Document:

exv10w2

 

Exhibit 10.2

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT
OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.

WARRANT TO PURCHASE COMMON STOCK OF MBI FINANCIAL, INC.

Void after April 17, 2012

     This Warrant is issued to                      (the “Holder”) by MBI Financial, Inc., a
Nevada corporation (the “Company”), on April 17, 2007 (the “Warrant Issue Date”).

          1. Purchase Rights. Subject to the terms and conditions hereinafter set forth, the
Holder is entitled, upon surrender of this Warrant at the principal office of the Company (or at
such other place as the Company shall notify the holder hereof in writing), to purchase from the
Company up to 2,000,000 fully paid and nonassessable shares (the “Shares”) of Common Stock, $
0.0167 par value per share, of the Company (the “Common Stock”). The number of shares of Common
Stock issuable pursuant to this Section 1 shall be subject to adjustment from time to time pursuant
to Section 9 hereof.

          2. Exercise Price. The purchase price for the Shares shall be $0.40 per share,
subject to adjustment from time to time pursuant to Section 9 hereof (the “Exercise Price”).

          3. Exercise Period. This Warrant shall be exercisable commencing on the Warrant Issue
Date and shall expire and be of no further force or effect at 4:30 pm (Dallas time) on April 17,
2012 (the “Expiration Date”).

          4. Method of Exercise. While this Warrant remains outstanding and exercisable in
accordance with Section 3 above, the Holder may exercise, in whole or in part, the purchase rights
evidenced hereby. Such exercise shall be effected by: (a) the surrender of the Warrant, together
with a duly executed copy of the form of Notice of Election attached hereto, to the Secretary of
the Company at its principal office; and (b) the payment to the Company of an amount equal to the
aggregate Exercise Price for the number of Shares being purchased by either, at the Holder’s
option, (i) certified check or bank draft, (ii) cancellation of principal or interest owed to the
Holder by the Company, or (iii) number of shares of Common Stock having an aggregate fair market
value equal to or greater than the respective Exercise Price for all Warrant Shares then being
exercised. “Fair Market Value” shall mean (a) if the Shares are then listed or quoted on a
national securities exchange, the last reported closing price per Share through such exchange, as
applicable, (b) if subclause (a) is not applicable and the Shares are then quoted on the OTC
Bulletin Board, the average of the last reported closing bid and ask prices per Share on the OTC
Bulletin Board, (c) if neither subclause (a) nor subclause (b) above are applicable and prices for
the Shares are reported in the “Pink Sheets” published by the National Quotation Bureau (or a
similar organization or entity), the average of the last reported closing bid and ask prices per
Share as listed in the Pink Sheets, and (d) if neither subclause (a), (b) nor subclause (c) above
is applicable, the value determined by the board of directors of the Company in good faith.

          5. Accredited Investor. On the date hereof, the Holder is an “accredited investor” as
defined in Rule 501(a) under the Securities Act of 1933, as amended (the “Securities Act”).
Immediately prior to any exercise of this Warrant pursuant to Section 4 hereof, the Holder shall
provide the Company with a representation that it is still an “accredited investor” as defined in
Rule 501(a) under the Securities Act.

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          6. Investment Representation. Unless the Shares are issued to the Holder in a
transaction registered under applicable federal and state securities laws, by its execution hereof,
the Holder represents and warrants to the Company that all Shares which may be purchased hereunder
will be acquired by the Holder for investment purposes for its own account and not with any present
intent for resale or distribution in violation of federal or state securities laws. Unless the
Shares are issued to the Holder in a transaction registered under the applicable federal and state
securities laws, all certificates issued with respect to the Shares shall bear the appropriate
restrictive investment legend and shall be held indefinitely, unless they are subsequently
registered under the applicable federal and state securities laws or the Holder obtains an opinion
of counsel, in form and substance satisfactory to the Company and its counsel, that such
registration is not required.

          7. Certificates for Shares. Upon the exercise of the purchase rights evidenced by
Section 1 of this Warrant, one or more certificates for the number of Shares so purchased shall be
issued as soon as practicable thereafter (with appropriate restrictive legends, if applicable), and
in any event within ten (10) business days of the delivery of the Notice of Election.

