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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
o | Preliminary Proxy Statement |
þ | Definitive Proxy Statement |
o | Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
o | Definitive Additional Materials |
o | Soliciting Material Pursuant to § 240.14a-12 |
þ | No fee required. | |||
o | Fee computed on table below per Exchange Act rules 14a-6(i)(1) and 0-11. | |||
(1) | Title of each class of securities to which transaction applies: | |||
(2) | Aggregate number of securities to which transaction applies: | |||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||
(4) | Proposed maximum aggregate value of transaction: | |||
(5) | Total fee paid: | |||
o | Fee paid previously with preliminary materials. | |||
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. | |||
(1) | Amount Previously Paid: | |||
(2) | Form, Schedule or Registration Statement No.: | |||
(3) | Filing Party: | |||
(4) | Date Filed: | |||
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![(NUANCE GRAPHIC)](https://capedge.com/proxy/DEFM14A/0000950135-05-004398/b55111nfb5511101.gif)
To adopt the merger agreement and approve the merger contemplated thereby. Upon completion of the merger, holders of Nuance common stock will be entitled to receive (i) 0.77 shares of ScanSoft common stock, and (ii) $2.20 of cash, for each share of Nuance common stock they hold at that time. Nuance common stock is listed on the NASDAQ National Market under the trading symbol “NUAN.” ScanSoft common stock is listed on the NASDAQ National Market under the trading symbol “SSFT.” |
Sincerely, | |
/s/Charles W. Berger | |
Charles W. Berger | |
Chief Executive Officer |
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![(NUANCE GRAPHIC)](https://capedge.com/proxy/DEFM14A/0000950135-05-004398/b55111nfb5511101.gif)
(1) To adopt the Agreement and Plan of Merger, dated as of May 9, 2005, among ScanSoft, Inc., a Delaware corporation, Nova Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of ScanSoft, Nova Acquisition LLC, a Delaware limited liability company and a wholly-owned subsidiary of ScanSoft, and Nuance (the “merger agreement”) and approve the merger contemplated thereby. Upon completion of the merger, holders of Nuance common stock will be entitled to receive (i) 0.77 shares of ScanSoft common stock, and (ii) $2.20 of cash, for each share of Nuance common stock they hold at that time; and | |
(2) To transact such other business as may properly come before the special meeting or any postponement or adjournment thereof. |
By Order of the Board of Directors of Nuance | |
/s/Douglas Clark Neilsson | |
Douglas Clark Neilsson | |
Vice President, Secretary and General Counsel |
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Q: | WHY ARE SCANSOFT AND NUANCE PROPOSING THE MERGER? | |
A: | We are proposing the merger because we believe the combination of our two companies will result in a comprehensive portfolio of speech applications, industry-defining technologies and technical expertise in network speech, embedded speech and dictation, which will allow the combined company to support partners and customers on a global scale more effectively and efficiently. Furthermore, after reviewing numerous strategic alternatives for enhancing stockholder value, the boards of directors of both ScanSoft, Inc. and Nuance Communications, Inc. believe that the merger will: |
1. better position the combined company to accelerate the development and adoption of innovative speech-enabled applications and services worldwide; | |
2. increase the rate of innovation through the exchange of ideas and technologies among varied development teams; | |
3. better equip the combined company to compete with a number of new, very large and well resourced competitors; and | |
4. generate cost synergies through headcount reductions, office site consolidations and reductions in marketing and administrative expenses. |
Q: | WHAT WILL HAPPEN PURSUANT TO THE MERGER? | |
A: | We are proposing a two step merger pursuant to which in the first step, Nova Acquisition Corporation, a wholly owned subsidiary of ScanSoft, will merge with and into Nuance, and thereafter will cease to exist as a separate corporate entity. After the first step merger, Nuance will be a wholly owned subsidiary of ScanSoft. In the second step, Nuance will merge with and into Nova Acquisition LLC, a wholly owned subsidiary of ScanSoft, and thereafter Nuance will cease to exist as a separate corporate entity. After the second step, Nova Acquisition LLC will be a wholly owned subsidiary of ScanSoft. We refer to the first step merger, together with the second step merger, herein as the “merger.” Pursuant to the merger agreement, no later than 90 days following the effective time of the merger, ScanSoft will change its corporate name to “Nuance.” | |
Assuming the merger and the financing with Warburg Pincus and its affiliates pursuant to the Stock Purchase Agreement had been completed on May 9, 2005, Nuance stockholders would have owned approximately 18% of the outstanding shares of ScanSoft common stock immediately after the merger and financing and ScanSoft stockholders would have owned the remaining 82% (not including options, warrants and other convertible securities outstanding). | ||
Q: | WHAT STOCKHOLDER APPROVALS ARE REQUIRED TO COMPLETE THE MERGER? | |
A: | We cannot complete the merger unless, among other things, a majority of the outstanding shares of Nuance common stock entitled to vote at the Nuance special meeting vote to adopt the merger agreement and approve the merger. As of July 27, 2005, Nuance directors and executive officers and one of its significant stockholders, SRI International, were entitled to vote approximately 8% of the outstanding shares of Nuance common stock (not including options, warrants and other convertible securities outstanding). These directors and executive officers and the significant stockholder have already agreed with ScanSoft, in a voting agreement, to vote their shares of Nuance common stock in favor of the adoption of the merger agreement and the approval of the merger. The voting agreements permit the sale of a limited number of shares of common stock by each of these directors and executive officers and the significant stockholder. | |
In addition, a majority of the votes cast at the ScanSoft special meeting on (i) the proposal to approve the issuance of shares of ScanSoft common stock to Nuance stockholders in the merger and (ii) the proposal to approve the Stock Purchase Agreement by and among ScanSoft and Warburg |
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Pincus Private Equity VIII, L.P. and certain of its affiliated entities (collectively, “Warburg Pincus”) and the issuance of the shares of ScanSoft common stock and warrants to acquire ScanSoft common stock pursuant to the Stock Purchase Agreement must be voted in favor of such proposals in order to complete the merger. Although not required to complete the merger, ScanSoft is also soliciting the approval of its stockholders to assume certain Nuance stock options in the manner set forth in the merger agreement. As of July 27, 2005, ScanSoft directors, executive officers and certain affiliates were entitled to vote approximately 16% of the outstanding shares of ScanSoft common stock (not including options, warrants and other convertible securities outstanding). These directors, executive officers and affiliates have already agreed with Nuance to vote their shares of ScanSoft common stock in favor of the transactions contemplated by the merger agreement, including the issuance of shares of ScanSoft common stock to Nuance stockholders in the merger, the issuance of shares of ScanSoft common stock and warrants to acquire ScanSoft common stock pursuant to the Stock Purchase Agreement and the assumption of certain Nuance stock options in the manner set forth in the merger agreement. The voting agreements permit the sale of a limited number of shares of common stock by ScanSoft directors, executive officers and affiliates. | ||
Q: | HOW DO THE BOARDS OF DIRECTORS OF SCANSOFT AND NUANCE RECOMMEND THAT I VOTE? | |
A: | The ScanSoft board of directors unanimously recommends that ScanSoft stockholders vote “FOR” the proposal to approve the issuance of shares of ScanSoft common stock in connection with the merger, “FOR” the proposal to approve the Stock Purchase Agreement and the issuance of the shares of ScanSoft common stock and warrants to acquire ScanSoft common stock pursuant to the Stock Purchase Agreement, and “FOR” the proposal to approve the assumption by ScanSoft of stock options outstanding under Nuance’s stock option plans with an exercise price of $10.00 or less in the manner set forth in the merger agreement (the “Option Assumption”). | |
The Nuance board of directors unanimously recommends that Nuance stockholders vote “FOR” the proposal to adopt the merger agreement and approve the merger. | ||
Q: | WHEN DO YOU EXPECT TO COMPLETE THE MERGER? | |
A: | We expect to complete the merger as quickly as possible once all the conditions to the merger, including obtaining the approvals of ScanSoft and Nuance stockholders, are fulfilled. While we cannot predict the exact timing, we currently expect to complete the merger in September of 2005. | |
Q: | WHY ARE SCANSOFT STOCKHOLDERS BEING ASKED TO APPROVE THE STOCK PURCHASE AGREEMENT AND THE ISSUANCE OF THE SHARES OF SCANSOFT COMMON STOCK AND WARRANTS TO ACQUIRE SCANSOFT COMMON STOCK PURSUANT TO THE STOCK PURCHASE AGREEMENT? | |
A: | Rule 4350(i) of the Nasdaq Marketplace Rules requires that listed companies obtain stockholder approval in certain circumstances, which include: (i) when an issuance or potential issuance of securities would result in a change of control of the issuer as defined under the Nasdaq Marketplace Rules, (ii) when an equity compensation arrangement is made, pursuant to which stock may be acquired by directors or directors’ affiliates, and (iii) when in connection with the acquisition of the stock or assets of another company, where due to the issuance of common stock or securities convertible into common stock, the securities to be issued represent or will represent 20% or more of the voting power or number of shares of common stock outstanding before the issuance. | |
ScanSoft stockholders are being asked to approve the Stock Purchase Agreement and the issuance of the shares of ScanSoft common stock and warrants to acquire ScanSoft common stock pursuant to the Stock Purchase Agreement because the acquisition of such securities by Warburg Pincus implicates each of these circumstances. |
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Q: | HOW MANY SHARES OF SCANSOFT COMMON STOCK WILL WARBURG PINCUS BENEFICIALLY OWN FOLLOWING THE MERGER AND THE ISSUANCE OF THE SECURITIES PURSUANT TO THE STOCK PURCHASE AGREEMENT? | |
