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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 3, 1999 COMMISSION FILE NUMBER 0-27038
SCANSOFT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-3156479
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9 CENTENNIAL DRIVE
PEABODY, MASSACHUSETTS 01960
(978) 977-2000
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, $0.001 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of
the Registrant was approximately $23,752,027 as of March 26, 1999, based on
$1.625 per share, the last reported sale price on the Nasdaq National Market for
such date. Shares of Common Stock held by each executive officer and director
and by each person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
The number of shares of the registrant's Common Stock, $0.001 par
value, outstanding as of March 26, 1999 was 26,355,780.
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<PAGE>
ITEM 11 OF PART III OF SCANSOFT, INC.'S (THE "COMPANY") ANNUAL REPORT ON FORM
10-K, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 5, 1999, IS
AMENDED IN ITS ENTIRETY TO READ AS FOLLOWS.
ITEM 11. EXECUTIVE COMPENSATION
The following table provides certain summary information for the fiscal
years 1996, 1997 and 1998 concerning compensation paid to the Company's Chief
Executive Officer and to the Company's four other named executive officers whose
compensation exceeded $100,000 in 1998 (the "Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------------ ------------------------
OTHER ANNUAL SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION OPTIONS(#)
- -------------------------------------- ------ ---------- ----------- -------------- ------------------------
<S> <C> <C> <C> <C> <C>
J. Larry Smart(2) ................. 1998 $314,357 $154,500 $ -- 698,574
President and Chief Executive 1997 190,500 98,429 21,500 815,000
Officer 1996 -- -- -- --
Rudolph E. Burger.................. 1998 193,269 25,000 -- 215,128
Senior Vice President of Business 1997 173,077 27,424 -- 205,000
Development 1996 137,307 -- -- 40,006
Geoffrey C. Darby(3) .............. 1998 117,944 10,000 -- 71,430
Vice President of Finance and 1997 159,346 17,498 -- 10,000
Chief Financial Officer 1996 156,000 20,000 -- 30,000
Murray Dennis(4) .................. 1998 193,817 86,550 -- 222,577
Vice President of Sales and 1997 175,000 80,045 -- 75,000
Marketing 1996 87,500 51,023 -- 150,000
Michael T. Burt(5) ................ 1998 136,254 20,000 -- 130,715
Vice President of Operations 1997 83,077 21,522 -- 100,000
1996 -- -- -- --
- ----------
(1) Includes amounts paid in the subsequent year for bonuses earned in the
indicated year.
(2) Mr. Smart joined the Company in April 1997.
(3) Mr. Darby left the Company in August 1998.
(4) Mr. Dennis joined the Company in May 1996.
(5) Mr. Burt joined the Company in April 1997.
</TABLE>
<PAGE>
RECENT OPTION GRANTS
The following table sets forth certain information regarding options
granted during the fiscal year ended January 3, 1999 to the Named Executive
Officers.
