THIRD AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
This
THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (the “
Agreement ”) is made as of January 29, 2009 by and
among Nuance Communications, Inc., a corporation organized and
existing under the laws of the State of Delaware (the “
Company ”), Warburg Pincus Private Equity VIII, L.P.,
Warburg Pincus Netherlands Private Equity VIII C.V. I, and
WP-WPVIII Investors, L.P. (collectively, the “ WP VIII
Purchasers ”), and Warburg Pincus Private Equity X, L.P.
and Warburg Pincus X Partners, L.P. (collectively, the “
WP X Purchasers ” and together with the WP VIII
Purchasers, the “ Purchasers ”).
A.
Immediately prior to the closing of the transactions contemplated
by the Purchase Agreement (as defined below), the WP VIII
Purchasers Beneficially Own an aggregate of 51,737,426 shares of
Voting Stock of the Company, including warrants to purchase an
aggregate of 10,766,538 shares of the Company Common
Stock;
B.
The WP X Purchasers are purchasing 17,395,626 shares of Company
Common Stock and warrants to purchase an aggregate of 3,862,422
shares of Company Common Stock (the “ Warrants
”) pursuant to that certain Purchase Agreement, dated as of
January 13, 2009 (the “ Purchase Agreement
”);
C.
The Board of Directors of the Company (the “ Board
”) has determined that it is in the best interests of the
Company and its stockholders to issue and sell the shares of
Company Common Stock and the Warrants to the WP X
Purchasers;
D.
The Company and the WP VIII Purchasers are parties to that certain
Second Amended and Restated Stockholders Agreement, dated as of
May 20, 2008 (the “ Prior Agreement ”);
and
E.
The Company and the WP VIII Purchasers desire to amend and restate
the rights and obligations set forth in the Prior Agreement, in
each case as set forth herein.
NOW
THEREFORE, in consideration of the covenants and promises set forth
herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties
hereby agree as follows:
1.
Certain Definitions . Unless the context otherwise requires,
the following terms, for all purposes of this Agreement, shall have
the meanings specified in this Section 1:
“
Additional Director Board Appointment Period ” shall
mean the period from the date hereof and ending on the later of
(i) the date that the Purchasers shall cease to Beneficially
Own at least 25,000,000 shares of Voting Stock (as adjusted from
time to time for any stock dividends, combinations,
recapitalizations and the like) or (ii) the date that
the
Purchasers’ percentage Beneficial
Ownership of the Voting Stock is less than the quotient of
(x) two (2) divided by (y) the then authorized number of
directors of the Company.
“
Affiliate ” shall have the meaning set forth in
Rule 12b-2 of the rules and regulations promulgated under the
Exchange Act; provided , however , that for purposes
of this Agreement, the Purchasers and their Affiliates, on the one
hand, and the Company and its Affiliates, on the other, shall not
be deemed to be “ Affiliates ” of one
another.
“
Beneficially Own, ” “ Beneficially Owned,
” or “ Beneficial Ownership ” shall have
the meaning set forth in Rule 13d-3 of the rules and
regulations promulgated under the Exchange Act.
“
Closing Date ” shall have the meaning ascribed to such
term in the Purchase Agreement.
“
Company Common Stock ” shall mean shares of the Common
Stock of the Company, $0.001 par value.
“
Company Competitor ” shall mean any person or entity
(or any Affiliates of such a person or entity) that
(i) conducts material activities and operations consisting of
providing speech technology primarily for use in telephony-network
based services, mobile or embedded platforms, or desktop or
server-based dictation software applications, (ii) develops
and licenses software that incorporates document capture or image
processing technology, (iii) has filed a statement on
Schedule 13D pursuant to Rule 13d-l(a) with the SEC that
indicates under Item 4 of such Schedule that the person has
acquired or holds the securities with a purpose or effect of
changing or influencing control of the Company, or in connection
with or as a participant in any transaction having that purpose or
effect, or (iv) to the Purchasers’ knowledge after a
written request, intends to file a statement on Schedule 13D
with the SEC indicating under Item 4 of such Schedule that the
person has acquired or holds the securities with a purpose or
effect of changing or influencing control of the Company, or in
connection with or as a participant in any transaction having that
purpose or effect.
