Reciprocal License Agreement - Corel Corp. and Dragon Systems Inc.


                        RECIPROCAL LICENSE AGREEMENT

         This Agreement made as of the 25th day of January, 1998 by and between 
COREL CORPORATION ("COREL") having its principal place of business at 1600
Carling Avenue, Ottawa, Ontario K1Z 8R7 and DRAGON SYSTEMS, INC. ("DRAGON")
having its principal place of business at 320 Nevada Street, Newton, MA 02160.

BACKGROUND:

1.       DRAGON designs, manufactures and markets speech recognition software
among other things.

2.       COREL has developed and markets certain productivity software.

3.       DRAGON desires to license such productivity software for distribution
together with its speech recognition software and COREL is willing to grant
DRAGON a license to such productivity software for distribution together with
DRAGON's speech recognition software subject to the terms and conditions of this
Agreement.

NOW THEREFORE, in consideration of the mutual promises, covenants and
obligations contained herein, the parties agree as follows:

1.       INTERPRETATION

1.1      Definitions. As used herein:

         1.1.1        "Agreement" means this Corel Reciprocal License Agreement,
                      including any schedules and exhibits attached hereto.

         1.1.2        "Customer" means any Distributor or End User.

         1.1.3        "DRAGON Product" means any version of DRAGON's speech
                      recognition software product entitled "Naturally Speaking"
                      now or hereafter marketed and distributed by DRAGON.

         1.1.4        "Distributor" means any third party which acquires
                      possession of an Integrated DRAGON Product for
                      distribution to an End User, sub-distributor, or reseller.


         1.1.5        "Documentation" means the user manuals, handbooks and
                      other written materials relating to the COREL Software
                      provided by COREL to DRAGON hereunder.

         1.1.6        "Effective Date" means the date first set out above.

         1.1.7        "End User" means any third party licensed by COREL or any
                      of its subsidiaries to use the Software pursuant to the
                      terms of an End User License.

         1.1.8        "End User License" means COREL's End User License
                      Agreement as modified by COREL from time to time.

         1.1.9        "Integrated DRAGON Product" means any DRAGON Product that
                      incorporates or is bundled with the COREL Software.

         1.1.10       "OEM" means an original equipment manufacturer and refers
                      to hardware vendors that hard-bundle Integrated DRAGON
                      Products with computer hardware for resale to
                      sub-distributors, resellers or End Users. For clarity,
                      "hard-bundle" means that the software application must be
                      sold as part of the complete system being sold at the time
                      of its original sale and not merely as one among other
                      software applications from which the consumer may choose
                      to have included as part of the system (ie.
                      "soft-bundle").

         1.1.11       "Person" means any an individual, corporation,
                      partnership, a trust, an unincorporated organization, the
                      government of a country or any political subdivision
                      thereof, or any agency or department of any such
                      government, and the executors, administrators or other
                      legal representatives of an individual in such capacity.

         1.1.12       "Dragon Reciprocal License Agreement" shall have the
                      meaning set out in Section 6. 1.

         1.1.13       "COREL Software" means the object code version of the
                      computer software described in Schedule "A" hereto, along
                      with accompanying Documentation.

         1.1.14       "Term" means the period of time from the Effective Date
                      through to the conclusion of this Agreement as provided in
                      Section 12.1.

         1.1.15       "Trade-marks" means the trade names, trade-marks and logos
                       related to the Software.

2.       GRANT OF LICENSE

                                       -2-

2.1      License. Subject to the terms and conditions hereof, COREL hereby 
grants to DRAGON and DRAGON accepts from COREL a world-wide, non-exclusive,
non-transferable license to reproduce and distribute the COREL Software in
object code format incorporated in or bundled only as part of an Integrated
DRAGON Product. In addition to any other restrictions set out in this Agreement,
the foregoing license shall be subject to the bundling and distribution
restrictions set out in Schedule "A" hereto.

2.2      Distributors. DRAGON shall have the right to appoint Distributors and
sublicense to them the right to distribute the Integrated DRAGON Product;
provided that DRAGON shall ensure that any such distribution of the Integrated
DRAGON Product by its Distributors is in compliance with and in accordance with
the terms of this Agreement.

2.3      OEM. DRAGON shall have the right to appoint OEMs and sublicense to them
the right to reproduce distribute the English (U.S.) version of the Integrated
DRAGON Product in the United States and Canada only; provided that DRAGON shall
ensure that any such reproduction and distribution of the Integrated DRAGON
Product by OEMs is in compliance with and in accordance with the terms of this
Agreement and, in particular, shall be restricted to hard-bundled distribution
as described in Section 1.1.10. No version of the Integrated DRAGON Product
other than the English (U.S.) version may be distributed by an OEM without the
written approval of an authorized representative of COREL.

2.4      Trade-marks. Subject to the terms and conditions hereof, COREL hereby 
grants to DRAGON and DRAGON accepts from COREL, a world-wide, royalty-free,
non-exclusive license to use the Trade-marks solely in the form provided by
COREL to DRAGON and only in connection with the reproduction, manufacturing,
marketing and distribution of any Integrated DRAGON Product.

         2.4.1        Non-alteration. DRAGON agrees not to obstruct, remove,
                      interfere with, or in any way alter the Trade-marks.
                      DRAGON acknowledges and agrees that COREL retains all of
                      its right, title and interest in the Trade-marks, and all
                      use of the Trade-marks by DRAGON shall enure to the
                      benefit of COREL.