A: | Warburg Pincus will beneficially own approximately 25% of ScanSoft’s common stock following the merger and the issuance of the shares and warrants pursuant to the Stock Purchase Agreement, assuming that they do not dispose of the shares of ScanSoft common stock held by them prior to such time. | |
Q: | WHAT WILL HAPPEN IF SCANSOFT STOCKHOLDERS DO NOT APPROVE THE ISSUANCE OF THE SHARES OF SCANSOFT COMMON STOCK AND WARRANTS TO ACQUIRE SCANSOFT COMMON STOCK PURSUANT TO THE STOCK PURCHASE AGREEMENT? | |
A: | The completion of the merger is conditioned on the approval of the Stock Purchase Agreement and the issuance of the shares of ScanSoft common stock and warrants to acquire ScanSoft common stock pursuant to the Stock Purchase Agreement by ScanSoft’s stockholders. If the Stock Purchase Agreement and the issuance of the shares of ScanSoft common stock and warrants to acquire ScanSoft common stock pursuant to the Stock Purchase Agreement are not approved by ScanSoft’s stockholders, the merger will not be consummated. Accordingly, a vote against the Stock Purchase Agreement and the issuance of the shares of ScanSoft common stock and warrants to acquire ScanSoft common stock pursuant to the Stock Purchase Agreement is effectively a vote against the merger. | |
Q: | WHERE CAN I FIND MORE INFORMATION ABOUT SCANSOFT AND NUANCE? | |
A: | You can find more information about ScanSoft and Nuance from reading this joint proxy statement/ prospectus and the various sources described in this joint proxy statement/ prospectus under the section entitled “Where You Can Find More Information” on page 147. |
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Q: | WHEN AND WHERE IS THE SCANSOFT SPECIAL MEETING? | |
A: | The ScanSoft special meeting will be held at ScanSoft’s offices at 1 Wayside Road, Burlington, Massachusetts on August 31, 2005 at 11:00 a.m., Eastern time. | |
Q: | WHAT WILL HAPPEN AT THE SCANSOFT SPECIAL MEETING? | |
A: | At the ScanSoft special meeting, ScanSoft stockholders will vote on the approval of (i) the issuance of shares of ScanSoft common stock to Nuance stockholders in the merger, and (ii) the Stock Purchase Agreement and the issuance of the shares of ScanSoft common stock and warrants to acquire ScanSoft common stock pursuant to the Stock Purchase Agreement. | |
Q: | ARE ANY OTHER MATTERS BEING VOTED UPON AT THE SCANSOFT SPECIAL MEETING? | |
A: | ScanSoft stockholders are also being asked to vote to approve the assumption by ScanSoft of options to purchase Nuance common stock with an exercise price of $10.00 or less that are outstanding under Nuance stock plans in the manner set forth in the merger agreement, although receipt of such approval regarding the assumption of options is not a condition to the merger. | |
Q: | WHY DO I NEED TO VOTE ON THE OPTION ASSUMPTION AND WHAT WILL NUANCE OPTIONHOLDERS RECEIVE IN THE MERGER? | |
A: | If you approve the Option Assumption, all options to purchase Nuance common stock outstanding under the Nuance stock option plans with an exercise price of $10.00 or less will be assumed by ScanSoft and become options to purchase ScanSoft common stock on the same terms and conditions as were applicable to the assumed options prior to the closing of the merger, except each such option will be exercisable for such whole number of shares of ScanSoft common stock (rounded down to the nearest share) equal to the product obtained by multiplying the number of shares of Nuance common stock issuable upon the exercise of such option, by the “option exchange ratio,” and the exercise price per share for the ScanSoft common stock shall be equal to the quotient (rounded up to the nearest cent) of the exercise price per share for such option, divided by the “option exchange ratio.” The option exchange ratio is defined as 0.77 (the stock consideration to be received by Nuance stockholders in the merger for each share of Nuance common stock), plus the quotient of (a) $2.20 (the cash consideration to be received by Nuance stockholders in the merger for each share of Nuance common stock), divided by (b) the average of the closing trading prices of the ScanSoft common stock during the five trading days immediately preceding the closing date, subject to potential adjustment for tax purposes. | |
The approval of ScanSoft’s stockholders is being sought for the Option Assumption because ScanSoft’s Amended and Restated By-Laws provide that stockholder approval is required for ScanSoft to sell securities exercisable into common stock with an exercise price that is fixed after the date of the agreement. Since under the proposed treatment of the assumed Nuance options in accordance with the merger agreement, the option exercise price is based in part on the average of the closing trading prices of the ScanSoft common stock during the five trading days immediately prior to the closing date, rather than being fixed as of the date the merger agreement was executed, the Option Assumption requires the approval of ScanSoft’s stockholders. | ||
In the event that the approval of the stockholders of ScanSoft is not obtained for the treatment of the Nuance options as described above, all options to purchase Nuance common stock outstanding under the Nuance stock option plans with an exercise price of $10.00 or less will be assumed by ScanSoft, but on different terms. Each assumed Nuance option will become an option to acquire ScanSoft common stock and cash, except each such assumed option will be exercisable for such number of shares of ScanSoft common stock (rounded down to the nearest share) equal to the number of shares of Nuance common stock issuable upon exercise of such option, multiplied by 0.77, and an amount of cash (rounded up to the nearest cent) equal to the number of shares of Nuance common stock issuable upon exercise of such option, multiplied by $2.20, and the exercise price per share for the |
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ScanSoft common stock and cash shall be equal to the quotient (rounded up to the nearest cent) of the exercise price per share for such option, divided by 0.77. | ||
Regardless of the outcome of the ScanSoft stockholder vote regarding the assumption, all Nuance options with an exercise price of more than $10.00, and not already fully vested, will accelerate and become fully vested prior to the effective time of the first step merger and shall terminate as of the effective time of the merger if not exercised prior to the effective time of the first step merger. | ||
As of July 27, 2005, there were options to purchase 9,729,453 shares of Nuance common stock outstanding, of which 8,471,637 had an exercise price of $10.00 or less. | ||
Q: | WHAT DO I NEED TO DO TO VOTE? | |
A: | After carefully reading and considering the information contained in this joint proxy statement/ prospectus, please mail your completed and signed proxy card in the enclosed postage-paid return envelope as soon as possible so that your shares may be represented at the ScanSoft special meeting. In order to assure that we obtain your vote, please vote as instructed on your proxy card even if you currently plan to attend the ScanSoft special meeting and vote in person. | |
If you sign and mail your proxy and do not indicate how you want to vote, your proxy will be voted for the approval of the issuance of shares of ScanSoft common stock in connection with the merger, for the Stock Purchase Agreement and the issuance of the shares of ScanSoft common stock and warrants to acquire ScanSoft common stock pursuant to the Stock Purchase Agreement and for the assumption by ScanSoft of certain options to purchase Nuance common stock that are outstanding under Nuance stock plans in the manner set forth in the merger agreement. | ||
Q: | MAY I CHANGE MY VOTE EVEN AFTER RETURNING A PROXY CARD? | |
A: | Yes. If you want to change your vote, you may do so at any time before your proxy is voted at the ScanSoft special meeting. You can do this in one of three ways. First, you can complete and send a proxy with a later date. Second, you can send a written notice to the corporate secretary of ScanSoft, stating that you would like to revoke your proxy. Third, you can attend the ScanSoft special meeting and vote in person. Your attendance at the ScanSoft special meeting alone will not revoke your proxy. | |
Q: | IF MY BROKER HOLDS MY SHARES IN “STREET NAME,” HOW DO I VOTE MY SHARES? | |
A: | You should contact your broker. You should follow the directions provided by your broker to vote your shares. Your broker will not be permitted to vote on the issuance of shares of common stock in connection with the merger, the financing contemplated in connection with the merger, or the treatment of the Nuance options as set forth in the merger agreement unless your broker receives appropriate instructions from you. | |
If you have instructed your broker to vote your shares, you must follow directions received from your broker to change those instructions. You cannot vote shares held in “street name” by returning a proxy card directly to ScanSoft or by voting in person at the ScanSoft special meeting. | ||
Q: | ARE THERE RISKS I SHOULD CONSIDER IN DECIDING WHETHER TO VOTE FOR THE ISSUANCE OF SHARES OF SCANSOFT COMMON STOCK IN CONNECTION WITH THE MERGER AND FOR THE FINANCING CONTEMPLATED IN CONNECTION WITH THE MERGER? | |
A: | Yes. You should consider the risk factors set out in the section entitled “Risk Factors” beginning on page 18 of this joint proxy statement/ prospectus. | |
Q: | WHO CAN HELP ANSWER MY QUESTIONS? | |
A: | If you have any questions about the merger or if you need additional copies of this joint proxy statement/ prospectus or the enclosed proxy card, you should contact: |
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Q: | WHEN AND WHERE IS THE NUANCE SPECIAL MEETING? | |
A: | The Nuance special meeting will be held at Nuance’s offices located at 1350 Willow Road, Menlo Park, California 94025 on August 31, 2005 at 8:00 a.m., Pacific time. | |
Q: | WHAT WILL HAPPEN AT THE NUANCE SPECIAL MEETING? | |
A: | At the Nuance special meeting, Nuance stockholders will be asked to consider and vote upon a proposal to adopt the merger agreement and to approve the merger. | |
Q: | WHAT DO I NEED TO DO TO VOTE? | |
A: | After carefully reading and considering the information contained in this joint proxy statement/ prospectus and the other information to which you have been referred, please mail your completed and signed proxy card in the enclosed postage-paid return envelope as soon as possible so that your shares may be represented at the Nuance special meeting. In order to assure that we obtain your vote, please vote as instructed on your proxy card even if you currently plan to attend the Nuance special meeting and vote in person. | |
If you sign and mail your proxy and do not indicate how you want to vote, your proxy will be voted for the adoption of the merger agreement and the approval of the merger. | ||
Q: | MAY I CHANGE MY VOTE EVEN AFTER RETURNING A PROXY CARD? | |