          8. Issuance of Shares. The Company covenants that the Shares, when issued pursuant to
the exercise of this Warrant under Section 4 hereof, will be duly and validly issued, fully paid
and nonassessable.

          9. Anti-dilution Adjustments. The Exercise Price and the number of shares (or amount
of other securities or property) purchasable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the occurrence of certain events described in this Section 9.
This Section 9 shall not require an adjustment to the Exercise Price in connection with any
dividends paid in cash out of the retained earnings of the Company in the ordinary course of
business of the Company or upon any sale of shares of Common Stock for a per share price that is
less than the Exercise Price.

               (a) Subdivision or Combination of Stock. If the Company shall effect a stock dividend
or stock split or subdivide its outstanding shares of Common Stock into a greater number of shares,
the Exercise Price in effect immediately prior to such stock dividend, stock split or subdivision
shall be proportionately reduced, and conversely, if the Company shall effect a reverse stock split
or combine its outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such reverse stock split or combination shall be
proportionately increased. Upon each adjustment of the Exercise Price, the Holder of this Warrant
shall thereafter be entitled to purchase, at the Exercise Price resulting from such adjustment, the
number of shares obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior to such
adjustment, and dividing the product thereof by the Exercise Price resulting from such adjustment.

               (b) Dividends in Common Stock, Other Securities, Property, Reclassifications. If the
holders of Common Stock (or any shares of stock or other securities at the time receivable upon the
exercise of this Warrant) shall have received or become entitled to receive, without payment
therefor,

                    (i) Common Stock or any shares of stock or other securities that are directly or indirectly
convertible into or exchangeable for Common Stock, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other distribution (other
than shares of Common Stock issued as a stock dividend, stock split or subdivision, adjustments in
respect of which shall be covered by the terms of Section 9(a) hereof),

                    (ii) any cash paid or payable otherwise than as a cash dividend paid out of the retained
earnings of the Company in the ordinary course of business (other than a liquidation or
dissolution, which shall be covered by the terms of Section 9(d) hereof), or

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                    (iii) additional shares of Common Stock or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification, recapitalization, reorganization,
combination of shares or similar corporate rearrangement (other than shares of Common Stock issued
as a stock dividend, stock split or subdivision, adjustments in respect of which shall be covered
by the terms of Section 9(a) hereof),

then, and in each such case, the Holder hereof shall, upon the exercise of this Warrant, be
entitled to receive, in addition to the number of shares of Common Stock receivable upon such
exercise, and without payment of any additional consideration therefor, the amount of stock and
other securities and property (including cash in the cases referred to in clauses (b) and (c)
above) which such Holder would hold on the date of such exercise had such Holder been the holder of
record of such Common Stock as of the date on which holders of Common Stock received or became
entitled to receive such shares or all other additional stock and other securities and property

          (c) Reorganization, Reclassification, Consolidation, Merger or Sale. If any
reclassification, recapitalization or reorganization, or consolidation or merger of the Company
with another corporation, or the sale of all or substantially all of its assets or other similar
transaction, shall be effected in such a way that holders of Common Stock shall be entitled to
receive, with respect to or in exchange for their shares of Common Stock, securities or other
assets or property (an “Organic Change”) and the Company is the resulting or surviving corporation
of such Organic Change, then, as a condition of such Organic Change, provisions shall be made by
the Company whereby the Holder hereof shall thereafter have the right to purchase and receive (in
lieu of the shares of the Common Stock of the Company purchasable and receivable upon the exercise
of this Warrant immediately prior to such Organic Change) such shares of stock, securities or other
assets or property as may be issued or payable in connection with such Organic Change with respect
to or in exchange for the number of outstanding shares of such Common Stock purchasable and
receivable upon the exercise of this Warrant immediately prior to such Organic Change. In the event
of any Organic Change, appropriate provision shall be made by the Company with respect to the
rights and interests of the Holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Exercise Price and of the number
of shares (or amount of stock, other securities or property) purchasable and receivable upon the
exercise of this Warrant) shall thereafter be applicable, in relation to any shares of stock,
securities or property thereafter deliverable upon the exercise hereof. In the event of any
Organic Change pursuant to which the Company is not the surviving or resulting corporation, prior
to the consummation thereof, the corporation resulting from such Organic Change or the corporation
purchasing such assets shall assume by written instrument the obligation to deliver to the Holder
such shares of stock, securities or assets as, in accordance with the foregoing provisions, the
Holder may be entitled to purchase; provided, however, this Warrant may be canceled by the Company
as of the effective date of any such Organic Change pursuant to which the Company is not the
surviving or resulting corporation by giving notice to the Holder of the Company’s intent to do so
at least fifteen business days prior to the effective date of such Organic Change or record date
associated with such Organic Change, whichever is earlier.