         2.4.2        Mark Policies and Standards. DRAGON shall display the
                      Trade-marks in accordance with COREL's guidelines for
                      using trade-marks as set out in Schedule "B" hereto or as
                      otherwise in effect from time to time and as provided to
                      DRAGON. Notwithstanding the foregoing, any change by COREL
                      to its trade-mark guidelines which affects DRAGON's usage
                      shall not apply retroactively to DRAGON's past usage which
                      conformed with the then current guidelines and COREL shall
                      permit DRAGON a reasonable period of time in which to
                      conform with the

                                       -3-

                      new guidelines. COREL retains the right to specify and
                      approve the quality and standards of all materials on
                      which the Trade-marks are displayed and to inspect from
                      time to time samples of such materials. Failure of DRAGON
                      to adhere to such standards of quality shall be grounds
                      for COREL to terminate DRAGON's rights to use such
                      Trade-marks.

         2.4.3        Validity and Enforceability of Marks. DRAGON shall not at
                      any time during or after this Agreement assert any claims
                      or interest in or to anything which may adversely affect
                      the validity or enforceability of any of the Trade-marks.
                      DRAGON shall not register, seek to register, or cause to
                      be registered any of the Trade-marks without COREL's prior
                      written consent.

         2.4.4        Infringement and Further Assurances. DRAGON agrees to
                      promptly notify COREL of any claim, action, suit,
                      proceeding, or litigation that is instituted by any Person
                      against it involving the Trade-marks. DRAGON agrees to
                      report all infringement or improper or unauthorized use of
                      the Trade-marks which come to the attention of DRAGON, and
                      to reasonably assist COREL in protecting same, but DRAGON
                      acknowledges and agrees that only COREL shall have the
                      right to bring any action, claim or suit in connection
                      with any such infringement. DRAGON agrees to execute all
                      reasonable documents and further assurances required by
                      COREL to register or protect COREL's rights in the
                      Trade-marks.

         2.4.5        Term. The license to use the Trade-marks herein shall be
                      contemporaneous and coterminous with this Agreement and is
                      granted solely for the purposes of this Agreement. Subject
                      to DRAGON's right to sell off inventory of DRAGON Product
                      in which the COREL Software is incorporated as set out in
                      Section 12.1.1, if this Agreement is terminated or is
                      assigned otherwise than as is provided herein, the rights
                      to use the Trademarks granted herein shall immediately end
                      and be of no further force or effect and DRAGON shall not
                      thereafter use, advertise or display any name, trademark,
                      trade name, designation or logo which is, or any part of
                      which is, to any extent similar to, or confusing with any
                      of the Trade-marks.

3.       OWNERSHIP

3.1      COREL Software. Except for the rights and licenses granted to DRAGON 
under this Agreement, COREL shall retain all right, title and interest,
including intellectual property rights in the COREL Software.


                                       -4-

3.2      Proprietary Rights Notices. DRAGON agrees not to obstruct, remove, 
interfere with, or in any way alter any proprietary rights notices that appear
in the COREL Software and to reproduce any such notices in all copies of the
COREL Software that are bundled with Integrated DRAGON Products.

4.       RESPONSIBILITIES OF DRAGON

4.1      End User License. DRAGON shall ensure that each copy of the COREL
Software is distributed with a copy of the End User License. DRAGON shall not
alter the End User License.

4.2      Restrictions. DRAGON shall reproduce the COREL Software only in the
form provided by COREL and shall not alter the COREL Software or any part
thereof. DRAGON shall not reverse engineer, decompile or disassemble the COREL
Software and agrees not to permit anyone else to do so.

4.3      Stand Alone Distribution. DRAGON shall not, nor shall DRAGON permit
any of its Distributors, to distribute the COREL Software other than
incorporated into or bundled as part of an Integrated DRAGON Product.

4.4      Support for Customers. DRAGON shall be solely responsible for
providing maintenance and technical support to End Users regarding the DRAGON
Software portion of Integrated DRAGON Product distributed through the retail
sales channel. Such maintenance and support shall be provided by DRAGON in
accordance with DRAGON's standard policies and procedures as they may be changed
by DRAGON from time to time. DRAGON shall have no maintenance or technical
support obligation regarding the DRAGON Software portion of the Integrated COREL
Product or the Integrated DRAGON Product distributed through the OEM sales
channel; provided that DRAGON shall provide COREL and OEMs with second-level
technical support in order to assist OEM in providing technical support to End
Users of Integrated DRAGON Product distributed through the OEM sales channel.

4.5      Packaging and Marketing Materials. DRAGON shall be solely responsible 
for the design, production and reproduction of all packaging and marketing
material for the Integrated DRAGON Products. Any packaging or marketing
materials prepared by or for DRAGON shall advertise the COREL Software as being
available only as a bundled product within an Integrated DRAGON Product, shall
quote only the bundled price, without disclosing a separate price for the COREL
Software, unless required by law. In addition, the front panel of any packaging
for the Integrated DRAGON Product shall prominently display the Trade-marks of
COREL.

4.6      Joint-Marketing Efforts. The parties shall cooperate in joint-marketing
opportunities regarding the Integrated DRAGON Products.


                                       -5-

4.7      Registered User Base. DRAGON shall provide COREL with access to its
database of registered End Users of DRAGON Products for the purpose of a mailing
for the marketing of any COREL products which are not substantially competitive
to the core functionality of any speech recognition product marketed by DRAGON.
For clarity, the COREL Software and upgrades thereto shall not be considered to
be competitive to the Integrated DRAGON Product. Such access shall be indirect
only, through DRAGON or it's third party mailing house. COREL shall bear all
costs associated with producing the insert and mailing such insert to DRAGON's
registered users, except for the access fee, if any, generally charged by DRAGON
to third parties and shall be restricted to one mailing per calendar quarter.
COREL shall not be entitled to use the information relating to DRAGON's
registered End Users for any other purpose. DRAGON shall be entitled to approve
all materials sent to its registered user base; such approval not to be
unreasonably withheld.