A: | Yes. If you want to change your vote, you may do so at any time before your proxy is voted at the Nuance special meeting. You can do this in one of three ways. First, you can complete and send a proxy with a later date. Second, you can send a written notice to the corporate secretary of Nuance stating that you would like to revoke your proxy. Third, you can attend the Nuance special meeting and vote in person. Your attendance at the Nuance special meeting alone will not revoke your proxy. | |
Q: | IF MY BROKER HOLDS MY SHARES IN “STREET NAME,” WILL MY BROKER VOTE MY SHARES FOR ME? | |
A: | No. You should contact your broker. You should follow the directions provided by your broker to vote your shares. Your broker will not vote your shares on the merger proposal unless your broker receives appropriate instructions from you. If you do not provide your broker with voting instructions, your shares will be considered present at the Nuance special meeting for purposes of determining a quorum, but will not be considered to have been voted in favor of adoption of the merger agreement and approval of the merger. As a result, your shares will have the effect of a vote against adoption of the merger agreement and approval of the merger if you do not give voting instructions to your broker. | |
If you have instructed your broker to vote your shares, you must follow directions received from your broker to change those instructions. You cannot vote shares held in “street name” by returning a proxy card directly to Nuance or by voting in person at the Nuance special meeting. | ||
Q: | WHAT WILL NUANCE STOCKHOLDERS AND OPTIONHOLDERS BE ENTITLED TO RECEIVE PURSUANT TO THE MERGER? | |
A: | If the merger is completed, Nuance stockholders will be entitled to receive (i) 0.77 of a share of ScanSoft common stock, and (ii) $2.20 of cash, for each share of Nuance common stock held by Nuance stockholders immediately prior to the effective time of the merger, subject to potential adjustment as described below. Instead of a fractional share of ScanSoft common stock, Nuance stockholders will be entitled to receive an amount of cash (rounded to the nearest whole cent), without interest, equal to the value of the fractional share that the respective Nuance stockholder would otherwise be entitled to receive multiplied by $4.46, which represents the closing price of a share of ScanSoft common stock on May 6, 2005, the business day immediately prior to the execution of the merger agreement and announcement of the merger. |
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All options with an exercise price of more than $10.00, and that are not already fully vested, will accelerate and become fully vested prior to the effective time of the first step merger, and shall terminate as of the effective time of the first step merger if not exercised prior to the effective time of the first step merger. | ||
Subject to the approval of the stockholders of ScanSoft, all options to purchase Nuance common stock outstanding under the Nuance stock option plans with an exercise price of $10.00 or less will be assumed by ScanSoft, and become options to purchase ScanSoft common stock on the same terms and conditions as were applicable to the assumed options prior to the closing of the merger, except each such option will be exercisable for that whole number of shares of ScanSoft common stock (rounded down to the nearest share) equal to the product obtained by multiplying the number of shares of Nuance common stock issuable upon the exercise of such option, by the “option exchange ratio,” and the exercise price per share for the ScanSoft common stock shall be equal to the quotient (rounded up to the nearest cent) of the exercise price per share for such option, divided by the “option exchange ratio.” The option exchange ratio is defined as 0.77 (the stock consideration to be received by Nuance stockholders in the merger for each share of Nuance stock), plus (a) $2.20 (the cash consideration to be received by Nuance stockholders in the merger for each share of Nuance stock), divided by (b) the average of the closing trading prices of the ScanSoft common stock during the five trading days immediately preceding the closing date, subject to potential adjustment as described below. | ||
In the event that the approval of the stockholders of ScanSoft is not obtained for the treatment of the Nuance options as described above, all options to purchase Nuance common stock outstanding under the Nuance stock option plans with an exercise price of $10.00 or less will be assumed by ScanSoft, but on different terms. Each such option will become an option to acquire ScanSoft common stock and cash, except each such assumed option will be exercisable for that such number of shares of ScanSoft common stock equal to the number of shares of Nuance common stock issuable upon exercise of such option, multiplied by 0.77, and an amount of cash equal to the number of shares of Nuance common stock issuance upon exercise of such option, multiplied by $2.20, and the exercise price per share for the ScanSoft common stock and cash shall be equal to the quotient of the exercise price per share for such option, divided by 0.77. | ||
Q: | WHAT ARE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO HOLDERS OF NUANCE COMMON STOCK? | |
A: | The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code. Consummation of the merger is conditioned upon receipt by ScanSoft and Nuance of tax opinions at closing from tax counsel to both ScanSoft and Nuance. The closing tax opinions will be given in reliance on customary representations and assumptions as to factual matters. In the event that the representations or assumptions are incorrect and the ultimate facts do not support reorganization treatment, the closing tax opinions cannot be relied upon. | |
Assuming the merger qualifies as a reorganization, the holders of Nuance common stock will recognize gain, if any, as of the effective time of the first step merger, but only to the extent of the amount of the cash consideration. Nuance stockholders will recognize gain, if any, on the shares of ScanSoft common stock they receive when they sell such ScanSoft common stock. If the Nuance common stock was held as a capital asset, then such gain would be capital gain and would be long term capital gain if the Nuance common stock was held for more than one year, as of the effective time of the first step merger. The holding period of the ScanSoft common stock received by a Nuance stockholder in the merger will include the holding period of the Nuance common stock exchanged therefore. Nuance’s stockholders will not be permitted to recognize a loss in connection with the merger. | ||
Tax matters are very complicated, and the tax consequences of the merger to a particular stockholder will depend in part on such stockholder’s circumstances. Accordingly, you should read the summary under the caption “Material U.S. Federal Income Tax Consequences” for a more complete discussion |
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of the U.S. federal income tax consequences of the merger. You should also consult your own tax advisor with respect to other tax consequences of the merger or any special circumstances that may affect the tax treatment to you of the cash or shares of ScanSoft common stock that you receive pursuant to the first step merger, including the applicability and effect of federal, state, local and foreign income tax and other tax laws. | ||
Q: | WHAT IF THE AMOUNT OF CASH CONSIDERATION IN THE MERGER WOULD PREVENT TAX COUNSEL TO BOTH SCANSOFT AND NUANCE FROM RENDERING A TAX OPINION TO THE EFFECT THAT FOR U.S. FEDERAL INCOME TAX PURPOSES, THE MERGER WILL QUALIFY AS A “REORGANIZATION” WITHIN THE MEANING OF SECTION 368(A) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED? | |
A: | Under the merger agreement, if neither tax counsel to ScanSoft nor tax counsel to Nuance can render the closing tax opinion because they both reasonably determine that the merger may not satisfy the continuity of interest requirements for a tax-free reorganization under Section 368(a) of the Internal Revenue Code, or the “continuity of interest test,” then ScanSoft (after consultation with such tax counsel) will reduce the cash consideration and correspondingly increase the stock consideration to the minimum extent necessary to enable the closing tax opinion to be rendered. In addition, the option exchange ratio will be similarly adjusted to reflect the reduction in the cash consideration and the increase in the stock consideration. The aggregate cash consideration will be reduced by $1.905 for each additional share of ScanSoft common stock to be issued in the merger. The continuity of interest test requires that, after the merger, the Nuance stockholders must continue to own a substantial part of the value of their proprietary interests in Nuance by virtue of their ownership of ScanSoft common stock. There is no definitive standard for determining whether the continuity of interest test has been met. For purposes of rendering the tax opinion, however, the continuity of interest test will be considered satisfied if the value, as of the effective time of the first step merger, of the ScanSoft common stock received by the Nuance stockholders constitutes at least 40% of the total value of the aggregate merger consideration, including amounts received by Nuance stockholders exercising their dissenters’ or appraisal rights. For purposes of the “continuity of interest test,” tax counsel will consider the value of a share of ScanSoft common stock to be the average of the high and low sales prices of a share of ScanSoft common stock on the last trading day prior to the date of the closing of the first step merger, which we refer to as the closing date price. If less than 40% of the total value of the merger consideration consists of ScanSoft common stock (calculated using the closing date price), then the aggregate cash consideration will be reduced by $1.905 for each additional share of ScanSoft common stock to be issued until the value of the common stock to be received constitutes at least 40% of the total value of the aggregate merger consideration. | |
Q: | WILL NUANCE STOCKHOLDERS BE ABLE TO TRADE THE SCANSOFT COMMON STOCK THAT THEY RECEIVE PURSUANT TO THE MERGER? | |
A: | Yes. Nuance stockholders will be able to trade the shares of ScanSoft common stock they receive pursuant to the merger once the stock certificates representing such shares have been received from the exchange agent upon their surrender to the exchange agent of the Nuance stock certificates. The shares of ScanSoft common stock that Nuance stockholders receive pursuant to the merger will initially be listed on the NASDAQ National Market under the symbol “SSFT.” Pursuant to the merger agreement, no later than 90 days following the effective time of the merger, ScanSoft will change its corporate name to “Nuance” and following such name change, ScanSoft will change its trading symbol to “NUAN” or another symbol mutually agreed to by Nuance and ScanSoft. Certain persons who are deemed affiliates of Nuance will be required to comply with Rule 145 promulgated under the Securities Act of 1933, as amended, which we refer to as the Securities Act, if they sell their shares of ScanSoft common stock received pursuant to the merger. | |