“
Controlled Fund ” shall mean any fund of which Warburg
Pincus Partners LLC is a general partner.
“
Exchange Act ” shall mean the Securities Exchange Act
of 1934, as amended.
“
Exchange Offer ” shall mean a bona fide exchange offer
subject to the provisions of Rule 13e-3 promulgated under the
Exchange Act.
“
Fair Market Value ” means, as of any date of
determination, (i) in the case of Company Common Stock, the
average of the closing sale prices of Company Common Stock during
the 5 trading days immediately preceding such date of determination
on the principal U.S. or foreign securities exchange on which such
Company Common Stock is listed or, if such Company Common Stock is
not listed or primarily traded on any such exchange, the average of
the closing sale prices or the closing bid quotations of such
security during the 5 day period preceding such date of
determination on Nasdaq or any comparable system then in use or, if
no such quotations are available, the fair market value of such
security as of such date of
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determination
as determined in good faith by the Company and the holders of a
majority in interest of the shares of Company Common Stock then
held by the Purchasers and (ii) in the case of property other
than cash or a security, the fair market value of such property on
such date of determination as determined in good faith by the
Company and the holders of a majority in interest of the shares of
Company Common Stock then held by the Purchasers; provided ,
however , that if such parties are unable to reach agreement
as to the fair market value of such security pursuant to clause
(i) above or such property pursuant to clause (ii) above
within a reasonable period of time, the fair market value shall be
determined in good faith by an independent investment banking firm
selected jointly by the Company and the holders of a majority in
interest of the shares of Company Common Stock then held by the
Purchasers or, if that selection cannot be made within
15 days, by an independent investment banking firm selected by
the American Arbitration Association in accordance with its rules.
All costs and expenses of such independent investment banking firm
shall be borne 50% by the Company and 50% by the Purchasers, pro
rata based on the number of shares of Company Common Stock then
held by each.
“
Form S-3 ” means such form under the Securities
Act as in effect on the date hereof or any successor or similar
registration form under the Securities Act subsequently adopted by
the SEC that permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company
with the SEC.
“
Holder ” means any person owning of record Registrable
Securities that have not been sold to the public or any transferee
or assignee of record of such Registrable Securities to which the
registration rights conferred by this Agreement have been
transferred or assigned in accordance with Section 5.8
hereof.
“
Permitted Amount ” shall mean the sum of (i) up
to a maximum of 5% of the issued and outstanding Voting Stock of
the Company as calculated immediately following the Closing Date
and (ii) any amount of shares of Voting Stock acquired
directly from the Company after the date of this Agreement pursuant
to an agreement with the Company.
“
Register, ” “ registered ” and
“ registration ” refer to a registration
effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering
of effectiveness of such registration statement or
document.
“
Registrable Securities ” means (a) shares of
Company Common Stock (i) held by the Purchasers on the day
immediately following the Closing Date or (ii) acquired
pursuant to open market purchases following the Closing Date, and
any Company Common Stock issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, any Company Common Stock,
warrant, right or other security held by the Purchasers.
Notwithstanding the foregoing, Registrable Securities shall not
include any securities of the Company sold by any person to the
public either pursuant to a registration statement under the
Securities Act or Rule 144.
“
Registration Expenses ” shall mean all expenses
incurred by the Company in complying with Sections 5.1 and 5.2
hereof, including, without limitation, all registration
and
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filing fees,
printing expenses, fees and disbursements of counsel for the
Company, Blue Sky fees and expenses and the expense of any special
audits incidental to or required by any such registration (but
excluding the compensation of regular employees of the Company,
which shall be paid in any event by the Company, and all
underwriting discounts and commissions).