4.8      Compliance with Laws. DRAGON shall comply with all laws, rules, and
regulations existing with respect to the Integrated DRAGON Product and the
performance by DRAGON of its obligations hereunder existing in the jurisdictions
where DRAGON carries on activities under this Agreement and where the Integrated
DRAGON Product is resold or distributed from time to time. DRAGON shall not
export the Integrated DRAGON Product unless such export complies with any
applicable export laws and regulations as they apply to the Integrated DRAGON
Product. In particular, DRAGON shall not export or re-export the Integrated
DRAGON Product, either directly or indirectly, to countries which the United
States has prohibited export, including, but not limited to Cuba, Iran, Iraq,
Libya and North Korea. DRAGON shall impose the same obligation on its
Distributors.

4.9      Quality Assurance. DRAGON agrees to implement and maintain quality
assurance programs in keeping with industry standards and practices with respect
to its reproduction and distribution of the Integrated DRAGON Products.

5.       RESPONSIBILITIES OF COREL

5.1      Gold Masters. To enable DRAGON to exercise the licenses granted
under Section 2.1 hereof, COREL shall deliver the gold masters of the media for
the COREL Software to DRAGON in accordance with the delivery schedule set out in
Schedule "A" hereto.

5.2      Support for Customers. COREL shall be responsible for providing
maintenance and technical support to End Users of the COREL Software portion of
Integrated DRAGON Product distributed through the retail sales channel. All such
support shall be provided in accordance with COREL's standard policies and
procedures as they may be changed by COREL from time to time.

5.3      Support to DRAGON. During the term of this Agreement, COREL shall
provide free of charge bug fixes, and reasonable telephone and facsimile support
in respect of

                                       -6-

the COREL Software to assist DRAGON in the implementation of the COREL Software
for DRAGON's purposes.

6.       CONSIDERATION

6.1      Payment. In consideration of the grant to DRAGON of the licenses to
the COREL Software hereunder, DRAGON agrees to pay COREL the amounts set out in
Schedule "C" hereto ("Royalty Schedule"). Except as set out in the Royalty
Schedule, DRAGON shall not be obligated to pay any license fee, royalties or
other payments to COREL in consideration of the licenses to the COREL Software
granted hereunder.

6.2      Reciprocal License Agreement. As further consideration of the grant
to DRAGON of the licenses to the COREL Software hereunder, DRAGON has entered
into a software license and distribution agreement which is attached hereto as
Exhibit 1 ("Dragon Reciprocal License Agreement") under which DRAGON has granted
to COREL a license to distribute certain versions of its speech recognition
software together with certain of COREL's productivity software products.

6.3      Taxes. DRAGON shall pay, in addition to all amounts specified in
this Agreement, all duties and foreign, federal, state, county, local income
taxes, value added taxes and other taxes, or amounts in lieu thereof, and
interest thereon, paid or payable or collectible by COREL (exclusive of taxes
based on COREL's net income) levied or based on amounts chargeable to or payable
by DRAGON pursuant to this Agreement. In the event any payments required to be
made by DRAGON under this Agreement are subject to applicable withholding tax
that DRAGON is required to deduct from such payments, DRAGON shall promptly
deliver to COREL receipts issued by appropriate government authorities for all
such taxes withheld or paid by DRAGON and DRAGON shall fully and promptly
cooperate with COREL to provide such information and records as COREL may
require in connection with any application by COREL to obtain available tax
credits.

6.4      Reports. DRAGON will provide to COREL quarterly reports within
forty (45) days of the end of each quarter specifying the number of
reproductions of the Integrated DRAGON Products released for distribution by
DRAGON and its Distributors. Such reports shall include a breakdown of the
number of Integrated DRAGON Products by version, language and sales channel (ie.
retail or OEM).

6.5      Audits. DRAGON agrees to maintain complete and accurate records
relating to its promotion, marketing, use and distribution of Integrated DRAGON
Product. COREL shall have the right no more often than once per twelve month
period to appoint an independent third party to examine DRAGON's relevant books
and records in order to verify DRAGON's compliance with the terms of this
Agreement. Any such audit shall be at the expense of COREL unless the audit
reveals a non-compliance by DRAGON

                                       -7-

with the terms of this Agreement of greater than five percent (5%) in which case
the audit shall be at the expense of DRAGON.

7.       WARRANTIES, REPRESENTATIONS AND COVENANTS

         COREL warrants, represents and covenants to DRAGON as follows and
acknowledges that DRAGON is relying on such warranties, representations and
covenants in entering into this Agreement and the transactions contemplated in
this Agreement:

7.1      Storage Medium. The COREL Software storage medium for the golden
masters is warranted against defects in workmanship and materials for a period
of ninety (90) days from the date it is delivered to Distributor. In the event
that the storage medium is defective COREL will replace it free of charge with
another copy of the COREL Software. Replacement of the storage medium shall be
COREL's sole obligation and Distributor's sole remedy for a breach of the
warranty in this section.