Q: | SHOULD I SEND IN MY NUANCE STOCK CERTIFICATES NOW? | |
A: | No. If Nuance stockholders adopt the merger agreement and approve the merger, after the merger is completed, ScanSoft will send Nuance stockholders written instructions, including a letter of |
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transmittal, that will explain how to exchange Nuance stock certificates for ScanSoft common stock certificates and cash. Please do not send in any Nuance stock certificates until you receive these written instructions and the letter of transmittal. |
Q: | AM I ENTITLED TO APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER? | |
A: | Yes. The stockholders of Nuance may be entitled, under certain circumstances, to appraisal rights under Delaware law. For a detailed discussion of dissenters’ rights under Delaware law, please see “The Merger — Appraisal Rights” on page 81. | |
Q: | ARE THERE RISKS I SHOULD CONSIDER IN DECIDING WHETHER TO VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER? | |
A: | Yes. You should consider the risk factors set out in the section entitled “Risk Factors” beginning on page 18 of this joint proxy statement/ prospectus. | |
Q: | WHO CAN HELP ANSWER MY QUESTIONS? | |
A: | If you have any questions about the merger or if you need additional copies of this joint proxy statement/ prospectus or the enclosed proxy card, you should contact: |
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ScanSoft, Inc. | |
1 Wayside Road | |
Burlington, Massachusetts 01803 | |
(781) 565-5000 | |
http://www.scansoft.com |
ScanSoft offers businesses and consumers market-leading speech and imaging solutions that facilitate the way people access, share, manage and use information in business and in daily life. ScanSoft’s products and technologies automate manual processes and help enterprises, professionals and consumers increase productivity, reduce costs and save time. ScanSoft’s products are sold as solutions into the financial, legal, healthcare, government, telecommunications and automotive industries through a global network of resellers, comprised of system integrators, independent software vendors, value-added resellers, hardware vendors, telecommunications carriers and distributors, and directly to businesses and consumers through a dedicated direct sales force and its e-commerce website (www.scansoft.com). ScanSoft’s common stock is traded on the NASDAQ National Market under the symbol “SSFT.” |
Nuance Communications, Inc. | |
1380 Willow Road | |
Menlo Park, California 94025 | |
(650) 847-0000 | |
http://www.nuance.com |
Nuance develops, markets and supports voice automation solutions for conducting interactions over the telephone for a range of industries and applications. Nuance’s products include speech recognition software, which is used to recognize what a person says, deliver responses and information and perform transactions; text-to-speech synthesis software, which converts information, for example, from a database, email or web page into an audio signal for delivery over the telephone; voice authentication software, which is used to provide secure access to information, on a relatively secure basis, by verifying the identity of speakers using the unique qualities of their voices; pre-packaged speech applications, that, for instance, efficiently route callers to specific destinations within a company, and reduce deployment time and cost; and a standards-based software platform designed as a foundation for voice system deployment and management. |
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Nova Acquisition Corporation | |
1 Wayside Road | |
Burlington, Massachusetts 01803 | |
(781) 565-5000 | |
Nova Acquisition LLC | |
1 Wayside Road | |
Burlington, Massachusetts 01803 | |
(781) 565-5000 |
Nova Acquisition Corporation and Nova Acquisition LLC are wholly owned subsidiaries of ScanSoft recently formed solely for the purpose of effecting the merger. They have no business operations. |
• | $2.20 per share in cash, without interest, and | |
• | 0.77 of a share of ScanSoft common stock. |
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• | each such option will be exercisable for such whole number of shares of ScanSoft common stock (rounded down to the nearest share) equal to the product obtained by multiplying the number of shares of Nuance common stock issuable upon the exercise of such option, by the “option exchange ratio,” and | |
• | the exercise price per share for the ScanSoft common stock shall be equal to the quotient (rounded up to the nearest cent) of the exercise price per share for such option, divided by the “option exchange ratio.” |
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• | each such assumed option will be exercisable for such number of shares of ScanSoft common stock (rounded down to the nearest share) equal to the number of shares of Nuance common stock issuable upon exercise of such option, multiplied by 0.77, and an amount of cash (rounded up to the nearest cent) equal to the number of shares of Nuance common stock issuable upon exercise of such option, multiplied by $2.20, and | |
• | the exercise price per share for the ScanSoft common stock and cash shall be equal to the quotient (rounded up to the nearest cent) of the exercise price per share for such option, divided by 0.77. |
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• | receipt of required approvals from ScanSoft stockholders regarding (i) the issuance of shares of ScanSoft common stock to Nuance stockholders in the merger and (ii) the Warburg Pincus financing; |
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• | receipt of required approvals from Nuance stockholders regarding the adoption of the merger agreement and approval of the merger; | |
• | the absence of any statute, rule, regulation, executive order, decree, injunction or other order which has the effect of making the merger, the issuance of shares of ScanSoft common stock in the merger or the Warburg Pincus financing, illegal or otherwise prohibiting consummation of the merger, the issuance of shares of ScanSoft common stock in the merger or the Warburg Pincus financing; | |
• | expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and similar merger notification laws or regulations of foreign governmental entities in connection with the merger and the Warburg Pincus financing; | |
• | the absence of any pending suit, action or proceeding asserted by any governmental authority (i) challenging or seeking to restrain or prohibit the consummation of the merger, the issuance of shares of ScanSoft common stock in the merger or the Warburg Pincus financing or (ii) seeking to require ScanSoft or Nuance to effect an action of divestiture, and no specified governmental authority shall have made any statement or communication that would reasonably be construed to indicate a governmental authority is likely to commence any such suit, action or proceeding; | |
• | effectiveness of the registration statement, of which this joint proxy statement/ prospectus is a part; | |
• | receipt by each company of an opinion from its legal counsel that, for U.S. federal income tax purposes, the merger will be treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code; provided, however, that if the counsel to either ScanSoft or Nuance does not render such opinion, this condition will be deemed to be satisfied with respect to such party if counsel to the other party renders an opinion to such party to the effect that the merger will constitute a “reorganization” within the meaning of Section 368(a) of the Code; | |
• | each company’s representations and warranties in the merger agreement being true and correct, to the extent set forth in the merger agreement, except when the failure of such representations or warranties to be true and correct has not resulted, and would not reasonably be expected to result in, individually or in the aggregate with other such failures, a material adverse change to the other party; | |
• | compliance in all material respects by each company with its covenants and agreements in the merger agreement, to the extent set forth in the merger agreement; | |
• | the absence of a material adverse change to each company; | |
• | the shares of ScanSoft common stock to be issued pursuant to the merger being authorized for listing on the NASDAQ National Market, subject to official notice of issuance; and | |
• | with respect to Nuance only, that the Warburg Pincus financing shall have been consummated prior to or simultaneous with the closing of the merger. |
• | if the merger is not completed by January 9, 2006; | |
• | if any governmental order, decree or ruling enjoining or prohibiting the merger, the stock issuance in connection with the merger or the Warburg Pincus financing has become final and nonappealable; |
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• | if the other party breaches the merger agreement in a way that would entitle the party seeking to terminate the agreement not to consummate the merger and, if permitted by the merger agreement, the breaching party does not cure the breach within 30 days; | |
• | if the other party materially breaches its non-solicitation provisions in the merger agreement; | |
• | if a material adverse change (as defined in the merger agreement) to the other party shall have occurred since May 9, 2005, the date of the merger agreement, and is continuing; | |
• | if ScanSoft stockholders do not approve either the issuance of shares of ScanSoft common stock to Nuance’s stockholders in the merger or the Warburg Pincus financing; or | |
• | if Nuance stockholders do not adopt the merger agreement and approve the merger. |
• | withdraws or adversely modifies its unanimous recommendation that Nuance stockholders adopt the merger agreement and approve the merger or fails to reconfirm its recommendation of the merger after the receipt of a written request to do so from ScanSoft; | |
• | recommends a third party acquisition proposal to Nuance stockholders; or | |
• | fails to recommend against a tender offer or exchange offer that is commenced by a third party. |
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• | such superior offer has been made and has not been withdrawn; | |
• | the Nuance special meeting of stockholders has not occurred; | |