<TABLE>
<CAPTION>
Percent of Potential Realizable Value at
Total Options Assumed Annual Rates of Stock
Securities Granted to Exercise Price Appreciation for Option
Underlying Employees in or Base Term ($)(2)
Options Fiscal Price Expiration -----------------------------------
Name Granted(#) Year(%)(1) ($/Share) Date 5% 10%
- -------------------- ------------- ---------------- ------------ ----------- --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
J. Larry Smart 115,715 3.68% $1.75 4/1/07 $114,980 $ 284,938
154,287 4.90 1.75 7/1/07 158,831 396,591
428,572 13.61 1.75 10/1/07 455,772 1,146,159
Rudolph E. Burger 34,286 1.09 1.75 9/27/05 27,389 65,072
156,556 4.97 1.75 5/20/07 158,384 393,998
4,286 0.14 1.75 10/6/07 4,558 11,462
20,000 0.64 2.31 6/23/08 29,055 73,631
Geoffrey C. Darby 17,143 0.54 1.75 12/9/08 21,085 54,860
25,715 0.82 1.75 7/25/06 23,233 56,476
8,572 0.27 1.75 10/6/07 9,116 22,925
20,000 0.64 2.31 6/23/08 29,055 73,631
Murray Dennis 2,111 0.07 1.75 7/24/06 1,906 4,634
126,461 4.02 1.75 7/25/06 114,254 277,735
52,576 1.67 1.75 2/4/07 51,166 126,249
21,429 0.68 1.75 10/6/07 22,789 57,309
20,000 0.64 2.31 6/23/08 29,055 73,631
Michael T. Burt 85,715 2.72 1.75 5/8/07 86,336 214,571
25,000 0.79 3.00 3/30/08 47,167 119,531
20,000 0.64 2.31 6/23/08 29,055 73,631
- ----------
(1) Based on options to purchase an aggregate of 3,147,801 shares of common
stock granted during fiscal 1998.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These
gains are based on assumed rates of stock appreciation of five percent
(5%) and ten percent (10%) compounded annually from the date the
respective options were granted to their expiration date and are not
presented to forecast possible future appreciation, if any, in the
price of our common stock. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other
expenses associated with the exercise of the options or the sale of the
underlying shares of common stock. The actual gains, if any, on the
stock option exercises will depend on the future performance of our
common stock, the optionee's continued employment through applicable
vesting periods and the date on which the options are exercised.
</TABLE>
<PAGE>
The following table shows the number of shares of common stock
represented by outstanding stock options held by each of the Named Executive
Officers as of January 3, 1999.
<TABLE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES(1)
<CAPTION>
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options at Fiscal Options at Fiscal Year-End
Name Year-End Exercisable/Unexercisable ($) Exercisable/Unexercisable
- ----------------------------- ----------------------------------------- ---------------------------------------
<S> <C> <C>
J. Larry Smart 395,001/303,573 $--/--
Rudolph E. Burger 86,825/138,303 863/6,038
Geoffrey C. Darby --/-- --/--
Murray Dennis 91,136/121,723 --/--
Michael T. Burt 42,901/87,814 --/--
- ----------
(1) Based on a per share price of $1.1875, the closing price of our common
stock as reported by The Nasdaq National Market on December 31, 1998,
the last trading day of the fiscal year.
</TABLE>
In January 1998, the Company allowed all holders of outstanding options
to exchange higher priced options for new options at $1.75 per share, the fair
market value at the time of the exchange. The repricing terms provided that for
each seven shares of options exchanged, six new options would be granted. The
repriced options maintained the same vesting schedule. Options for 2,656,449
shares were exchanged for new options for 2,276,956 shares.
<TABLE>
TEN-YEAR OPTION/SAR REPRICINGS
(as of March 26, 1999)
<CAPTION>
LENGTH OF
ORIGINAL
OPTION TERM
NUMBER OF REMAINING
SECURITIES NUMBER OF MARKET PRICE EXERCISE AT DATE OF
UNDERLYING SHARES OF STOCK AT PRICE AT TIME NEW REPRICING
OPTIONS/SARS REISSUED TIME OF OF REPRICING EXERCISE OR
DATE OF REPRICED OR 7:6 RATIO REPRICING OR OR AMENDMENT PRICE AMENDMENT
EXECUTIVE OFFICER REPRICING AMENDED (#) (#) AMENDMENT ($) ($) ($) (YEARS)
- ------------------------ ---------- ------------- ----------- --------------- --------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Larry Smart....... 1/12/98 135,000 115,715 $1.75 $3.75 $1.75 9.25
President and Chief 1/12/98 180,000 154,287 1.75 3.44 1.75 9.50
Executive Officer 1/12/98 500,000 428,572 1.75 3.88 1.75 9.75
Jay Hanson........... 7/25/96 5,000 5,000 6.50 10.75 6.50 9.83
