE 144, OR (iii) PURSUANT TO AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER OF SUCH SECURITIES THAT SUCH
REGISTRATION OR RULE 144 COMPLIANCE IS NOT REQUIRED UNDER THE SECURITIES
ACT AS TO SUCH SALE, OFFER OF SALE, PLEDGE, HYPOTHECATION OR OTHER
DISTRIBUTION. THIS CERTIFICATE MUST SE SURRENDERED TO THE ISSUER HEREOF OR
ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE TRANSFER OF ANY
INTEREST IN THE SECURITIES REPRESENTED HEREBY; or
NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK WHICH MAY BE
PURCHASED PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "WARRANT SHARES")
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("THE
ACT") AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE, PLEDGED OR
OTHERWISE DISPOSED OF, DIRECTLY OR INDIRECTLY, UNLESS SUCH SECURITIES ARE
TRANSFERRED PURSUANT TO (I) A REGISTRATION UNDER THE ACT OR (II)
REGULATION S OR OTHER EXEMPTION FROM REGISTRATION UNDER THE ACT, AND THERE
IS AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT. HEDGING
3
TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED HEREBY MAY NOT BE
CONDUCTED UNLESS IN ACCORDANCE WITH THE ACT.
(e) Fractional Shares. Upon the exercise of the rights represented by this
Warrant the Company shall not be obligated to issue fractional shares of Common
Stock, and in lieu thereof, the Company shall pay to the Holder an amount in
cash equal to the Fair Market Value per share of Common Stock immediately prior
to such exercise multiplied by such fraction (rounded to the nearest cent).
(f) Record Ownership of Warrant Shares. The Warrant Shares shall be deemed
to have been issued, and the person in whose name any certificate representing
Warrant Shares shall be issuable upon the exercise of the rights represented by
this Warrant (as indicated in the appropriate Notice of Exercise) shall be
deemed to have become the holder of record of (and shall be treated for all
purposes as the record holder of) the Warrant Shares represented thereby,
immediately prior to the close of business on the date or dates upon which the
rights represented by this Warrant are exercised in accordance with the terms
hereof.
(g) Stock Certificates. In the event of any exercise of the rights
represented by this Warrant, certificates for the Warrant Shares so purchased
pursuant hereto shall be delivered to the Holder (or Holder's designee) within
the normal settlement period and, unless this Warrant has been fully exercised
or has expired, a new Warrant representing the Warrant Shares with respect to
which this Warrant shall not have been exercised shall also be issued to the
Holder within such time.
(h) Issue Taxes. The issuance of certificates for shares of Common Stock
upon the exercise of the rights represented by this Warrant shall be made
without charge to the Holder for any issuance tax in respect thereof, provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the Holder of the Warrant.
2. EXERCISABILITY OF WARRANT SHARES. Notwithstanding anything to the contrary in
this Warrant, this Warrant shall only be exercisable, and the Holder may
subscribe for the purchase of Warrant Shares as follows: (i) for One Hundred
Twenty-Five Thousand (125,000) Warrant Shares upon the payment of the 2006
Automation Earnout in accordance with Section 9.3 of the Merger Agreement, and
(ii) for up to an additional One Hundred Twenty-Five Thousand 125,000 Warrant
Shares, calculated on a linear scale in proportion to the percentage of the 2006
Automation Earnout Bonus earned in accordance with Section 9.3 of the Merger
Agreement. In the event this Warrant shall not become exercisable in accordance
with the foregoing due to the fact that the conditions to the payment of the
2006 Automation Earnout have not been satisfied, this Warrant shall immediately
terminate.
3. ADJUSTMENT RIGHTS.
(a) Right to Adjustment. The number of Warrant Shares purchasable upon the
exercise of the rights represented by this Warrant, and the Exercise Price
therefor, shall be subject to adjustment from time to time upon the occurrence
of certain events as follows:
(i) Reclassifications. In the event of a reclassification of the
Common Stock other than by stock split, subdivision, consolidation or
combination thereof, the Company shall execute a new Warrant, the terms of which
provide that the holder of this Warrant shall have the right to exercise the
rights represented by such new Warrant, and procure upon such exercise and
4
payment of the same aggregate Exercise Price then in effect, in lieu of the
shares of Common Stock theretofore issuable upon exercise of the rights
represented by this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification by a holder
of an equivalent number of shares of Common Stock. Such new Warrant shall
provide for adjustments, which are as equivalent as practicable to the
adjustments provided for in this Section 3. The provisions of this Section
3(a)(i) shall apply with equal force and effect to all successive
reclassifications of the Common Stock.