• | Nuance has delivered to ScanSoft (i) a written notice at least five business days before effecting its change of recommendation, which notice states that Nuance has received a superior offer and the material terms of such offer, including the identity of the person or persons making such offer, that the Nuance board of directors intends to change its recommendation and the manner in which it intends to do so or may intend to do so, (ii) provided to ScanSoft a copy of all written materials delivered to the person or group making the superior offer in connection with such superior offer, and (iii) made available to ScanSoft all materials and information made available to the person or group making the superior offer in connection with such superior offer (to the extent such material and information has not been previously furnished); | |
• | the Nuance board of directors has not breached any of its non-solicitation obligations under the merger agreement; and | |
• | the Nuance board of directors has concluded in good faith, after receipt of advice of its legal counsel, that, in light of such superior offer, the change of recommendation is required in order for the Nuance board of directors to comply with its fiduciary duties to Nuance’s stockholders under applicable law. |
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• | Mr. William H. Janeway, one of ScanSoft’s directors, is a Vice Chairman of Warburg Pincus LLC and was nominated by Warburg Pincus to the board of directors of ScanSoft pursuant to the terms of the Stockholders Agreement between ScanSoft and Warburg Pincus. As such, Mr. Janeway may be deemed to have a pecuniary interest in the ScanSoft shares held by Warburg Pincus and the shares and warrants to be issued pursuant to the Warburg Pincus financing. | |
• | Ms. Katharine Martin, one of ScanSoft’s directors, and the owner of record of 1,000 shares of ScanSoft common stock and options to purchase an aggregate of 135,000 shares of ScanSoft common stock, is a member of Wilson Sonsini Goodrich & Rosati, P.C., the law firm representing ScanSoft in connection with the merger and the Warburg Pincus financing and ScanSoft’s primary outside corporate and securities counsel. | |
• | Directors and executive officers of Nuance hold shares of Nuance’s common stock and will receive the merger consideration described above upon the effectiveness of the first step merger. In addition, all outstanding Nuance stock options, including those held by Nuance directors and executive officers, with an exercise price of $10.00 or less will be assumed by ScanSoft and become options to purchase shares of ScanSoft common stock. | |
• | The employment agreement between Nuance and Charles Berger, Nuance’s President and Chief Executive Officer, entitles him to certain benefits in the event of a change in control of Nuance. | |
• | The agreement of ScanSoft to honor the obligations of Nuance pursuant to indemnification agreements between Nuance and its directors and officers and to provide directors’ and officers’ liability tail coverage for a period of six years following the effective time of the merger. | |
• | Nuance has entered into a Change of Control and Retention Agreement with each of its officers, other than its Chief Executive Officer, who are subject to the reporting requirements of Section 16 of the Exchange Act and three other officers that provide for certain cash severance payments and options accelerations in the event of a termination within 18 months after a change of control of Nuance. | |
• | Continued representation of two Nuance directors on the ScanSoft board of directors. | |
• | Nuance has entered into option agreements with each of Nuance’s executive officers that provide for certain accelerations of Nuance options held by such executive officers following a change of control of Nuance. In addition, all Nuance stock options, including those held by Nuance directors and officers, with an exercise price of more than $10.00 that are not already fully vested, will accelerate and become fully vested prior to the effective time of the merger. |
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Nine | ||||||||||||||||||||||||||||
Six Months Ended | Months | |||||||||||||||||||||||||||
March 31, | Ended | Year Ended December 31, | ||||||||||||||||||||||||||
Sep. 30, | ||||||||||||||||||||||||||||
2005 | 2004 | 2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||||
Consolidated Statement of Operations Data: | ||||||||||||||||||||||||||||
Total revenue | $ | 113,691 | $ | 89,646 | $ | 130,907 | $ | 135,399 | $ | 106,619 | $ | 62,717 | $ | 47,961 | ||||||||||||||
Income (loss) from operations | 4,648 | (2,391 | ) | (7,993 | ) | (6,462 | ) | 6,603 | (16,931 | ) | (52,497 | ) | ||||||||||||||||
Income (loss) before income taxes | 4,082 | (1,926 | ) | (8,045 | ) | (5,787 | ) | 6,587 | (17,194 | ) | (52,779 | ) | ||||||||||||||||
Net income (loss) | $ | 2,139 | $ | (1,483 | ) | $ | (9,378 | ) | $ | (5,518 | ) | $ | 6,333 | $ | (16,877 | ) | $ | (53,251 | ) | |||||||||
Net income (loss) per share: basic and diluted | $ | 0.02 | $ | (0.01 | ) | $ | (0.09 | ) | $ | (0.07 | ) | $ | 0.09 | $ | (0.34 | ) | $ | (1.26 | ) | |||||||||
Weighted average common shares outstanding: | ||||||||||||||||||||||||||||
Basic | 105,264 | 101,213 | 103,780 | 78,398 | 67,010 | 49,693 | 42,107 | |||||||||||||||||||||
Diluted | 112,812 | 101,213 | 103,780 | 78,398 | 72,796 | 49,693 | 42,107 | |||||||||||||||||||||
As of | ||||||||||||||||||||||||
As of | ||||||||||||||||||||||||
Mar. 31, | Sep. 30, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | |||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Consolidated Balance Sheet Data: | ||||||||||||||||||||||||
Cash and cash equivalents. | $ | 25,882 | $ | 22,963 | $ | 42,584 | $ | 18,853 | $ | 14,324 | $ | 2,571 | ||||||||||||
Marketable securities | 3,858 | 24,728 | — | — | — | 62 | ||||||||||||||||||
Working capital | (29,269 | ) | 27,940 | 44,305 | 16,842 | 9,318 | (6,484 | ) | ||||||||||||||||
Total assets | 452,690 | 392,653 | 401,940 | 143,690 | 142,070 | 109,480 | ||||||||||||||||||
Long-term liabilities | 33,632 | 45,360 | 48,340 | 725 | 6,143 | 2,172 | ||||||||||||||||||
Total stockholders’ equity | 309,009 | 301,745 | 303,226 | 119,378 | 114,534 | 87,461 |
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Six Months Ended | |||||||||||||||||||||||||||||
March 31, | Year Ended December 31, | ||||||||||||||||||||||||||||
2005(1) | 2004(2) | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||||||||||
Consolidated Statement of Operations Data: | |||||||||||||||||||||||||||||
Total revenue | $ | 28,114 | $ | 29,430 | $ | 57,877 | $ | 55,038 | $ | 44,085 | $ | 39,300 | $ | 51,818 | |||||||||||||||
Loss from operations | (5,990 | ) | (3,186 | ) | (27,691 | ) | (22,287 | ) | (73,071 | ) | (117,781 | ) | (29,825 | ) | |||||||||||||||
Loss before income taxes | (5,068 | ) | (2,816 | ) | (26,594 | ) | (21,107 | ) | (70,384 | ) | (109,791 | ) | (23,124 | ) | |||||||||||||||
Net loss | $ | (4,958 | ) | $ | (2,794 | ) | $ | (26,179 | ) | $ | (19,301 | ) | $ | (71,184 | ) | $ | (110,365 | ) | $ | (23,474 | ) | ||||||||
Net loss per share: | |||||||||||||||||||||||||||||
basic and diluted | $ | (0.14 | ) | $ | (0.08 | ) | $ | (0.74 | ) | $ | (0.56 | ) | $ | (2.11 | ) | $ | (3.40 | ) | $ | (1.03 | ) | ||||||||
Weighted average common shares outstanding: | |||||||||||||||||||||||||||||
Basic and diluted | 36,025 | 34,947 | 35,487 | 34,471 | 33,666 | 32,480 | 22,717 | ||||||||||||||||||||||
As of | As of December 31, | |||||||||||||||||||||||
Mar. 31, | ||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Consolidated Balance Sheet Data: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 69,547 | $ | 53,583 | $ | 40,206 | $ | 43,771 | $ | 132,618 | $ | 219,047 | ||||||||||||
Marketable securities | 18,029 | 37,493 | 66,599 | 83,737 | 41,977 | 8,728 | ||||||||||||||||||
Working capital | 74,469 | 81,113 | 99,661 | 110,034 | 128,672 | 226,366 | ||||||||||||||||||
Total assets | 122,490 | 130,257 | 141,497 | 161,670 | 208,231 | 279,338 | ||||||||||||||||||
Long-term liabilities | 50,772 | 53,286 | 43,612 | 43,122 | 21,911 | 2,552 | ||||||||||||||||||
Total stockholders’ equity | 44,675 | 49,216 | 72,561 | 89,273 | 154,825 | 251,991 |
(1) | Six month results for the period ended March 31, 2005 were derived from Nuance’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the SEC, Nuance’s consolidated financial statements for the nine months ended September 30, 2004 included in its Quarterly Report on Form 10-Q for the three months ended September 30, 2004, as filed with the SEC, and Nuance’s consolidated financial statements for the three months ended March 31, 2005 included in its Quarterly Report on Form 10-Q for the three months ended March 31, 2005, as filed with the SEC. | |
(2) | Six month results for the period ended March 31, 2004 were derived from Nuance’s consolidated financial statements included its Annual Report on Form 10-K for the year ended December 31, 2003, as filed with the SEC, Nuance’s consolidated financial statements for the nine months ended September 30, 2003 included in its Quarterly Report on Form 10-Q for the three months ended September 30, 2003, as filed with the SEC, and Nuance’s consolidated financial statements for the three months ended March 31, 2004 included in its Quarterly Report on Form 10-Q for the three months ended March 31, 2004, as filed with the SEC. |
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Six Months Ended | Nine Months Ended | ||||||||
Mar. 31, 2005 | Sep. 30, 2004 | ||||||||
(In thousands, except per share data) | |||||||||
Pro Forma Combined Statement of Operations Data | |||||||||
Total revenue | $ | 146,047 | $ | 181,414 | |||||
Loss from operations | (15,683 | ) | (55,315 | ) | |||||
Loss before income taxes | (17,659 | ) | (58,684 | ) | |||||
Net loss | $ | (19,524 | ) | $ | (59,661 | ) | |||
Net loss per share: | |||||||||
Basic and diluted | $ | (0.13 | ) | $ | (0.41 | ) | |||
Weighted average common shares outstanding: | |||||||||
Basic and diluted | 147,434 | 146,235 | |||||||
As of March 31, | ||||||||
2005 | ||||||||
Pro Forma Combined Balance Sheet Data: | ||||||||
Cash and cash equivalents | $ | 69,844 | ||||||
Marketable securities | 20,720 | |||||||
Working capital | 14,133 | |||||||
Total assets | 714,925 | |||||||
Long-term liabilities | 75,456 | |||||||
Total stockholders’ equity | 496,895 |
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Six Months | Nine Months | ||||||||
Ended March 31, | Ended September 30, | ||||||||
2005 | 2004 | ||||||||
ScanSoft: | |||||||||
Income (loss) from continuing operations per share: | |||||||||
Historical — basic and diluted | $ | 0.02 | $ | (0.09 | ) | ||||
Pro forma — basic and diluted | $ | (0.13 | ) | $ | (0.41 | ) | |||
Book value per share at March 31, 2005: | |||||||||
Historical | $ | 2.85 | |||||||
Pro forma | $ | 3.31 | |||||||
Six Months | Nine Months | ||||||||
Ended March 31, | Ended September 30, | ||||||||
2005 | 2004 | ||||||||
Nuance: | |||||||||
Loss from continuing operations per share: | |||||||||
Historical — basic and diluted | $ | (0.14 | ) | $ | (0.73 | ) | |||
