PEABODY, Mass., August 12, 2002 - ScanSoft, Inc. (Nasdaq: SSFT), a leading supplier of digital imaging, speech and language solutions, today announced that it has reached agreement with representatives of L&H Holdings USA, Inc. and Lernout & Hauspie Speech Products N.V. (collectively, L&H) on the orderly disposition of the approximately 7.4 million shares of ScanSoft's common stock held by L&H. These shares were issued as consideration for the Company's December 2001 acquisition of the speech and language business of L&H. The terms include:

ScanSoft will repurchase shares of its common stock worth $7.0 million from L&H at a share price equal to the average closing price for the 20 trading days following the bankruptcy court's approval of the agreement, but no less than $4.79.

ScanSoft will facilitate an underwritten public offering of the remaining L&H shares no later than February 15, 2003.

ScanSoft will issue up to 300,000 shares to holders of the approximately six million shares remaining as consideration for holding ScanSoft shares for the extended period.

ScanSoft will grant L&H observer rights on ScanSoft's board of directors until the public offering is completed.

The agreement remains subject to the approval of the U.S. Bankruptcy Court for the District of Delaware.

The $7.0 million share repurchase will be funded from cash balances. As of the end of the second quarter, ScanSoft reported positive operating cash flow and held $18.3 million in cash. ScanSoft has said previously that it expects sequentially increasing operating cash flows in the third and fourth quarter.

"We are pleased to have reached an agreement that will provide for the orderly disposition of these shares," said Paul Ricci, chairman and CEO of ScanSoft. "Because we believe ScanSoft's shares are undervalued, the transaction, as structured, provides the opportunity to maximize value for our shareholders while allowing the L&H Estate the continued opportunity to participate in the Company's growth. The L&H assets continue to perform beyond our expectations." On December 12, 2001, ScanSoft announced that it had closed the acquisition of substantially all the operating and technology assets of L&H's Speech and Language Technologies business. Consideration for the transaction comprised $10 million in cash, a $3.5 million note and 7.4 million shares of ScanSoft stock. The U.S. Bankruptcy Court approved the transaction on December 11, 2001.

About ScanSoft, Inc.

ScanSoft, Inc. (Nasdaq: SSFT) is the leading supplier of imaging, speech and language solutions that are used to automate a wide range of manual processes - saving time, increasing worker productivity and improving customer service. For more information regarding ScanSoft products and technologies, please visit www.scansoft.com.

Trademark reference: ScanSoft and the ScanSoft logo are registered trademarks or trademarks of ScanSoft, Inc. in the United States and other countries. All other company or product names mentioned may be the trademarks of their respective owners.

Safe Harbor Statement
Except for the historical information contained herein, this press release includes forward-looking statements within the meaning of Section 21(e) of the Securities Exchange Act of 1934. These statements include those regarding the expectation of sequentially increasing operating cash flows in the third and fourth quarter, the value of ScanSoft shares, the maximization of value to stockholders and L&H creditors should the proposal be accepted and the performance of the speech and language business. These statements are based on ScanSoft's current expectations; estimates as to prospective events and circumstances that may or may not be in ScanSoft's control and as to which there can be no firm assurances given. These forward-looking statements are subject to risks and uncertainties and there can be no assurance that any of these forward-looking statements may prove to be correct and actual results may differ materially. These risks and uncertainties include, but are not limited to, the risks that the bankruptcy court may not approve the agreement, the company's ability to complete the underwritten public offering in a timely manner, potential volatility in ScanSoft's stock price, uncertainty in the market and market acceptance regarding L&H's disposition of ScanSoft common stock, and other risks detailed from time to time in ScanSoft's SEC reports. ScanSoft disclaims any intent or obligation to update these forward-looking statements.

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