“
Representatives ” shall mean the directors, officers,
employees and independent contractors, agents or advisors
(including, without limitation, attorneys, accountants, and
investment bankers) of the specified party or any of its
Subsidiaries.
“
Rule 144 ” means Rule 144 as promulgated by
the SEC under the Securities Act, as such rule may be amended from
time to time, or any similar successor rule that may be promulgated
by the SEC.
“
SEC ” or “ Commission ” means the
Securities and Exchange Commission or any other federal agency at
the time administering the Securities Act.
“
Securities Act ” means the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from
time to time.
“
Selling Expenses ” means all underwriting discounts,
selling commissions and stock transfer rates applicable to the sale
of Registrable Securities and, except as set forth in the
definition of “Registration Expenses” above, all fees
and reimbursement of counsel for the Holders.
“
Shelf Registration Period ” shall mean the period
beginning immediately following the Closing Date and ending at
12:00 a.m. New York City time on the 365th day after the
effectiveness of any registration statement filed pursuant to the
terms of Section 5.3, as such period may be
extended.
“
Standstill Period ” shall mean the three (3) year
period beginning on the Closing Date and ending at 12:00 a.m.
New York City time on the third anniversary of the Closing
Date.
“
Subsidiaries ” shall mean each corporation, limited
liability company, partnership, association, joint venture or other
business entity of which any party or any of its Affiliates owns,
directly or indirectly, more than 50% of the stock or other equity
interest entitled to vote on the election of the members of the
board of directors or similar governing body.
“
Third Party Tender Offer ” shall mean a bona fide
public tender offer subject to the provisions of
Regulation 14D when first commenced within the meaning of
Rule 14d-2(a) of the rules and regulations under the Exchange
Act, by a person or 13D Group (which is not made by and does not
include any of the Company or any Affiliate of the Company) to
purchase or exchange for cash or other consideration any Voting
Stock and which consists of an offer to acquire more than 10% of
the Voting Power of the Company.
“
13D Group ” means any group of persons formed for the
purpose of acquiring, holding, voting or disposing of Voting Stock
which would be required under Section 13(d) of the Exchange Act,
and the rules and regulations promulgated thereunder, to file a
statement on
4
Schedule 13D pursuant to Rule 13d-l(a) or
Schedule 13G pursuant to Rule 13d-1(c) with the SEC as a
“person” within the meaning of Section 13(d)(3) of
the Exchange Act if such group Beneficially Owned Voting Stock
representing more than 5% of any class of Voting Stock then
outstanding.
“
Voting Power ” shall mean the number of votes entitled
to then be cast by the Voting Stock of the Company at any election
of directors of the Company, provided that, for the purpose of
determining Voting Power, each share of Preferred Stock of the
Company, if any (the “ Preferred Stock ”), shall
be deemed to be entitled to the number of votes equal to the number
of shares of Company Common Stock into which such share of
Preferred Stock could then be converted.
“
Voting Stock ” shall mean shares of the Company Common
Stock and any other securities of the Company having the ordinary
power to vote in the election of members of the Board of Directors
of the Company and any securities convertible, exchangeable for or
otherwise exercisable to acquire voting securities.
2.