          (d) Liquidation or Dissolution. In the event of a proposed dissolution or liquidation
of the Company, this Warrant will terminate immediately prior to the consummation of such proposed
action, so long as the Company has delivered the notice required by Section 9(h) hereof.

          (e) Certain Events. If any change in the outstanding Common Stock of the Company or
any other event occurs as to which the other provisions of this Section 9 are not strictly
applicable or if strictly applicable would not fairly protect the purchase rights of the Holder of
the Warrant in accordance with such provisions, then the Board of Directors of the Company shall
make an adjustment in the number and class of shares or other securities or property available
under the Warrant, the Exercise Price or the application of such provisions, so as to protect such
purchase rights as aforesaid. The adjustment shall be such as will give the Holder of the Warrant
upon exercise for the same aggregate Exercise Price the total

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number, class and kind of shares or
other securities or property as the Holder have owned had the Warrant been exercised prior to
the event and had the Holder continued to hold such shares until after the event requiring
adjustment.

               (f) Carry Over of Adjustments. No adjustment of the Exercise Price shall be made if
the amount of such adjustment shall be less than 1% of the Exercise Price in effect immediately
prior to the event giving rise to the adjustment, provided, however, that in such case any
adjustment that would otherwise be required then to be made shall be carried forward and shall be
made at the time of and together with the next subsequent adjustment which, together with any
adjustment so carried forward, shall amount to at least 1% of the Exercise Price.

               (g) Discretionary Reduction in Exercise Price. The Company may at any time or from
time to time reduce the Exercise Price of the Warrant.

               (h) Notice of Adjustment.

                    (i) Immediately upon any adjustment in the number or class of shares or other securities or
property subject to this Warrant or of the Exercise Price, the Company shall give written notice
thereof to the Holder, setting forth in reasonable detail and certifying the calculation of such
adjustment,

                    (ii) The Company shall give written notice to the Holder at least 10 business days prior to
the date on which the Company closes its books or takes a record for determining rights to receive
any dividends or distributions,

                    (c) The Company shall give written notice to the Holder at least 15 business days prior to the
date on which an Organic Change shall take place, and

                    (d) The Company shall give written notice to the Holder at least 15 business days prior to the
effective date of any proposed liquidation or dissolution of the Company.

          10. Shares to be Reserved. The Company will at all times keep available, and reserve
out of its authorized shares of Common Stock, solely for the purpose of issue upon the exercise of
the Warrant, such number of Shares as shall then be issuable upon the exercise of the Warrant. The
Company will take all such actions as are within its power to ensure that all such Shares may be so
issued without violation of any applicable law.

          11. No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional
shares the Company shall make a cash payment therefor on the basis of the Exercise Price then in
effect.

          12. No Stockholder Rights. Prior to exercise of this Warrant, the Holder shall not be
entitled to any rights of a stockholder with respect to the Shares, including (without limitation)
the right to vote such Shares, receive dividends or other distributions thereon, exercise
preemptive rights or be notified of stockholder meetings, and such holder shall not be entitled to
any notice or other communication concerning the business or affairs of the Company. However,
nothing in this Section 12 shall limit the right of the Holder to be provided the Notices required
under this Warrant. Notwithstanding the foregoing, the Holder shall be deemed a stockholder and
shall be entitled to all of the rights of a stockholder with respect to the Shares immediately upon
satisfying all of Section 4 hereof.