Equivalent pro forma — basic and diluted | $ | (0.10 | ) | $ | (0.31 | ) | |||
Book value per share at March 31, 2005: | |||||||||
Historical | $ | 1.24 | |||||||
Equivalent pro forma | $ | 2.55 | |||||||
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Nuance Common | ScanSoft | Implied Price per | ||||||||||||||||||||||
Stock | Common Stock | Share | ||||||||||||||||||||||
High | Low | High | Low | High | Low | |||||||||||||||||||
May 9, 2005 | $ | 3.24 | $ | 3.03 | $ | 4.64 | $ | 4.48 | $ | 5.77 | $ | 5.65 | ||||||||||||
July 27, 2005 | $ | 4.90 | $ | 4.76 | $ | 4.20 | $ | 4.10 | $ | 5.43 | $ | 5.36 |
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Nuance stockholders will receive a fixed ratio of (i) 0.77 of a share of ScanSoft common stock, and (ii) $2.20 of cash, for each share of Nuance common stock exchanged in the merger, regardless of any changes in market value of Nuance common stock or ScanSoft common stock before the completion of the merger. |
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The merger consideration may be adjusted in order for the merger to qualify as a “reorganization” for tax purposes. |
Warburg Pincus will own a large percentage of the ScanSoft common stock after consummation of the merger and the Warburg Pincus financing, and will have significant control over matters submitted to the vote of stockholders. |
ScanSoft may fail to integrate successfully ScanSoft’s and Nuance’s operations. As a result, ScanSoft and Nuance may not achieve the anticipated benefits of the merger, which could adversely affect the price of ScanSoft common stock. |
• | coordinating software development operations in a rapid and efficient manner to ensure timely release of products to market; | |
• | combining product offerings and product lines quickly and effectively; | |
• | successfully managing difficulties associated with transitioning current customers to new product lines; | |
• | demonstrating to our existing and potential customers that the merger will not result in adverse changes in customer service standards or business focus; | |
• | retaining key alliances with partners and suppliers; |
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• | coordinating sales and marketing efforts to communicate effectively the capabilities of the combined company; | |
• | absorbing costs and delays in implementing overlapping systems and procedures, including financial accounting systems; | |
• | persuading employees that ScanSoft’s and Nuance’s business cultures are compatible, maintaining employee morale and retaining key employees; and | |
• | overcoming potential distraction of management attention and resources from the business of the combined company. |
ScanSoft’s operating results could be adversely affected as a result of purchase accounting treatment, and the corresponding impact of amortization or impairment of other intangibles relating to its proposed merger with Nuance, if the results of the combined company do not offset these additional expenses. |
ScanSoft and Nuance expect to incur significant costs associated with the merger. |
Nuance executive officers and directors have interests that are different from, or in addition to, interests of Nuance stockholders generally, which may influence them to support the merger. |
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• | existing agreements that provide, among other things, for severance and other benefits as a result of the merger; | |
• | continued representation of two Nuance directors on the ScanSoft board of directors; | |
• | continued director and executive officer indemnification and insurance; and | |
• | acceleration of certain Nuance options held by its executive officers. |
Whether or not the merger is completed, the announcement and pendency of the proposed merger has caused disruptions in the business of Nuance and may cause further disruptions in the business of Nuance or disruptions in the business of ScanSoft, which could have material adverse effects on each company’s or the combined company’s business and operations. |
Failure to complete the merger could negatively impact Nuance’s and ScanSoft’s stock price, future business and operations. |
• | Neither Nuance nor ScanSoft would realize any anticipated benefits from being a part of a combined company; | |
• | Nuance and ScanSoft may be obligated to pay the other a fee of $6.63 million in liquidated damages if the merger agreement is terminated in certain circumstances; | |
• | the price of Nuance or ScanSoft common stock may decline to the extent that its current market price reflects a market assumption that the merger will be completed; | |
• | Nuance or ScanSoft may experience difficulties in attracting strategic customers and partners who were expecting to use the products proposed to be offered by the combined company; | |
• | Nuance and ScanSoft must pay all or a portion of certain costs relating to the merger, such as legal, accounting, financial advisor and printing fees, even if the merger is not completed, which costs will be substantial; and |
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• | with respect to Nuance, Nuance may not be able to find another buyer willing to pay an equivalent or higher price in an alternative transaction than the price that would be paid pursuant to the merger. |
Regulatory agencies, private parties, state attorneys general and other antitrust authorities may raise challenges to the merger on antitrust grounds. |
The price of ScanSoft common stock may be affected by factors different from those affecting the price of Nuance common stock. |
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Our operating results may fluctuate significantly from period to period, and this may cause our stock price to decline. |
• | slowing sales by our distribution and fulfillment partners to their customers, which may place pressure on these partners to reduce purchases of our products; | |
• | volume, timing and fulfillment of customer orders; | |
• | rapid shifts in demand for products given the highly cyclical nature of the retail software industry; | |
• | the loss of, or a significant curtailment of, purchases by any one or more of our principal customers; | |
• | concentration of operations with one manufacturing partner and ability to control expenses related to the manufacture, packaging and shipping of our boxed software products; | |
• | customers delaying their purchasing decisions in anticipation of new versions of products; | |
• | customers delaying, canceling or limiting their purchases as a result of the threat or results of terrorism; | |
• | introduction of new products by us or our competitors; | |
• | seasonality in purchasing patterns of our customers, where purchases tend to slow in the fourth fiscal quarter; | |
• | reduction in the prices of our products in response to competition or market conditions; | |
• | returns and allowance charges in excess of recorded amounts; | |
• | timing of significant marketing and sales promotions; | |
• | write-offs of excess or obsolete inventory and accounts receivable that are not collectible; | |
• | increased expenditures incurred pursuing new product or market opportunities; | |
• | inability to adjust our operating expenses to compensate for shortfalls in revenue against forecast; and | |
• | general economic trends as they affect retail and corporate sales. |
We have grown, and may continue to grow, through acquisitions, which could dilute our existing stockholders and could involve substantial integration risks. |
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• | difficulty in transitioning and integrating the operations and personnel of the acquired businesses, including different and complex accounting and financial reporting systems; | |
• | potential disruption of our ongoing business and distraction of management; | |
• | potential difficulty in successfully implementing, upgrading and deploying in a timely and effective manner new operational information systems and upgrades of our finance, accounting and product distribution systems; | |
• | difficulty in incorporating acquired technology and rights into our products and technology; | |
• | unanticipated expenses and delays in completing acquired development projects and technology integration; | |
• | management of geographically remote units both in the United States and internationally; | |
• | impairment of relationships with partners and customers; | |
• | entering markets or types of businesses in which we have limited experience; and | |
• | potential loss of key employees of the acquired company. |
Purchase accounting treatment of our acquisitions could decrease our net income in the foreseeable future, which could have a material and adverse effect on the market value of our common stock. |
We have a history of operating losses, and we may incur losses in the future, which may require us to raise additional capital on unfavorable terms. |
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Historically, a small number of product areas have generated a substantial portion of our revenues. A significant reduction in the revenue contribution in absolute dollars from these product areas could seriously harm our business, results of operations, financial condition, cash flows and stock price. |
We rely on a small number of distribution and fulfillment partners, including 1450, Digital River and Ingram Micro, to distribute many of our products, and any adverse change in our relationship with such partners may adversely impact our ability to deliver products. |
A significant portion of our accounts receivable is concentrated among our largest customers, and non-payment by any of them would adversely affect our financial condition. |
Speech technologies may not achieve widespread acceptance by businesses, which could limit our ability to grow our speech business. |
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• | consumer demand for speech-enabled applications; | |
• | development by third-party vendors of applications using speech technologies; and | |
• | continuous improvement in speech technology. |
The markets in which we operate are highly competitive and rapidly changing, and we may be unable to compete successfully. |
The failure to successfully implement, upgrade and deploy in a timely and effective manner new information systems and upgrades of our finance and accounting systems to address certain issues identified in connection with our fiscal 2004 year-end audit could harm our business. |
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A significant portion of our revenue is derived from sales in Europe and Asia. Our results could be harmed by economic, political, regulatory and other risks associated with these and other international regions. |
• | changes in a specific country’s or region’s economic conditions; | |
• | geopolitical turmoil, including terrorism and war; | |