(ii) Stock Splits, Dividends, Combinations and Consolidations. In
the event of a stock split, stock dividend or subdivision of or in respect of
the outstanding shares of Common Stock, the number of Warrant Shares issuable
upon the exercise of the rights represented by this Warrant immediately prior to
such stock split, stock dividend or subdivision shall be proportionately
increased and the Exercise Price then in effect shall be proportionately
decreased, effective at the close of business on the record date of such stock
split, stock dividend or subdivision, as the case may be. In the event of a
reverse stock sprit, consolidation, combination or other similar event of or in
respect of the outstanding shares of Common Stock, the number of Warrant Shares
issuable upon the exercise of the rights represented by this Warrant immediately
prior to such reverse stock split, consolidation combination or other similar
event shall be proportionately decreased and the Exercise Price shall be
proportionately increased, effective at the close of business on the record date
of such reverse stock split, consolidation, combination or other similar event,
as the case may be.
(iii) Requirement to Deliver a Prospectus under Israeli Law. In the
event the distribution of this Warrant to any Shareholder pursuant to Section 5
hereof would require the publication of a prospectus pursuant to Israeli
securities laws, then (i) the number of Warrant Shares issuable upon the
exercise of this Warrant shall be reduced by the number of such Warrant Shares
that would otherwise have been allocated upon distribution of the Warrants by
the Shareholder Representative pursuant to Section 5 below to any Shareholder
that counts towards the maximum number of holders which if exceeded would
require the publication of a prospectus under Israeli securities laws and (ii)
any such Shareholder shall be entitled to receive cash consideration in lieu of
such distribution of Warrants in accordance with Section 1.6(c)(ii) of the
Merger Agreement.
(b) Notices. Upon any adjustment of the Exercise Price, and any increase
or decrease in the number of Warrant Shares subject to this Warrant, in
accordance with this Section 3, the Company, within thirty (30) days thereafter,
shall give written notice thereof to the Holder at the address of such Holder as
shown on the books of the Company, which notice shall state the Exercise Price
as adjusted and, if applicable, the increased or decreased number of Warrant
Shares subject to this Warrant, setting forth in reasonable detail the method of
calculation of each such adjustment.
4. TRANSFER OF WARRANT.
This Warrant and the rights represented hereby are not transferable,
except in accordance with Section 5 below.
5. DISTRIBUTION BY SHAREHOLDER REPRESENTATIVE. Notwithstanding anything to the
contrary contained herein, upon the achievement of the 2006 Automation Earnout
pursuant to Article IX of the Merger Agreement, the Shareholder Representative
shall distribute (such date of distribution, the "Distribution Date") the
Warrants then exercisable in accordance with Section 2 hereof to the
Shareholders in accordance with the liquidation rights and
5
preferences afforded such Shareholders under the Articles of Association of
Polaris; provided, however, that if the distribution of the Warrant to any
Shareholder would require the publication of a prospectus pursuant to Israeli
securities laws, (i) the number of Warrant Shares into which this Warrant is
exercisable shall be reduced, in accordance with Section 3(a)(iii) hereof, by
the number of such Warrant Shares that would have been allocated upon
distribution of the Warrants by the Shareholder Representative pursuant to this
Section 5 to any Shareholder that counts towards the maximum number of holders
which if exceeded would require the publication of a prospectus under Israeli
securities laws and (ii) any such Shareholder shall be entitled to receive cash
consideration in lieu of such distribution of Warrants in accordance with
Section 1.6(c)(ii) of the Merger Agreement. It is agreed and understood that for
purposes of determining whether liquidation preferences have been satisfied and
for the payment of cash in lieu of the Warrants, each share subject to the
Warrants shall have a value of $1.33.
6. [INTENTIONALLY OMITTED]
7. NO STOCKHOLDER RIGHTS. The holder of this warrant (and any transferee hereof)
shall not be entitled to vote on matters submitted for the approval or consent
of the stockholders of the Company or to receive dividends declared on or in
respect of shares of Common Stock, or otherwise be deemed to be the holder of
Common Stock or any other capital stock or other securities of the Company which
may at any time be issuable upon the exercise of the rights represented hereby
for any purpose, nor shall anything contained herein be construed to confer upon
the holder (or any transferee hereof) any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted for the approval or consent of the stockholders, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, merger or consolidation,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until this Warrant shall have been
exercised and the Warrant Shares issuable upon the exercise of the rights
represented hereby shall have become deliverable as provided herein.
8. EXPIRATION OF WARRANT. This Warrant shall expire, and the rights represented
hereby may no longer be exercised as of the close of business on the second
(2nd) anniversary of the Distribution Date relating to the 2006 Automation
Earnout (or, if there is no such distribution, on the date that would have been
the Distribution Date had the 2006 Automation Earnout been earned); provided,
however, that, notwithstanding anything to the contrary contained herein, in the
event the portion of the Israeli Income Tax Ruling set forth in Section
6.4(b)(i)(B) of the Merger Agreement is not obtained prior to the Effective
Date, this Warrant shall immediately terminate as of the Closing of the Merger
and shall be of no further force and effect; and provided further, however, that
this Warrant shall immediately terminate upon the termination of the Merger
Agreement in accordance with Article XI thereof.
9. [INTENTIONALLY OMITTED].