          13. Participation in Rights Distribution. If at any time, while this Warrant, or any
portion thereof, is outstanding and unexpired, the Company shall issue to all holders of its Common
Stock rights

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(“Rights”) entitling the holders thereof to purchase any shares of capital stock, the
Company also shall issue to
the Holder identical Rights, with such number of Rights to be issued to the Holder being based
on the number of shares of Common Stock which Holder would then be entitled to receive if this
Warrant had been exercised in full immediately prior to the issuance of Rights. Prior to issuing
Rights, the Company shall provide notice to the Holder as set forth in Section 9(h) hereof. In
connection with issuing Rights, the Company will take all necessary corporate action to at all
times keep available and reserve out of its authorized shares of Common Stock the number of shares
of Common Stock issuable upon exercise of the Rights.

          14. Transfers of Warrant. In order for a transferee of this Warrant to receive any of
the benefits of such Warrant, the Company must have received notice of such transfer, pursuant to
Section 18 hereof, in the form of assignment attached hereto, accompanied by an opinion of counsel,
which opinion shall be reasonably acceptable to the Company, that an exemption from registration of
this Warrant under the Securities Act and under any applicable state securities law is available.

          15. Replacement. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant or, in the case of mutilation, upon surrender of
this Warrant, the Company will issue to the Holder a replacement warrant (containing the same terms
and conditions as this Warrant).

          16. Successors and Assigns. The terms and provisions of this Warrant shall inure to
the benefit of, and be binding upon, the Company and the Holder hereof and their respective
successors and permitted assigns as set forth in Section 14 hereof.

          17. Amendments and Waivers. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a particular instance
and either retroactively or prospectively), with the written consent of the Company and the Holder.

          18. Notices. All notices required under this Warrant shall be deemed to have been
given or made for all purposes (i) upon personal delivery, (ii) upon confirmation receipt that the
communication was successfully sent to the applicable number if sent by facsimile; (iii) one
business day after being sent, when sent by professional overnight courier service, or (iv) five
days after posting when sent by registered or certified mail. Notices to the Company shall be sent
to the principal office of the Company (or at such other place as the Company shall notify the
Holder hereof in writing). Notices to the Holder shall be sent to the address of the Holder on the
books of the Company (or at such other place as the Holder shall notify the Company hereof in
writing).

          19. Captions. The section and subsection headings of this Warrant are inserted for
convenience only and shall not constitute a part of this Warrant in construing or interpreting any
provision hereof.

          20. Governing Law. This Warrant shall be governed by the laws of the State of Texas.

Remainder of Page Intentionally Left Blank.

Signature Page(s) to Follow.

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     IN WITNESS WHEREOF, MBI Financial, Inc. caused this Warrant to be executed by an officer
thereunto duly authorized.

	 	 	 	 	 	 	 
	 	 	MBI FINANCIAL, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

Patrick A. McGeeney
	 	 
	 

	 	Title:
	 	Chairman, CEO and President	 	 
	 
	 	 	 	 	 	 
	 	 	Agreed to and Acknowledged by:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

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FORM OF ELECTION TO EXERCISE

     The undersigned hereby irrevocably elects to exercise the number of Warrants of MBI FINANCIAL,
INC. set out below for the number of Shares (or other property or securities subject thereto) as
set forth below:

	 	 	 	 	 	 	 	 	 
	 

	 	(a)
	 	Number of Shares to be Acquired:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 

	 	(b)
	 	Exercise Price per Share:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	(c)
	 	Aggregate Purchase Price [(a) multiplied by (b)]:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

and hereby tenders a certified check, bank draft or cash for such aggregate purchase price, and
directs such Shares to be registered and a certificate therefore to be issued as directed below.

DATED this                      day of                                         , ___.

Per:                                                            

	 	 	 	 	 	 	 
	Direction as to Registration

	 	 	 	 	 	 
	Name of Registered Holder:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	Address of Registered Holder:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 

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FORM OF ASSIGNMENT

(To be executed by the registered holder if such holder

desires to transfer the Warrant.)

     FOR VALUE RECEIVED                                          hereby sells, assigns and transfers unto
                                        .

(Please print name and address of transferee)

this Warrant, together with all right, title and interest therein, and does hereby irrevocably
constitute and appoint                                          Attorney, to transfer the within Warrant on
the books of the within-named Company, with full power of substitution.