7.2      Limitation. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, THE COREL
SOFTWARE AND STORAGE MEDIA ARE PROVIDED AND LICENSED "AS IS" AND THERE ARE NO
WARRANTIES, REPRESENTATIONS OR CONDITIONS, EXPRESS OR IMPLIED, WRITTEN OR ORAL,
ARISING BY STATUTE, OPERATION OF LAW OR OTHERWISE, REGARDING THEM, OR ANY OTHER
PRODUCT OR SERVICE PROVIDED HEREUNDER OR IN CONNECTION HEREWITH. COREL DISCLAIMS
ANY IMPLIED WARRANTY OR CONDITION OF MERCHANTABLE QUALITY, MERCHANTABILITY,
DURABILITY OR FITNESS FOR A PARTICULAR PURPOSE. NO REPRESENTATION OR OTHER
AFFIRMATION OF FACT, INCLUDING BUT NOT LIMITED TO STATEMENTS REGARDING
PERFORMANCE OF THE COREL SOFTWARE OR STORAGE MEDIA, WHICH IS NOT CONTAINED IN
THIS AGREEMENT, SHALL BE DEEMED TO BE A WARRANTY BY COREL. THERE IS NO IMPLIED
WARRANTY OF NONINFRINGEMENT; THE SOLE REMEDY FOR INFRINGEMENT IS PROVIDED IN
SECTION 8.

7.3      No Variation. NO AGREEMENTS VARYING OR EXTENDING THE FOREGOING
WARRANTIES OR LIMITATIONS WILL BE BINDING ON EITHER PARTY UNLESS IN WRITING AND
SIGNED BY AN AUTHORIZED REPRESENTATIVE OF BOTH PARTIES.

7.4      DRAGON not to Bind. DRAGON will give and make no warranties or
representations on behalf of COREL as to quality, merchantable quality, fitness
for a particular use or purpose or any other features of the COREL Software; and
DRAGON shall not incur any liabilities, obligations or commitments on behalf of
COREL, including, without limitation, a variation of the End User License.


                                       -8-

          Confidential Materials omitted and filed separately with the
        Securities and Exchange Commission. Asterisks denote omissions.

8.       INFRINGEMENT

8.1      Defense and Settlement. If notified promptly in writing of any
action (and all prior related claims) brought against DRAGON alleging that
DRAGON's distribution or other disposition of the COREL Software under this
Agreement infringes any valid Canadian or United States copyright, COREL will
defend that action at its expense and will pay the costs and damages awarded
against DRAGON in the action, provided: that COREL shall have sole control of
the defense of any such action and all negotiations for its settlement or
compromise; that DRAGON, and where applicable, those for whom DRAGON is in law
responsible, cooperate fully with COREL in its defense of the action; and that
COREL shall have no liability if the action results from the use of the COREL
Software for purposes or in an environment for which it was not designed or
modification of the COREL Software by anyone other than COREL.

8.2      Options Where Claim. If a final injunction is obtained in such
action against DRAGON's resale of the COREL Software or if in COREL's opinion
the COREL Software is likely to become the subject of a claim of infringement,
COREL shall at its sole option and expense either procure for DRAGON the right
to resell the COREL Software or replace or modify the COREL Software so that it
becomes non-infringing or terminate this Agreement. In the event COREL
terminates this Agreement pursuant to this Section 8.2, DRAGON shall be entitled
to terminate the Reciprocal License Agreement.

9.       LIMITATION OF LIABILITY

9.1      Limitation. EXCEPT IN CASE OF A CLAIM FOR WHICH COREL IS OBLIGATED
TO DEFEND AND SETTLE PURSUANT TO SECTION 8.1 AND THE INDEMNITY PROVIDED BY
DRAGON PURSUANT TO SECTION 10.1, IN NO EVENT WILL EITHER PARTY BE LIABLE FOR
INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES
WHATSOEVER RESULTING FROM LOSS OF USE, DATA OR PROFITS, ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR THE USE OR PERFORMANCE OF THE COREL SOFTWARE
OR STORAGE MEDIA, OR OTHER COREL PROVIDED MATERIAL WHETHER IN AN ACTION IN
CONTRACT OR TORT INCLUDING BUT NOT LIMITED TO NEGLIGENCE AND WHETHER OR NOT SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR SUCH DAMAGES ARE
FORESEEABLE.

9.2      Aggregate Liability. Other than as provided in Section 8, COREL's
aggregate liability to DRAGON whether for negligence, breach of contract,
misrepresentation or otherwise shall in respect of a single occurrence or a
series of occurrences in no circumstances exceed the amount of [**].

                                       -9-

10.      DRAGON INDEMNIFICATION

10.1     Indemnification. Except as set forth in Section 8, DRAGON agrees to 
indemnify and save COREL harmless from and against any and all claims, demands,
costs and liabilities (including all reasonable legal and attorney fees and
expenses) of any kind whatsoever, arising directly or indirectly: (i) out of
claims by DRAGON's Customers relating to DRAGON Products; (ii) out of DRAGON's,
or its authorized Distributor's reproductions of the COREL Software; or (iii)
out of DRAGON's performance or non-performance of its obligations hereunder.

11.      CONFIDENTIALITY

11.1     Proprietary Information. All information (regardless of its form,
manifestation or how it is known to the other party) concerning either party to
this Agreement, including without limitation the source code for the COREL
Software, technology, data, business, financial affairs, and operations of each
respective party hereto, is hereby deemed to be for the purposes of this Section
11 as confidential and proprietary to each such respective party ("Confidential
Information"). Confidential Information shall not include information defined as
Confidential Information above which the receiving party can establish before a
court of competent jurisdiction: (i) was in the possession of the receiving
party at the time of disclosure; (ii) prior to or after the time of disclosure
becomes part of the public domain without the act or omission of the party to
whom it was disclosed; (iii) is disclosed to the receiving party by a third
party under no legal obligation to maintain the confidentiality of such
information; or (iv) was independently developed by the receiving party. All
such Confidential Information shall be treated as strictly confidential by the
receiving party and its employees, contractors and agents and shall not be
disclosed by the receiving party without the disclosing party's prior written
consent. However, the receiving party may disclose Confidential Information of
the disclosing party in accordance with judicial or other governmental order,
provided the receiving party shall give the disclosing party reasonable notice
prior to such disclosure and shall comply with any applicable protective order
or equivalent.