10. MISCELLANEOUS.
(a) Governing Law. This Warrant is being delivered in the State of New
York, and shall be construed and enforced in accordance with and governed by the
laws of such State. The parties expressly stipulate that any litigation under
this Warrant shall be brought in the courts of the State of New York. The
parties agree to submit to the jurisdiction and venue of such courts.
6
(b) Notice Procedures. Unless otherwise provided, any notice required or
permitted under this Warrant shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified, one day
after deposit with a nationally recognized overnight courier, transmission by
confirmed facsimile or three days after deposit with the United States Post
Office, by registered or certified mail, postage prepaid and addressed to the
party to be notified at the address indicated for such party on the signature
page hereof, or at such other address as such party may designate by ten (10)
days' advance written notice to the other parties. A copy of any notices to the
Company shall simultaneously be sent to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (fax)
(c) Successors and Assigns. The terms of this Warrant shall be binding
upon and shall inure to the benefit of any successors or assigns of the Company
and of the Holder.
(d) Entire Agreement. This Warrant constitutes the full and entire
understanding and agreement between the parties with respect to the subject
matter hereof and supersedes in their entirety any prior or contemporaneous
agreements by and between the Company and the Holder with respect to such
matters.
(e) Further Assurances: No Impairment. The Company shall not by amendment
of its Certificate of Incorporation or through any other means, directly or
indirectly, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant and shall at all times in good faith assist in the
carrying out of such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment. The Company shall at no time close its transfer
books against the transfer of this Warrant or of any Warrant Shares issued or
issuable upon the exercise of the rights represented by this Warrant in any
manner which interferes with a timely exercise of such rights. The Company shall
not, by any action, seek to avoid the observance or performance of any of the
terms of this Warrant, but shall at all times in good faith seek to carry out
all such terms and take all such actions as may be necessary or appropriate in
order to protect the rights of the Holder under this Warrant against impairment.
(f) Lost Warrant. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation upon surrender and cancellation of such Warrant, the
Company at the Holder's expense shall execute and deliver to the Holder, in lieu
thereof, a new Warrant of like date and tenor.
(g) Amendments. This Warrant and any provision hereof may be amended,
waived or terminated (either generally or in a particular instance,
retroactively or prospectively and for a specified period of time or
indefinitely) only by a written instrument signed by the Company and the Holder.
7
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly
authorized officer.
Issued this 15th day of November 2004.
SCANSOFT, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer and
Director
Address:
--------------------------------
----------------------------------------
Acknowledged and Accepted:
-----------------
By: /s/ Yahal ▇▇▇▇▇
----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address:
------------------------------------
--------------------------------------------
Date: November 15, 2004
[SIGNATURE PAGE TO WARRANT]
EXHIBIT A
NOTICE OF CASH EXERCISE
To: SCANSOFT, INC.
--------------------
--------------------
1. The undersigned hereby elects to purchase __________ shares of Common
Stock of ScanSoft, Inc., a Delaware corporation (the "Company"), pursuant to the
terms of Warrant No. __ issued on November 15, 2004, to and in the name of
____________, a copy of which is attached hereto (the "Warrant"), and tenders
herewith full payment of the aggregate Exercise Price for such shares in
accordance with the terms of the Warrant.
2. Please issue a certificate or certificates representing said shares of
Common Stock in such name or names as specified below:
-------------------------
-------------------------
3. The undersigned hereby represents and warrants that the aforesaid
shares of Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares and all representations and warranties of
the undersigned set forth in attached Warrant are true and correct as of the
date hereof. In support thereof, the undersigned has executed an Investment
Representation Statement, in the form attached as Exhibit C to the Warrant,
concurrently herewith.
----------------------------------------
----------------------------------------
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Date:
-----------------------------------
EXHIBIT B
NOTICE OF NET-ISSUE EXERCISE
To: SCANSOFT, INC.
--------------------
--------------------
1. The undersigned hereby elects to purchase __________ shares of Common
Stock of ScanSoft, Inc., a Delaware corporation (the "Company"), on a net-issue
basis pursuant to the terms of Warrant No. __ issued on November 15, 2004, to
and in the name of ____________, a copy of which is attached hereto (the
"Warrant").
2. Net-issue Information:
(a) Number of Shares of Common Stock to be Delivered:_____________
(b) Number of Shares of Common Stock Surrendered:_________________
(c) Number of Shares Remaining Subject to Warrant:________________
3. Please issue a certificate or certificates representing said shares of
Common Stock in such name or names as specified below:
-------------------------
-------------------------
4. The undersigned hereby represents and warrants that the aforesaid
shares of Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares and all representations and warranties of
the undersigned set forth in attached Warrant are true and correct as of the
date hereof. In support thereof, the undersigned has executed an Investment
Representation Statement, in the form attached as Exhibit C to the Warrant,
concurrently herewith.
----------------------------------------
----------------------------------------
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Date:
-----------------------------------