Dated:                                         , _____

	 	 	 	 	 	 	 
	 

	 	Signature
	 	 
 

	 	 
	 	 	(Signature must conform in all respect to name of
holder as specified on the face of the Warrant.)	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	(Insert Social Security or Other Identifying
Number of Holder)	 	 

8<PAGE>
                                                                     Exhibit 4.4

                           NUANCE COMMUNICATIONS, INC.

                   FORM OF STAND-ALONE STOCK OPTION AGREEMENT

I.    NOTICE OF STOCK OPTION GRANT

      ______________

      You, __________, (the "Optionee"), have been granted a Nonstatutory Stock
Option to purchase Common Stock of the Company, subject to the terms and
conditions of this Agreement, as follows:

<TABLE>
<S>                                       <C>
      Grant Number                        ________

      Date of Agreement/Grant             April __, 2007

      Vesting Commencement Date           April __, 2007

      Exercise Price per Share            $_______

      Total Number of Shares Granted      ________

      Total Exercise Price                $________

      Type of Option:                     ___ Incentive Stock Option

                                          _X_ Nonstatutory Stock Option

      Term/Expiration Date:               April __, 20__
</TABLE>

      Vesting Schedule:

      Subject to accelerated vesting as set forth below, this Option may be
exercised, in whole or in part, in accordance with the vesting schedule attached
hereto as Exhibit A.

<PAGE>

      Termination Period:

      This Option may be exercised for 30 (THIRTY) DAYS after (i) Optionee
voluntarily ceases to be a Service Provider or (ii) Optionee's employment is
terminated for cause. In the event of an involuntary termination (not for
cause), this option may be exercised 90 (NINETY) DAYS after Optionee ceases to
be a Service Provider. Upon the death or Disability of the Optionee, this Option
may be exercised for SIX MONTHS after Optionee ceases to be a Service Provider.

      If there is a change of control transaction and Optionee's employment is
terminated within twelve months following the change of control transaction by
the Company for a reason other than cause, death or disability, and Optionee
executes a severance agreement specified by the Company (including, among other
things, a full release of claims and non-competition agreement), Optionee will
receive immediate acceleration of any unvested stock options.

      In no event shall this Option be exercised later than the Term/Expiration
Date as provided above.

II.   AGREEMENT

      A. Definitions. As used herein, the following definitions shall apply:

            (a) "Administrator" means the Board or any of its Committees as
      shall be responsible for administering the Company's equity compenstation
      plans.

            (b) "Agreement" means this stock option agreement between the
      Company and Optionee evidencing the terms and conditions of this Option.

            (c) "Applicable Laws" means the requirements relating to the
      administration of equity-based awards under U.S. state corporate laws,
      U.S. federal and state securities laws, the Code, any stock exchange or
      quotation system on which the Common Stock is listed or quoted and the
      applicable laws of any foreign country or jurisdiction that may apply to
      this Option.

            (d) "Board" means the Board of Directors of the Company.

            (e) "Code" means the Internal Revenue Code of 1986, as amended. Any
      reference to a section of the Code herein will be a reference to any
      successor or amended section of the Code.

            (f) "Committee" means a committee of Directors appointed by the
      Board.

            (g) "Common Stock" means the common stock of the Company.

            (h) "Company" means Nuance Communications, Inc. a Delaware
      corporation. With respect to the definitions of the Performance Goals, the
      Committee may determine that "Company" means Nuance Communications, Inc.
      and its consolidated subsidiaries.

                                      -2-
<PAGE>

            (i) "Consultant" means any person, including an advisor, engaged by
      the Company or a Parent or Subsidiary to render services to such entity.

            (j) "Director" means a member of the Board.

            (k) "Disability" means total and permanent disability as defined in
      Section 22(e)(3) of the Code.

            (l) "Employee" means any person, including Officers and Directors,
      employed by the Company or any Parent or Subsidiary of the Company.
      Neither service as a Director nor payment of a director's fee by the
      Company shall be sufficient to constitute "employment" by the Company.

            (m) "Exchange Act" means the Securities Exchange Act of 1934, as
      amended.