Vice President, 1/12/98 10,000 8,572 1.75 4.25 1.75 7.67
Engineering 1/12/98 5,000 3,750 1.75 4.25 1.75 7.67
1/12/98 5,000 4,286 1.75 6.50 1.75 8.58
1/12/98 5,000 4,286 1.75 6.50 1.75 8.58
1/12/98 10,000 8,572 1.75 3.50 1.75 9.08
1/12/98 8,000 6,858 1.75 2.63 1.75 9.42
1/12/98 3,300 2,829 1.75 3.63 1.75 9.67
1/12/98 30,000 25,715 1.75 3.88 1.75 9.75
Bruce S. Mowery...... 7/25/96 150,000 150,000 6.50 10.75 6.50 9.83
Vice President,
Marketing
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Rudolph E. Burger.... 1/12/98 40,000 32,812 1.75 7.00 1.75 7.75
Senior Vice 1/12/98 200,000 156,556 1.75 2.69 1.75 9.42
President, Business 1/12/98 5,000 4,286 1.75 3.88 1.75 9.75
Development
Michael T. Burt...... 1/12/98 100,000 85,715 $1.75 $2.81 $1.75 9.33
Vice President,
Operations
Geoffrey C. Darby.... 1/12/98 20,000 17,143 1.75 4.25 1.75 7.66
Vice President, 1/12/98 30,000 25,715 1.75 6.50 1.75 8.58
Finance 1/12/98 10,000 8,572 1.75 3.88 1.75 9.75
Murray L. Dennis..... 7/25/96 150,000 150,000 6.50 10.75 6.50 9.83
Vice President, 1/12/98 150,000 128,572 1.75 6.50 1.75 8.58
Sales and Marketing 1/12/98 50,000 42,858 1.75 3.50 1.75 9.08
1/12/98 25,000 21,429 1.75 3.88 1.75 9.75
</TABLE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of 15 meetings during the fiscal
year ended January 3, 1999. Each director attended at least 75% of the aggregate
number of meetings of (i) the Board of Directors and (ii) the committees of the
Board of Directors on which he served, except David F. Marquardt, who attended
66.6% of the meetings.
The Board of Directors has an Audit Committee and a Compensation
Committee. It does not have a nominating committee or a committee performing the
functions of a nominating committee.
The Audit Committee of the Board of Directors, which currently consists
of directors Paul A. Ricci, J. Larry Smart and William J. Harding, held one
meeting during 1998. The Audit Committee, which meets periodically with
management and our independent public accountants, recommends engagement of our
independent public accountants and is primarily responsible for approving the
service performed by our independent public accountants and reviewing and
evaluating our accounting principles and the adequacy of our internal auditing
procedures and controls.
The Compensation Committee of the Board of Directors, which currently
consists of directors Paul A. Ricci, William J. Harding and David F. Marquardt,
held three meetings during 1998. The Compensation Committee, in conjunction with
the Board of Directors, establishes salaries, incentives and other forms of
compensation for directors, officers and other employees, administers the
various incentive compensation and benefit plans (including our stock purchase
and stock option plans) and recommends policies relating to such plans.
COMPENSATION OF DIRECTORS
Nonemployee directors of the Company are automatically granted options
to purchase shares of the Company's Common Stock pursuant to the terms of the
Company's 1995 Directors' Stock Option Plan (the "Directors' Option Plan").
Under such plan, each person who was a nonemployee director of the Company on
the date of the Company's initial public offering, which was December 11, 1995,
was granted an option to purchase 20,000 shares of Common Stock on the date of
such offering and each person who thereafter first becomes a nonemployee
director will be granted an option to purchase 20,000 shares of Common Stock on
the date on which he or she first becomes a nonemployee director (the "First
Option"). Thereafter, on January 1 of each year, commencing January 1, 1997,
each nonemployee director shall be automatically granted an additional option to
purchase 5,000 shares of Common Stock (a "Subsequent Option") if, on such date,
he or she shall have served on the Company's Board of Directors for at least six
(6) months. The Directors' Plan provides that the First Option shall become
exercisable in installments as to twenty-five percent (25%) of the total number
of shares subject to the First Option on each anniversary of the date of grant
of the First Option and each Subsequent Option shall become exercisable in full
on the first anniversary of the date of grant of that Subsequent Option. Options
granted under the
<PAGE>
Directors' Option Plan have an exercise price equal to the fair market value of
the Company's Common Stock on the date of grant, and a term of ten (10) years.