Appointment of the Purchasers’ Nominee(s) to the Board
. The Company hereby agrees that (a) until the date that the
Purchasers cease to Beneficially Own at least 10,000,000 shares of
Voting Stock (as adjusted from time to time for any stock
dividends, combinations, splits, recapitalizations and the like),
the Board shall take such action as may be necessary to appoint one
(1) member of the Board who shall be designated by Warburg
Pincus Private Equity VIII, L.P. so long as it holds shares of
Company Common Stock and thereafter by the holders of a majority in
interest of the shares of Company Common Stock then held by the
Purchasers, and (b) until the expiration of the Additional
Director Board Appointment Period, the Board shall take such action
as may be necessary to appoint a second member of the Board who
shall be designated by Warburg Pincus Private Equity X, L.P. so
long as it holds shares of Company Common Stock and thereafter by
the holders of a majority in interest of the shares of Company
Common Stock then held by the Purchasers. Each nominee so
designated shall be reasonably acceptable to, and approved by a
majority of the Board, which acceptance and approval shall not be
unreasonably withheld (such nominees from time to time so
designated, each a “ Purchaser Nominee, ” and
collectively, the “ Purchaser Nominees ”). For
as long as the Purchaser Nominee(s) have a right to be appointed to
the Board pursuant to this Section 2, the Company shall
nominate and take such action as may be necessary to cause the
Purchaser Nominee(s) to be elected or appointed to the Board. If at
any time during the period when the Purchaser Nominee(s) have a
right to be appointed to the Board pursuant to this Section 2,
there shall occur a vacancy in the Board seat previously occupied
by a Purchaser Nominee by reason of resignation, removal, death or
incapacity, then such vacancy shall be filled by another Purchaser
Nominee designated in accordance with this
Section 2.
3.
Covenants of the Purchasers .
3.1
Standstill . During the Standstill Period, the Purchasers,
Warburg Pincus & Co., and Warburg Pincus Partners LLC, shall
not, without the prior written consent of the Company or its Board
of Directors:
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(a) acquire,
offer, seek or propose to acquire, or agree to acquire, directly or
indirectly (including acquiring beneficial ownership as defined in
Rule 13d-3 under the Exchange Act), by purchase or otherwise,
any Voting Stock of the Company or direct or indirect rights to
acquire any Voting Stock of the Company, or of any successor to or
person in control of the Company, or any assets of the Company or
any Subsidiary or division of the Company or of any such successor
or controlling person, provided , however , that the
Purchasers, Warburg Pincus & Co., and Warburg Pincus Partners
LLC may acquire in one or more transactions an aggregate number of
shares of Voting Stock equal to the Permitted Amount.
(b) make,
or in any way participate, directly or indirectly, in any
“solicitation” of “proxies” to vote (as
such terms are used in the rules of the SEC), or seek to advise or
influence any person or entity with respect to the voting of any
Voting Stock of the Company (other than in such Purchaser’s
Representatives’ capacities as a member of the
Company’s Board of Directors in a manner consist with his or
her fiduciary duties);
(c) make
any public announcement with respect to, or submit a proposal for
or offer of (with or without conditions) (including to the
Company’s Board of Directors), any extraordinary transaction
involving the Company or any of its securities or
assets;
(d) form,
join or in any way participate in a 13D Group in connection with
any of the foregoing;
(e) otherwise
act or seek to control or influence the management or Board of
Directors or policies of the Company, whether alone or in concert
with others (other than in such Purchaser’s
Representatives’ capacities as a member of the
Company’s Board of Directors in a manner consistent with his
or her fiduciary duties);
(f) take
any action that could reasonably be expected to require the Company
to make a public announcement regarding the possibility of any of
the events described in clauses (a) through (e)
above;
(g) request
the Company or any of its Representatives, directly or indirectly,
to amend or waive any provision of this Section 3.1 in a
manner that would require public disclosure; or
(h) direct
or instruct any of their respective Subsidiaries, Representatives
or Affiliates to take any such action.