            (n) "Fair Market Value" means, as of any date, the value of Common
      Stock determined as follows:

                  (i) If the Common Stock is listed on any established stock
            exchange or a national market system, including without limitation
            the Nasdaq National Market or The Nasdaq SmallCap Market of The
            Nasdaq Stock Market, its Fair Market Value shall be the closing
            sales price for such stock (or the closing bid, if no sales were
            reported) as quoted on such exchange or system on the day of
            determination, as reported in The Wall Street Journal or such other
            source as the Administrator deems reliable;

                  (ii) If the Common Stock is regularly quoted by a recognized
            securities dealer but selling prices are not reported, the Fair
            Market Value of a Share of Common Stock shall be the mean between
            the high bid and low asked prices for the Common Stock on the last
            market trading day on the day of determination, as reported in The
            Wall Street Journal or such other source as the Administrator deems
            reliable; or

                  (iii) In the absence of an established market for the Common
            Stock, the Fair Market Value shall be determined in good faith by
            the Administrator.

            (o) "Nonstatutory Stock Option" means an Option that by its terms
      does not qualify or is not intended to qualify as an Incentive Stock
      Option.

            (p) "Officer" means a person who is an officer of the Company within
      the meaning of Section 16 of the Exchange Act and the rules and
      regulations promulgated thereunder.

            (q) "Option" means this Nonstatutory Stock Option.

            (r) "Optionee" means ________ or his successor.

            (s) "Optioned Stock" means the Common Stock subject to this Option.

                                      -3-
<PAGE>

            (t) "Parent" means a "parent corporation," whether now or hereafter
      existing, as defined in Section 424(e) of the Code.

            (u) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
      successor to Rule 16b-3.

            (v) "Section 16(b)" means Section 16(b) of the Exchange Act.

            (w) "Service Provider" means an Employee, Director or Consultant.

            (x) "Share" means a share of the Common Stock, as adjusted in
      accordance with Section J Part II of this Agreement.

            (y) "Subsidiary" means a "subsidiary corporation", whether now or
      hereafter existing, as defined in Section 424(f) of the Code.

      B. Grant of Option.

            The Compensation Committee of the Board of the Company hereby grants
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement an Option to purchase the number of Shares, as set forth in the Notice
of Grant, at the Exercise Price per share set forth in the Notice of Grant,
subject to the terms and conditions of this Agreement.

      C. Exercise of Option.

            (a) Right to Exercise. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of this Agreement.

            (b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit B (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company. The
Exercise Notice shall be completed by the Optionee and delivered to the Stock
Plan Administrator of the Company (or its designee). The Exercise Notice shall
be accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares (and the amount of any income or employment tax the Company is required
by law to withhold by reason of such exercise). This Option shall be deemed to
be exercised upon receipt by the Company of such fully executed Exercise Notice
accompanied by such aggregate Exercise Price (and any withholding tax).

            No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.

                                      -4-
<PAGE>

      D. Method of Payment.

            Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:

            1. cash; or

            2. check; or

            3. consideration received by the Company under a cashless exercise
program implemented by the Company in connection with this Agreement; or

            4. surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.

      E. Non-Transferability of Option.

            This Option may not be transferred in any manner otherwise than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by the Optionee. The terms of this Agreement shall be
binding upon the executors, administrators, heirs, successors and assigns of the
Optionee.

      F. Term of Option.

            This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with
the terms of this Agreement.

      G. Tax Consequences.

            Some of the federal tax consequences relating to this Option, as of
the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.

      H. Exercising the Option.

            1. Nonstatutory Stock Option. The Optionee may incur regular federal
income tax liability upon exercise of a NSO. The Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market Value of the Exercised Shares on the
date of exercise over their aggregate Exercise Price. If the Optionee is an
Employee or a former Employee, the Company will be required to withhold from his
or her compensation or collect from Optionee and pay to the applicable taxing
authorities an amount in cash equal to a percentage of this compensation income
at the time of exercise, and may refuse to honor the exercise and refuse to
deliver Shares if such withholding amounts are not delivered at the time of
exercise.

                                      -5-
<PAGE>

            2. Disposition of Shares.

                  (a) NSO. If the Optionee holds NSO Shares for at least one
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.

      I. Termination of Relationship as a Service Provider.

            1. Optionee Ceases to be a Service Provider. If the Optionee ceases
to be a Service Provider, other than upon the Optionee's death or Disability,
the Optionee may exercise his or her Option within such period of time as is
specified in the Notice of Grant above to the extent that the Option is vested
on the date of termination (but in no event later than the expiration of the
term of such Option as set forth in this Agreement). If, after termination, the
Optionee does not exercise the Option within the time specified, the Option
shall terminate, and the Shares covered by such Option terminate.