• | trade protection measures and import or export licensing requirements imposed by the United States or by other countries; | |
• | compliance with foreign and domestic laws and regulations; | |
• | negative consequences from changes in applicable tax laws; | |
• | difficulties in staffing and managing operations in multiple locations in many countries; |
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• | difficulties in collecting trade accounts receivable in other countries; and | |
• | less effective protection of intellectual property. |
We are exposed to fluctuations in foreign currency exchange rates. |
If we are unable to attract and retain key personnel, our business could be harmed. |
Unauthorized use of our proprietary technology and intellectual property will adversely affect our business and results of operations. |
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Third parties have claimed and may claim in the future that we are infringing their intellectual property, and we could be exposed to significant litigation or licensing expenses or be prevented from selling our products if such claims are successful. |
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Our software products may have bugs, which could result in delayed or lost revenue, expensive correction, liability to our clients and claims against us. |
The holdings of our two largest stockholders may enable them to influence matters requiring stockholder approval. |
The market price of our common stock has been and may continue to be subject to wide fluctuations. |
Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses. |
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We have implemented anti-takeover provisions, which could discourage or prevent a takeover, even if an acquisition would be beneficial to our stockholders. |
• | a preferred shares rights agreement; | |
• | authorized “blank check” preferred stock; | |
• | prohibiting cumulative voting in the election of directors; | |
• | limiting the ability of stockholders to call special meetings of stockholders; | |
• | requiring all stockholder actions to be taken at meetings of our stockholders; and | |
• | establishing advance notice requirements for nominations of directors and for stockholder proposals. |
Our ability to accurately forecast our quarterly sales is limited, most of our short term costs are relatively fixed, certain of our costs are difficult to predict, and we expect our business to be affected by seasonality. As a result, our quarterly operating results are likely to fluctuate. |
• | delays or cancellations in expected orders by customers due to concerns about product or technical support continuation following the close of the merger; | |
• | changes or projected changes in United States or international economic and political conditions; | |
• | delays or cancellations in expected orders by customers who are reducing or deferring spending or adjusting project plans; | |
• | delays in orders due to the complex nature of large telephony systems and the associated implementation projects; | |
• | timing of product deployments and completion of project phases, particularly for large orders and large solution projects; | |
• | delays in recognition of revenue for sales transactions completed but not earned, as required by applicable accounting principles; | |
• | our ability to develop, introduce, ship and support new and/or enhanced products, such as new versions of our software platform and applications, that respond to changing technology trends in a timely manner; |
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• | our ability to manage product transitions; | |
• | rate of market adoption for speech technology and our products, such as our software platform and applications; | |
• | changes in our selling model, including focus of certain sales representatives on direct sales to end user customers and the resulting potential for channel conflict; | |
• | unexpected customer non-renewal of maintenance contracts or lower renewal instances than anticipated; | |
• | delays in the negotiation and documentation of orders, particularly large orders and orders from large companies; | |
• | expenses incurred in defending and settling litigation, which are difficult to predict and manage; | |
• | changes in the amount, and the timing of our expenses; | |
• | expenses incurred in responding to new corporate governance requirements, particularly those relating to the testing of internal controls; and | |
• | the utilization rate of our professional services personnel, which is dependent upon acquisition of new projects as large scale, multi-quarter projects near completion. |
We depend on a limited number of orders for a substantial portion of our revenue during any given quarter. The loss or delay of a significant order could substantially reduce our revenue in any given period and harm our business. |
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Historically we have depended upon third-party resellers for a significant portion of our sales. The loss of key third-party resellers, or a decline in third-party resellers’ resale of our products and services, could limit our ability to sustain and grow our revenue. |
Speech software products and services generally, and our products and services in particular, may not achieve widespread acceptance, which could require us to modify our sales and marketing efforts and could limit our ability to successfully grow our business. |
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• | acceptance by businesses of the benefits of speech technology; | |
• | widespread and successful deployment of speech software applications; | |
• | end-user demand for services and solutions having a voice user interface; | |
• | demand for new uses and applications of speech software technology, including adoption of voice user interfaces by companies that operate web-based and touch tone IVR self service solutions; | |
• | adoption of industry standards for speech software and related technologies; and | |
• | continuing improvements in hardware and telephony technology that may reduce the costs and deployment time of speech software solutions. |
Our products and services can have a long sales and implementation cycle and, as a result, our quarterly revenues and operating results may fluctuate. |
Our current and potential competitors, some of whom have greater resources and experience than we have, may market or develop products, services or technologies that may cause demand for, and the prices of, our products to decline. |
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Use of our products may infringe the intellectual property rights of others. Intellectual property infringement claims against our customers or us could be costly to us. Such claims could also slow our sales cycle or market adoption of our products. |
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We have a history of losses. We expect to continue to incur losses in the near term, and we may not achieve or maintain profitability. |
Sales to customers outside the United States have historically accounted for a significant portion of our revenue, exposing us to risks inherent in international operations. |
• | difficulties and costs of staffing and managing foreign operations; | |
• | the difficulty in establishing and maintaining an effective international third-party reseller network; | |
• | the burden of complying with a wide variety of foreign laws, particularly with respect to tax, intellectual property and license requirements; | |
• | longer sales and payment cycles than we experience in the United States; | |
• | political and economic instability outside the United States; | |
• | import or export licensing and product certification requirements; | |
• | tariffs, duties, price controls or other restrictions on foreign currencies or trade barriers imposed by the United States or foreign countries; | |
• | potential adverse tax consequences, including higher marginal rates and withholding taxes; | |
• | the impact of foreign exchange translations on the expense of our foreign operations; and | |
• | a limited ability, and significant costs, to enforce agreements, intellectual property rights and other rights in most foreign countries. |
Our stock price may be volatile due to many factors, some of which are outside of our control. |
• | actual or anticipated variations in ScanSoft’s operating results or announcements by ScanSoft; | |
• | concerns regarding the ability of us and ScanSoft to bring the merger to a close; | |
• | actual or anticipated variations in operating results; |
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• | announcements of operating results and business conditions by our customers, suppliers or competitors; | |
• | announcements by our competitors relating to new customers, technological innovations or new products or services; | |
• | announcements by us of new products and/or shifts in business focus or sales and distribution models; | |
• | material increases in our capital expenditures, including for infrastructure and information technology; | |
• | economic developments in our industry as a whole; | |
• | general market and economic conditions; and | |
• | general decline and other changes in information technology and capital spending plans. |
Any defects in, or other problems with, our products could harm our business and result in claims against us. |
If we are unable to effectively manage our operations and resources in accordance with market and economic conditions, our business could be harmed. |
We could be adversely impacted by the need for an increase in our restructuring accrual for our Pacific Shores facility. |
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We rely on the services of our key personnel, whose knowledge of our business and technical expertise would be difficult to replace. |
Our failure to successfully respond to and manage rapid change in the market for speech software could cause us to lose revenue and harm our business. It is essential that we continue to develop new products that achieve commercial acceptance. |
Speech products are not 100% accurate, and we could be subject to claims related to the performance of our products. Any claims, whether successful or unsuccessful, could result in significant costs and could damage our reputation. |
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We may incur a variety of costs to engage in future acquisitions of companies, products or technologies, and the anticipated benefits of those acquisitions may never be realized. |
• | difficulties in assimilating the operations, personnel and technologies of acquired companies; | |
• | diversion of our management’s attention from ongoing business concerns; | |
• | our potential inability to maximize our financial and strategic position through the successful incorporation of acquired technology and rights into our products and services; | |