11.2     Treatment of Confidential Information. Neither party shall in any
way duplicate all or any part of the other party's Confidential Information,
except in accordance with the terms and conditions of this Agreement. Each party
shall have an appropriate agreement with each of its employees, contractors and
agents having access to the other party's Confidential Information sufficient to
enable that party to comply with all the terms of this Agreement. Each party
agrees to protect the other's Confidential Information with a fiduciary duty and
shall adopt or maintain procedures to protect such Confidential Information
commensurate with such duty.

11.3     Further Treatment of Proprietary Information. Each party agrees
not to disclose any such Confidential Information without the prior written
consent of the other, to anyone other than that party's employees, contractors
and agents who have a need to

                                      -10-

know same to carry out the rights granted hereunder. Each party shall use its
reasonable efforts to protect all such Confidential Information from material
harm, damage, theft, tampering, sabotage, interference or unauthorized use,
during the term of this Agreement and during such time as such Confidential
Information remains in the possession of the other party.

11.4     Action to Protect. Each party shall promptly report to the other
any actual or suspected violation of the terms of this Section 11, and shall
take all reasonable steps to prevent, control or remedy such violation.

11.5     Equitable Relief. In recognition of the unique and proprietary
nature of the information disclosed by the parties, it is agreed that each
party's remedies for a breach by the other of its obligations under this Section
11 shall be inadequate and the disclosing party shall, in the event of such
breach and be entitled to seek equitable relief, including without limitation,
injunctive relief and specific performance, in addition to any other remedies
provided hereunder or available at law.

12.      TERMINATION

12.1     Term. Subject to Section 6.1, this Agreement shall commence on the
Effective Date and, subject to Section 8.2, shall continue for a period of two
(2) years unless it is terminated in accordance with the provisions of this
Section. Unless either party notifies the other a minimum of sixty (60) days
prior to the end of the Term of this Agreement or any renewal Term thereof, it
shall automatically renew for successive one (1) year terms thereafter. This
Agreement may be terminated by either party in the event of any material breach
by the other party hereto which continues after thirty (30) days written notice
of said breach (which notice shall, in reasonable detail, specify the nature of
the breach) by the non-defaulting party to the defaulting party.

         12.1.1       Upon termination of this Agreement the licenses granted to
                      DRAGON pursuant to Section 2 shall terminate immediately
                      and DRAGON shall immediately discontinue distribution of
                      and return or destroy Gold Masters of the COREL Software
                      within its possession or control within thirty (30) days
                      of termination. Notwithstanding the foregoing, DRAGON
                      shall be entitled to distribute for a period of six (6)
                      months after the date of termination all inventory of
                      Integrated DRAGON Products existing at the date of
                      termination and DRAGON may retain such copies of the COREL
                      Software as are required to maintain and support its End
                      Users.

No termination of this Agreement by either DRAGON or COREL shall affect
sublicenses of the COREL Software granted to End Users under the terms of the
End User License.

                                      -11-

13.      NOTICES

13.1     Notices. Any notice or other communication to the parties shall be
sent to the attention of the persons and at the addresses set out below, or such
other persons and/or places as they may from time to time specify by notice in
writing to the other party. Any such notice or other communication shall be in
writing, and shall be given by registered mail, facsimile or telex and shall be
deemed to have been given when such notice should have reached the addressee in
the ordinary course, provided there is no strike by postal employees in effect
or other circumstances delaying mail delivery, in which case notice shall be
delivered or given by facsimile or telex.

In the case of COREL:                       In the case of DRAGON:

Corel Corporation                           Dragon Systems, Inc.
1600 Carling Ave.                           320 Nevada St.
Ottawa, ON                                  Newton, MA
Canada K1Z 8R7                              U.S.A. 02160
Fax: 613-725-2691                           Fax: 617-332-9575

Attention:  Carey Stanton                   Attention:    Janet Baker
            Vice-President of                             President
            Business Development

CC:      Corporate Counsel                  CC:      Hale & Dorr
         Legal Department                            60 State Street
                                                     Boston, MA 02109

                                            Attention:   Michael Bevilacqua

14.      GENERAL

14.1     Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the Province of Ontario, Canada, excluding that
body of law applicable to choice of law and excluding the United Nations
Convention on Contracts for the International Sale of Goods and any legislation
implementing such Convention, if otherwise applicable.

14.2     Survival. The provisions of sections 2.4.5, 3, 4.4, 5.2, 7, 8, 9,
10 and 11 shall survive any termination of this Agreement until expressly waived
in writing by the party for whom they are of benefit or terminated by a further
written agreement of the parties.

14.3     Enforceability. If any provision of this Agreement is declared by
a court of competent jurisdiction to be invalid, illegal or unenforceable, such
provision or part thereof which is necessary to render the provision valid,
legal and enforceable, shall be

                                      -12-

severed from the agreement and the other provisions and the remaining part
thereof of that provision shall remain in full force and effect.

14.4     Further Assurances. The parties agree to do all such things and to
execute such further documents as may reasonably be required to give full effect
to this Agreement.