            2. Disability of Optionee. If Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise
this Option within such period of time as is specified in the Notice of Grant to
the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in this
Agreement). If, after termination, the Participant does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall terminate.

            3. Death of Optionee. If Optionee dies while a Service Provider, the
Option may be exercised following the Optionee's death within such period of
time as specified in the Notice of Grant (but in no event may the Option be
exercised later than the expiration of the term of such Option as set forth in
this Agreement), by the Optionee's estate or by a person who acquires the right
to exercise the Option by bequest or inheritance, but only to the extent that
the Option is vested on the date of death. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
terminate.

            4. Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate to the
Participant at the time that such offer is made.

      J. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.

            (a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number and class of Shares that may be
delivered under this Agreement and/or the number, class, and price of Shares
covered under this Agreement, shall be proportionately adjusted for any increase
or decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Shares, or
any other increase or decrease in the number of issued Shares effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as

                                      -6-
<PAGE>

expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of Shares subject this Agreement.

            (b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for the Optionee to
have the right to exercise his Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. To the extent it has not
been previously exercised, the Option will terminate immediately prior to the
consummation of such proposed action.

            (c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, the Option shall be assumed or an equivalent option substituted
by the successor corporation or a Parent or Subsidiary of the successor
corporation. In the event that the successor corporation refuses to assume or
substitute for the Award, the Optionee shall fully vest in and have the right to
exercise the Option as to all of the Optioned Stock, including Shares as to
which would not otherwise be vested or exercisable. If the Option becomes fully
vested and exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee in writing
or electronically that the Option will be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option will
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger or
sale of assets, the Option confers the right to purchase or receive, for each
Share subject of Optioned Stock subject to the Option immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of assets is
not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option, for each Share
of Optioned Stock to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per Share consideration received by
holders of Common Stock in the merger or sale of assets.

      K. Administration of the Agreement. The Administrator shall have the
authority, in its discretion, to construe and interpret the terms of this
Agreement and the Option granted pursuant thereto, to prescribe, amend and
rescind the rules and regulations relating to the Agreement, to determine the
Fair Market Value of the Common Stock, and to make all other determinations
deemed necessary or advisable for administering the Agreement. The
Administrator's decisions, determinations and interpretations shall be final and
binding on the Optionee and all other persons.

      L. Notices. Any notice to be given to the Company hereunder shall be in
writing and shall be addressed to the Company at its then current principal
executive office or to such other address as the Company may hereafter designate
to the Optionee by notice as provided in this Section. Any notice to be given to
the Optionee hereunder shall be addressed to the Optionee at the address set
forth beneath his signature hereto, or at such other address as the Optionee may
hereafter

                                      -7-
<PAGE>

designate to the Company by notice as provided herein. A notice shall be deemed
to have been duly given when personally delivered or mailed by registered or
certified mail to the party entitled to receive it.

      M. No Effect on Employment or Service. This Agreement will not confer upon
Optionee's right with respect to continuing the Optionee's relationship as a
Service Provider with the Company, nor will this Agreement interfere in any way
with the Optionee's right or the Company's right to terminate such relationship
at any time, with or without cause, to the extent permitted by Applicable Laws.

      N. Entire Agreement; Governing Law. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and supersede
in their entirety all prior undertakings and agreements of the Company and
Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee's interest except by means of a writing signed by the
Company and Optionee. This Agreement is governed by the internal substantive
laws, but not the choice of law rules, of Delaware.

                                      -8-
<PAGE>

                        NO GUARANTEE OF CONTINUED SERVICE

            OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED,
BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS
OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE
PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

      By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the this Agreement. Optionee has reviewed this Agreement
in its entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Agreement and fully understands all provisions of the Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to this
Agreement. Optionee further agrees to notify the Company upon any change in the
residence address indicated below.

OPTIONEE:                               NUANCE COMMUNICATIONS, INC.

-----------------------------------
Signature                               By

-----------------------------------     -----------------------------------
                                        Title

                                      -9-

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