Pursuant to the Directors' Option Plan, on January 1, 1998, each nonemployee
director was granted an option to purchase 5,000 shares of Common Stock. The
terms of such options, including vesting terms, are substantially similar to the
terms of the First Option.
CHANGE IN CONTROL AND EMPLOYMENT AGREEMENTS
AGREEMENTS WITH VISIONEER'S EXECUTIVE OFFICERS
Two executive officers of Visioneer prior to the merger, J. Larry
Smart, President and Chief Executive Officer and a director, and Murray Dennis,
Vice President of Sales and Marketing, executed employment and non-compete
agreements with Primax V Acquisition Corp., a wholly owned subsidiary of Primax
Electronics Ltd. After the sale of the hardware business to Primax in January
1999, Mr. Dennis became employed by Primax, and received a signing bonus paid by
Primax equal to six months of his Visioneer salary as part of his new employment
compensation package. He also released Visioneer from its obligations under his
existing employment agreement with Visioneer. Mr. Smart is entitled to receive
payment of six months additional salary by Visioneer since his termination of
employment. Michael T. Burt, Vice President of Operations, received a payment of
four months additional salary upon termination of employment. Pursuant to an
engagement letter dated August 11, 1998 between Visioneer and The Brenner Group
LLC, Richard Brenner serves as the Company's Chief Financial Officer. Visioneer
paid The Brenner Group hourly fees for Mr. Brenner's services and paid a success
fee of 90,000 for completion of the hardware sale and the merger with ScanSoft.
The total amount of payments to Messrs. Smart and Brenner will be approximately
325,000.
In November 1998, Visioneer's Board of Directors approved the
acceleration of vesting of 50% of unvested options held by Messrs. Dennis and
Burt upon each individual's termination of employment with Visioneer. Visioneer
also accelerated the vesting of certain options held by Mr. Smart in accordance
with the vesting schedules set forth in letter agreements between Visioneer and
Mr. Smart dated April 9, 1997, July 7, 1997 and October 6, 1997. Options to
purchase a total of approximately 151,787 shares held by Mr. Smart have also
been accelerated.
In November 1998, Visioneer's Board of Directors also approved offering
to employees, including executive officers, whose employment was terminated by
Visioneer prior to the effective time of the merger the right to receive 0.20
per share for each option share held by such employee that is or would have
vested as of the effective time of the merger (including options that will be
accelerated prior to such time), provided that the employee agreed to terminate
all additional outstanding unvested options held by such employee. Accordingly,
Mr. Dennis received approximately 30,500 for options exercisable as of the date
of the hardware sale to Primax and options accelerated as a result of their
termination of employment. Similarly, Messrs. Smart and Burt received
approximately 134,000 and 17,400, respectively, for options that would be
exercisable as of the closing of the merger and for options accelerated in
connection with the closing of the merger or their termination of employment.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Peabody, State of
Massachusetts, on June 1, 1999.
SCANSOFT, INC.
By: /S/ MICHAEL K. TIVNAN
------------------------------------------
Michael K. Tivnan
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/S/ MICHAEL K. TIVNAN President, Chief Executive June 1, 1999
- --------------------------------- Officer and Director
Michael K. Tivnan (Principal Executive
Officer)
/S/ SHARON PLANTE
- --------------------------------- Controller (Principal June 1, 1999
Sharon Plante Accounting Officer)
*
- ---------------------------------
Paul Ricci Director June __, 1999
*
- ---------------------------------
J. Larry Smart Director June __, 1999
*
- ---------------------------------
David F. Marquardt Director June __, 1999
*
- ---------------------------------
William Harding Director June __, 1999
*
- ---------------------------------
Mark Myers Director June __, 1999
* BY /S/ MICHAEL K. TIVNAN
- ---------------------------------
Michael K. Tivnan
(Attorney-in-Fact)