Notwithstanding
the foregoing, if, at any time during the Standstill
Period,
(i) any
person or 13D Group (other than any person or 13D Group which
includes the Purchasers, their respective Subsidiaries or
Representatives) acquires Beneficial Ownership of Voting Stock of
the Company representing 40% or more of the then outstanding Voting
Stock of the Company;
(ii) any
person or 13D Group (other than any person or 13D Group which
includes the Purchasers, their respective Subsidiaries or
Representatives) announces or commences a tender or exchange offer
to acquire Voting Stock of the Company
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which, if
successful, would result in such person or 13D Group owning, when
combined with any other Voting Stock of the Company owned by such
person or 13D Group, 50% or more of the then outstanding Voting
Stock of the Company;
(iii) the
Company enters into, or resolves to enter into, any merger, sale or
other business combination transaction pursuant to which the
outstanding shares of Common Stock would be converted into cash
and/or securities and/or property of another person or 13D Group
(other than any person or 13D Group which includes the Purchasers,
their respective Subsidiaries or Representatives) or 50% or more of
the outstanding shares of Common Stock as of immediately prior to
such transaction would be owned by persons other than the then
current holders of shares of Common Stock and any person or 13D
Group which includes the Purchasers, their respective Subsidiaries
or Representatives;
then, except as
otherwise provided herein, the Standstill Period shall be suspended
and tolled during the pendency of any such event with respect to
the Purchasers, their respective Subsidiaries and Representatives
and the provisions of subparagraphs (a) through (g) shall
not be applicable to the Purchasers, their respective Subsidiaries
and Representatives during the pendency of any such event. For the
avoidance of doubt, the Standstill Period shall resume and be
extended by an amount of time equal to the time during which such
event was pending, and the provisions of subparagraphs
(a) through (g) shall resume to be applicable to the
Purchasers, their respective Subsidiaries and Representatives in
the event that the provisions of (i) through (iii) cease
to be applicable, such as, for example and without limitation,
disposition of the Voting Stock of the Company to below 40% by the
person or 13D Group, withdrawal of the tender or exchange offer by
the person or 13D Group, or termination of merger, sale or other
business combination transaction.
3.2
Transfer Restrictions .
(a) The
Purchasers shall not (and shall not permit any Affiliate to),
directly or indirectly:
(i) Sell,
transfer, pledge, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, transfer the economic risk of
ownership of, or otherwise dispose of (each, a “
Transfer ”) any Voting Stock or Voting Power to any
person or group that is conducting, is participating or has
participated in a solicitation of proxies in opposition to the
recommendation or proposal of the Board, or has proposed or
otherwise solicited stockholders of the Company for approval of one
or more stockholder proposals;
(ii) Transfer
five percent (5%) or more of the Voting Stock or Voting Power (in
one or a series of transactions) in response to a Third Party
Tender Offer or an Exchange Offer with respect to which the Board
shall not have recommended that stockholders of the Company accept
such offer, unless prior to such Transfer, the Purchasers have
complied with the provisions of Section 3.3 below;
or
(iii) Transfer
five percent (5%) or more of the Voting Stock or Voting Power (in
one or a series of transactions that have not been approved by a
majority of the
7
Board) to a
Company Competitor who has made a bona fide written offer to
acquire such securities, unless prior to such Transfer, the
Purchasers have complied with the provisions of Section 3.3
below.
(b) Prior
to the date that is one hundred eighty (180) days following
the Closing Date, no Purchaser will, directly or indirectly,
Transfer any shares of Voting Stock (it being understood that
Transfers of, or other transactions with respect to direct or
indirect ownership interests in a Purchaser the purpose of which is
not to Transfer shares of Voting Stock shall not be considered to
be direct or indirect Transfers of shares of Voting Stock) except
for the following:
(i) Transfers
to other Purchasers;
(ii) Transfers
in connection with a bona fide pledge to, or similar arrangement in
connection with a bona fide borrowing from a financial
institution;
(iii) Transfers
in a transaction approved by a majority of the Board, excluding the
Purchaser Nominees; or
(iv) Transfers
in connection with a tender offer, merger, sale of all or
substantially all the Company’s assets or any similar
transaction involving the Company approved and/or recommended by a
majority of the Board, excluding the Purchaser Nominees.
3.3
The Company’s Right of First Refusal .
(a) Prior
to the Purchasers effecting any Transfer of Voting Stock or Voting
Power that is subject to the restrictions set forth in
Section 3.2(a), the Company shall have a first refusal right
to purchase such Voting Stock or Voting Power on the following
terms and conditions:
(i) The
Purchasers shall give prior notice (the “ Transfer
Notice ”) to the Company in writing of such intention,
specifying the name of the proposed purchaser or transferee, the
amount of V
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