14.5     Entire Agreement. This Agreement, together with the Reciprocal
License Agreement, constitutes the entire agreement between the parties
concerning the subject matter hereof and cancels and supersedes any prior
understandings and agreements between the parties hereto with respect thereto.
There are no representations, warranties, terms, conditions, undertakings or
collateral agreements, expressed, implied or statutory, between the parties
other than as expressly set forth in this Agreement or the Reciprocal License
Agreement.

14.6     Remedies. The remedies expressly stated in this Agreement shall be
in addition to and not in substitution for those generally available at law or
in equity.

14.7     Waiver. No waiver or any provision of this agreement by a party
shall be enforceable against that party unless it is in writing and signed by an
authorized officer of that party.

14.8     Assignment. Neither party may assign this Agreement or the rights
granted hereunder without the prior written consent of the other which shall not
be unreasonably withheld; provided that either may assign this Agreement to a
purchaser of all or substantially all of the assets related to the product line
which utilizes the COREL Software or to a successor corporation in the event of
a merger or other reorganization in which it is not the surviving entity and
provided further that either party may assign all or any part of its rights
under this Agreement to a wholly-owned subsidiary of such party.

14.9     Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed to be an original and all of
which together shall constitute but one and the same instrument.

14.10    Publicity. Upon the Effective Date or shortly thereafter, the
parties shall co-operate to make a public announcement about the execution of
this Agreement. Each party must approve the final form and content of that
announcement. After the initial announcement is made under this Section 14.11,
COREL and DRAGON shall communicate and co-operate with respect to advertising
and publicity regarding this Agreement and their relationship, and, subject to
section 2.3, shall obtain the consent of the other party before publishing or
releasing any public statements or announcements relating to this Agreement,
other than advertising and marketing materials.



                                      -13-

14.11    Independent Contractors. The parties to this Agreement are independent 
contractors. No relationship of principal to agent, master to servant, employer
to employee or franchisor to franchisee is established hereby between the
parties. Neither party has the authority to bind the other or incur any
obligation on its behalf.

14.12    No Benefit No Director, Officer or employee of Corel Corporation
(and/or its subsidiaries and affiliates) shall be admitted to any share or part
of this Agreement or to any benefit arising therefrom.

14.13    Purpose of Agreement. This Agreement, together with the Dragon
Reciprocal Agreement, enables COREL, royalty-free, to license and distribute
DRAGON's current and next major version of DNS Personal Edition incorporated
into or bundled with its current and next major version of Corel WordPerfect
Suite, including its Legal Edition of the Suite. DRAGON may, also on a
royalty-free basis, license and distribute COREL's previous version and current
version of Corel WordPerfect Suite incorporated into or bundled with DRAGON's
speech recognition products. Both parties will engage in a variety of joint
marketing activities. Since it is understood that integrated products
incorporating or bundled with the current version of DRAGON's DNS software are
more salable than those incorporating or bundled with the previous version of
Corel WordPerfect Suite, COREL agrees further to actively promote DRAGON's
visibility with its products, and to engage in additional activities
facilitating DRAGON's activities to realize timely revenues through the
licensing and distribution of DRAGON products and product upgrades to COREL's
target market and customer base. These additional activities, actively under
discussion and therefor not detailed in the agreements here, are essential to
the success of DRAGON, as well as to COREL.

Also included in these agreements are terms and conditions under which each of
the parties may, for royalty, sublicense specific integrated products to
hardware OEMs for purchasers of new equipment. Additionally, certain other
designated COREL products incorporating Corel WordPerfect Suite may be licensed
and distributed by DRAGON for fees to be determined by the parties. These
include, but are not limited to COREL's 32-bit Legal Edition and 32-bit Medical
Edition Suites.

                            [signature page follows]



                                      -14-

         IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date first above written.


                                            COREL CORPORATION

                                            PER: \s\ Michael O'Reilly
                                                ---------------------------
                                                     Name:
                                                     Title:



                                            PER: \s\ Mitch Desrochers
                                                ---------------------------
                                                     Name:
                                                     Title:



                                            DRAGON SYSTEMS, INC.

                                            PER: \s\ Janet M. Baker
                                                ---------------------------
                                                     Name:  Janet M. Baker
                                                     Title: President



                                      -15-

                                  SCHEDULE "A"

                                 COREL SOFTWARE


1.       Corel WordPerfect Suite 7 OEM (object code) ("WPS7")
         DLL to enable integration of WPS7 with DRAGON Product (object code)
         ("DLL")

         Platforms:   Windows 95 & Windows NT4.0

         Languages:        English (US)
                           English (UK)
                           French
                           Italian
                           German
                           Spanish

         Estimated Delivery Date:  COREL shall deliver a gold master of WPS7
                                   together with DLL to Dragon within four (4)
                                   weeks of the Effective Date.

         Bundled with:     DRAGON may bundle WPS7 together with DLL with any
                           version of DRAGON Product

2.       Corel WordPerfect Suite 8 OEM (object code) ("WPS8") (object code)
         DLL to enable integration of WPS8 with DRAGON Product (object code) 
         ("DLL")

         Platforms:   Windows 95 & Windows NT4.0

         Languages:        English (US)
                           English (UK)
                           French
                           Italian
                           German
                           Spanish

         Estimated Delivery Date:           February/98

Bundled with:     DRAGON may bundle WPS8 with any version of DRAGON Product

Distribution
Restriction:      DRAGON shall not be permitted to distribute WPS8 with the 
                  Deluxe version of DRAGON Product until thirty (30) days
                  following the first


                                      -16-

                      commercial shipment of the relevant language version of
                      Corel WordPerfect Suite 9 by Corel.

                      DRAGON shall not be permitted to distribute WPS8 with the
                      Preferred version of DRAGON Product until sixty (60) days
                      following the first commercial shipment of the relevant
                      language version of Corel WordPerfect Suite 9 by Corel.

                      DRAGON shall not be permitted to distribute WPS8 with the
                      Personal version of DRAGON Product until ninety (90) days
                      following the first commercial shipment of the relevant
                      language version of Corel WordPerfect Suite 9 by Corel.

                      DRAGON shall not be permitted to distribute the English
                      (US) language OEM version of WPS8 with the English (US)
                      language version of DRAGON Product until ninety (90) days
                      following the first commercial shipment of Corel
                      WordPerfect Suite 9 by Corel.




                                      -17-

                                  SCHEDULE "B"

                           TRADE-MARK USAGE GUIDELINES





                                 [see attached]




                                      -18-

                        GUIDELINES FOR USING COREL LOGOS

Corel logos or trademarks in stylized form (the "Marks") are valuable assets and
may be used publicly with permission only from Corel. In order to protect the
value of these assets, Corel must maintain control over the manner in which the
Marks are used. Corel has established the following set of guidelines for
properly using the Marks. If these guidelines are not followed, Corel may
terminate your right to use the Marks.

-        Upon request, COREL will provide authorized users with camera ready
         artwork of the Marks. This artwork may not be altered in any way.

-        You may not display the Marks on packaging, documentation, collateral
         or advertising in a manner which suggests that your product is a COREL
         product, or in a manner which suggests that COREL or any of the Marks
         are a part of your product name.

-        When displayed, the Marks cannot be larger than or more prominent than
         your product name, trade-mark, logo or trade name.

-        When displayed, the Marks must stand alone. A minimum amount of empty
         space must be left between the Marks and any other object such as type,
         photography, borders, edges, etc. The required border of empty space
         around the Marks must be 1/2x wide, where x is the height of the Mark.

-        You may not combine the Marks with any other feature including, but not
         limited to, other logos, words, graphics, photos, slogans, numbers,
         design features, or symbols.

-        [Strike-through Text]. \s\ MOR  \s\ JB


COREL LOGOS INCLUDE, BUT ARE NOT LIMITED TO, THE FOLLOWING:

1.       COREL LOGO

The word COREL is used in association with Corel's stylized "C" in two different
forms as follows:

COREL  (Form A)                                      COREL  (Form B)

The logo is approved for use in black or colour. If used in colour, the C must
be reproduced in red (PMS 186) and the word COREL must be reproduced in blue
(PMS 293). The logo should be used only in the forms depicted above. The logo
should be identified with the (R) symbol in the following countries:


                                      -19-

         Canada, Germany, United Kingdom, United States, Austria, Benelux,
         France, Columbia, Finland, Poland, Norway, South Korea, Switzerland and
         Taiwan.

The logo should be identified with the symbol (TM) in all other countries. The
(R) or (TM) symbol must appear at the top-right comer of the graphic. When using
the Marks in some countries where the symbol (TM) should be used as well as
other countries where the symbol (R) should be used, the symbol (TM) may be used
in all cases.

2.       CORELDRAW! LOGO

This logo is used in the following design form:

                                   CORELDRAW!

The logo is approved for use in black or with a coloured line in PMS Magenta.

The logo should be identified with the (R) symbol in Canada only.

The logo should be identified with the (TM) symbol in all other countries.

When used in text, the trade-mark must be depicted in the form CorelDRAW.

3.       BALLOON DESIGN LOGO

This logo is used in the following form:

The logo should be identified with the (TM) symbol at the top right corner of
the graphic in all countries. Note that either the CorelDRAW logo or the Corel
trademark may be used on the balloon, provided properly identified.

4.       COREL VENTURA LOGO

This logo is used in the following form:

                                  COREL VENTURA

The logo should be identified with the TM symbol at the top right comer of the
graphic in all countries.

5.       COREL PROFESSIONAL CD-ROM PHOTOS LOGO

This logo is used in the following form:


                                      -20-

                                      COREL

The logo should be identified with the (TM) symbol at the top right comer of the
graphic in all countries.

TRADEMARK NOTICE

All products sold and all advertisements or other printed materials distributed
displaying any of the Marks must, in an appropriate place, bear the following
notice:

                               IS A TRADE-MARK OF
              COREL CORPORATION OR COREL CORPORATION LIMITED, USED
                                 UNDER LICENSE.

Corel reserves the right to review your use of the Marks. Any specimens or
examples which are required to be delivered to Corel under the terms of your
license should be sent to one of the following:

                 COREL CORPORATION
                 THE COREL BUILDING
                 1600 CARLING AVENUE
                 OTTAWA, ONTARIO
                 K1Z 8R7

                 ATTENTION: PUBLISHING PROGRAMS (RELATING TO BOOKS/MAGAZINES)
                 ATTENTION: EDUCATION DEPARTMENT (TRAINING MATERIALS)
                 ATTENTION: MEDIA RELATIONS (ARTICLES/REVIEWS)
                 ATTENTION: LEGAL DEPARTMENT (IF NONE OF THE ABOVE APPLIES)

Corel reserves the right to conduct spot checks and will periodically request
samples. Corel may also conduct spot checks in the marketplace of advertising
and related printed materials. Failure to comply with standards of quality
specified by Corel, failure to adhere to these guidelines or failure to comply
with a request for samples is grounds for termination of your license.



                                      -21-

          Confidential Materials omitted and filed separately with the
        Securities and Exchange Commission. Asterisks denote omissions.


                                   SCHEDULE"C"

                                ROYALTY SCHEDULE

1.       Retail Sales

         DRAGON shall pay to COREL a royalty of [**] per unit on sales of
Integrated DRAGON Product in which WPS8 is incorporated or bundled sold through
the retail sales channel.

2.       OEM Sales

         DRAGON shall pay COREL the following per unit royalties on sales of
Integrated DRAGON Product sold through the OEM sales channel. Only the English
(U.S.) version of the Integrated DRAGON Product may be sold through the OEM
sales channel and is restricted to distribution in the United States and Canada.



          UNITS/MONTH*           INTEGRATED DRAGON          INTEGRATED DRAGON
                                 PRODUCT IN WHICH WPS8 IS   PRODUCT IN WHICH WPS7 IS
                                 INCORPORATED**             INCORPORATED**
-----------------------------    -------------------------  -------------------------
                                                      
[**]                             [**]                       [**]

[**]                             [**]                       [**]

[**]                             [**]                       [**]

[**]                             [**]                       [**]

[**]                             [**]                       [**]



*The unit amounts refer to the average number of units distributed by each OEM
distributer in any particular month. They do not refer to total OEM sales by
DRAGON.

**May only be distributed on PCs with RAM equal to or greater than 48MB and that
use DRAGON certified audio channels.

All dollar amounts are in U.S. currency.

3.       The foregoing amounts shall be paid by DRAGON to COREL on a quarterly 
basis within [**] days of the end of each quarter.


                                      -22-

                                ADDENDUM NO.1 TO
                     THE COREL RECIPROCAL LICENSE AGREEMENT

         THIS ADDENDUM made as of the 17th day of September, 1998, by and
between Corel Corporation and Corel Corporation Limited (collectively "COREL")
and Dragon Systems, Inc. ("DRAGON").

BACKGROUND:

1.       COREL and DRAGON have entered into the Corel Reciprocal License
         Agreement made as of the 25th day of January, 1998 ("License
         Agreement"), under which COREL granted to DRAGON a license to its Corel
         WordPerfect software product.

2.       COREL and Dragon wish to amend the License Agreement as set out below.

         NOW THEREFORE, in consideration of the mutual promises, covenants and
obligations contained herein, the parties agree as follows:

1.       AGREEMENT TERMS

1.1      Except as specifically amended in this Addendum, the terms and
         conditions of the License Agreement shall continue in full force and
         effect and govern this Addendum as if repeated herein in full.

2.       SCHEDULE "A" - COREL SOFTWARE

2.1      Schedule "A" to the License Agreement shall be deleted and replaced by
         Schedule "A-1" attached hereto.

3.       SCHEDULE "C"- ROYALTY SCHEDULE

3.1      The pricing matrix for Integrated DRAGON Product sold through the OEM
         sales channel as set out in Schedule "C" shall be deleted and replaced
         with the following:



                                      -23-

          Confidential Materials omitted and filed separately with the
         Securities and Exchange Commission. Asterisks denote omissions.




       UNITS/MONTH         INTEGRATED DRAGON PRODUCT
                           IN WHICH WPS8 IS INCORPORATED
------------------------   -----------------------------
                         
          [**]                        [**]

          [**]                        [**]

          [**]                        [**]

          [**]                        [**]

          [**]                        [**]



Note:    Prices are for the U.S. and Canada only

4.       SUPPORT

4.1      Section 5.2 to the License Agreement shall be amended by adding the
following:

         "Notwithstanding the foregoing, COREL shall have no obligation to
         provide maintenance or technical support to End Users of the COREL
         Software products "Corel PrintHouse Magic" or "Corel WEB.DESIGNER"."

4.2      Section 5.3 to the License Agreement shall be amended by adding the
following:

         "Notwithstanding the foregoing, COREL shall have no obligation to
         provide any support to DRAGON, including those items listed above, for
         the COREL Software products "Corel PrintHouse Magic" and "Corel
         WEB.DESIGNER"."

5.       REGISTERED USER BASE

5.1      Dual Registration. The following shall be added to Section 4.7 of
the License Agreement:

         "Notwithstanding the foregoing, DRAGON agrees that it shall institute a
         process whereby End Users of the Integrated DRAGON Product may elect to
         register as users of the COREL Software at the same time that they
         register as users of the DRAGON Product. Where an End User elects to
         register as a user of the COREL Software, such user information shall
         be provided to COREL by DRAGON. COREL agrees that it shall comply with
         all laws regarding the use of the registered user names and shall
         defend or settle, and indemnify DRAGON from


                                      -24-

         any claim, action or demand arising from COREL's use of the registered
         names. COREL also agrees that it shall not use the register user
         information that it receives from DRAGON hereunder for the purposes of
         marketing products that are competitive with the DRAGON Software."

6.       EFFECTIVE DATE

6.1      This Addendum shall be effective as of the first date set out above.

         IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date first above written.

                                        COREL CORPORATION

                                        PER: \s\ Michael P. O'Reilly
                                             ----------------------------
                                                 Name: Michael P. O'Reilly
                                                 Title: Vice-President  Finance
                                                        C.F.O. and Treasurer

                                        PER: \s\ Mitch Desrochers
                                             ----------------------------
                                        Name: Mitch Desrochers
                                                 Title:   Controller

                                        COREL CORPORATION LIMITED

                                        PER: \s\ Anthony O Dowd
                                             ----------------------------
                                        Name: Anthony O Dowd
                                        Title:   General Mgr.


                                        DRAGON SYSTEMS, INC.

                                        PER: \s\ John Shagoury
                                             ----------------------------
                                         Name: John Shagoury
                                         Title    C.O.O.