• | additional expense associated with impairments of acquired assets, such as goodwill or acquired workforce; | |
• | increases in the risk of claims against us, related to the intellectual property or other activities of the businesses we acquire; | |
• | maintenance of uniform standards, controls, procedures and policies; and | |
• | impairment of existing relationships with employees, suppliers and customers as a result of the integration of new management personnel. |
We are exposed to the liquidity problems of our customers. We may have difficulty collecting amounts owed to us. |
Due to changed requirements relating to accounting treatment for employee stock options, we may choose or be required to change our business practices. |
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International sales opportunities may require us to develop localized versions of our products. If we are unable to do so timely, our ability to grow our international revenue and execute our international business strategy will be adversely affected. |
If the industry standards we support are not adopted as the standards for speech software, customers may not use our speech software products. |
Our inability to adequately protect our proprietary technology could harm our ability to compete. |
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Our charter and bylaws and Delaware law contain provisions which may delay or prevent a change of control of Nuance. |
• | the division of the board of directors into three separate classes; | |
• | the elimination of cumulative voting in the election of directors; | |
• | prohibitions on our stockholders acting by written consent and calling special meetings; | |
• | procedures for advance notification of stockholder nominations and proposals; and | |
• | the ability of the board of directors to alter our bylaws without stockholder approval. |
Our headquarters are located near known earthquake fault zones, and the occurrence of an earthquake or other natural disaster could cause damage to our facilities and equipment, which could require us to curtail or cease operations. |
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We rely on a continuous power supply to conduct our operations, and an energy crisis could disrupt our operations and increase our expenses. |
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1. To consider and vote upon a proposal to approve the issuance of shares of ScanSoft common stock in connection with a two step merger pursuant to which (i) in the first step, Nova Acquisition Corporation, a wholly owned subsidiary of ScanSoft, will merge with and into Nuance Communications, Inc., with Nuance surviving as a wholly owned subsidiary of ScanSoft and (ii) in the second step, Nuance will merge with and into Nova Acquisition LLC, a wholly owned subsidiary of ScanSoft, as contemplated by the Agreement and Plan of Merger, dated May 9, 2005, among ScanSoft, Nova Acquisition Corporation, Nova Acquisition LLC and Nuance; | |
2. To consider and vote upon a proposal to approve the Stock Purchase Agreement, dated as of May 5, 2005, by and among ScanSoft and Warburg Pincus Private Equity VIII, L.P. and certain of its affiliated entities and the issuance of the shares of ScanSoft common stock and warrants to acquire ScanSoft common stock pursuant to the Stock Purchase Agreement; | |
3. To consider and vote upon a proposal to approve the assumption by ScanSoft of stock options outstanding under the Nuance stock option plans with an exercise price of $10.00 or less in the manner set forth in the merger agreement; and | |
4. To transact such other business as may properly come before the ScanSoft special meeting or any postponement or adjournment thereof. |
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• | submitting a written notice of revocation to the corporate secretary of ScanSoft at 1 Wayside Road, Burlington, Massachusetts 01803 bearing a later date than the proxy; | |
• | granting a duly executed proxy relating to the same shares and bearing a later date (which automatically revokes the earlier proxy) and delivering it to the corporate secretary of ScanSoft; or | |
• | by attending the ScanSoft special meeting and voting in person. |
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1. To consider and vote upon a proposal to adopt the merger agreement and approve the merger; and | |
2. To transact such other business as may properly come before the Nuance special meeting or any postponement or adjournment thereof. |
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1. submitting a written notice of revocation to the corporate secretary of Nuance at 1350 Willow Road, Menlo Park, California 94025 bearing a later date than the proxy; | |
2. granting a duly executed proxy relating to the same shares and bearing a later date (which automatically revokes the earlier proxy) and delivering it to the corporate secretary of Nuance; or | |
3. by attending the Nuance special meeting and voting in person. |
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ScanSoft’s Reasons for the Merger and Recommendation of the ScanSoft Board of Directors |
• | a complete product portfolio with the widest language coverage in the speech industry; |
• | network automated speech recognition, or ASR, in 46 languages, network text to speech, or TTS, in 26 languages; | |
• | embedded ASR in 12 languages, embedded TTS in 20 languages; | |
• | large vocabulary continuous dictation in 7 languages; |
• | the ability to better serve the customer base of each company with a comprehensive portfolio of technologies, applications and expertise that will enable customers to effectively deploy innovative speech-solutions; | |
• | the ability of the combined company to bring together an array of technical resources — including scientists and engineers and a broad patent portfolio — to handle complex implementations and solve more difficult problems with speech technology, develop new products and greater functionality for existing products; | |
• | the complementary nature of the technologies of the combined company; | |
• | the ability to leverage a unified sales infrastructure to expand sales coverage and create improved opportunities for selling the products of the combined company; | |
• | the ability to leverage combined technical assets and expertise to focus on technology specific to specific verticals, increased ability to develop applications more efficiently and optimization of technology to improve performance; | |
• | increased combined technical depth in the face of AT&T’s, Microsoft’s and IBM’s investments in speech technology; | |
• | the ability of the combined company to employ the skills and resources of both companies’ management teams; and | |
• | the expected synergies from the combined research and development, marketing, sales and administrative areas of the company following the merger. |
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• | reviewed certain publicly available financial data with respect to Nuance and ScanSoft, including the consolidated financial statements for their three most recent fiscal years and for any subsequent interim periods to December 31, 2004, as well as the draft interim financial statements for the quarter ended March 31, 2005, and certain other relevant financial and operating data relating to Nuance and ScanSoft made available to Thomas Weisel Partners from published sources and from the internal records of Nuance and ScanSoft; | |
• | reviewed the financial terms and conditions of the merger agreement; | |
• | reviewed certain publicly available information concerning the trading of, and the trading market for, Nuance common stock and ScanSoft common stock; | |
• | compared Nuance and ScanSoft from a financial point of view with certain other public companies that Thomas Weisel Partners deemed to be relevant; |
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• | considered the financial terms, to the extent publicly available, of selected recent business combinations which Thomas Weisel Partners deemed to be comparable, in whole or in part, to the merger; | |
• | reviewed and discussed with representatives of the management of Nuance and ScanSoft certain information of a business and financial nature regarding Nuance and ScanSoft, furnished to Thomas Weisel Partners by Nuance and ScanSoft, including financial forecasts and related assumptions of Nuance and ScanSoft; | |
• | made inquiries and held discussions regarding the merger and the merger agreement and other matters related thereto with ScanSoft’s counsel; and | |
• | performed such other analyses and examinations as Thomas Weisel Partners has deemed appropriate. |
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Exchange Ratio/ Implied Consideration per Share | ||||||||||||
Period | High | Average | Low | |||||||||
30 Day | 0.821x/ $ | 3.66 | 0.730x/ $ | 3.26 | 0.647x/ $ | 2.89 | ||||||
90 Day | 1.007x/ $ | 4.49 | 0.789x/ $ | 3.51 | 0.647x/ $ | 2.89 | ||||||
180 Day | 1.363x/ $ | 6.08 | 0.929x/ $ | 4.14 | 0.647x/ $ | 2.89 | ||||||
One Year | 1.363x/ $ | 6.08 | 0.944x/ $ | 4.21 | 0.647x/ $ | 2.89 |
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• | Aspect Communications Corp. | |
• | Brooktrout Inc. | |
• | Comverse Technology, Inc. | |
• | Interactive Intelligence Inc. | |
• | InterVoice Inc. | |
• | NMS Communications Corporation | |
• | Openwave Systems Inc. | |
• | Witness Systems, Inc. |
Implied Price per | Implied Price per | |||||||||||||||||||||||
Share without | Share with | |||||||||||||||||||||||
Enterprise Value as a Multiple of: | Low | High | Synergies | Synergies | ||||||||||||||||||||
CY2005E Revenues | 0.8 | x | 2.9 | x | $ | 2.29 | $ | 5.22 | $ | 5.59 | $ | 8.36 | ||||||||||||
CY2006E Revenues | 0.6 | x | 2.6 | x | $ | 2.11 | $ | 5.12 | $ | 5.43 | $ | 8.26 |
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Acquiror | Target | |
Adobe Systems, Inc. | Macromedia Inc. | |
Oracle Corporation | Retek Inc. | |
Infor Global Solutions | MAPICS, Inc. | |
International Business Machines Corporation | Corio, Inc. | |
Computer Associates International, Inc. | Netegrity, Inc. | |
Symantec Corp. | Brightmail Inc. | |
BMC Software Inc. | Marimba Inc. | |
TIBCO Software Inc. | Staffware plc | |
Pitney Bowes | Group 1 Software Inc. | |
Ariba | FreeMarkets, Inc. | |
Symantec Corp. | On Technology Corp. | |
EMC Corp. | Documentum, Inc. | |
Interwoven Inc. | iManage, Inc. | |
Business Objects SA | Crystal Decisions Inc. | |
PeopleSoft Inc. | J.D. Edwards & Company | |
ScanSoft, Inc. | Speechworks Inc. |
Enterprise Value | Enterprise Value | ||||||||
to Last Twelve | to Next Twelve | ||||||||
Months’ | Months’ | ||||||||
Revenue | Revenue | ||||||||
NUANCE TRANSACTION | |||||||||
Software Transactions | 3.3 | x | 3.3x | ||||||
Maximum | 7.5 | x | 6.7x | ||||||
Mean | 3.4 | x | 3.2x | ||||||
Median | 3.0 | x | 2.8x | ||||||
Minimum | 1.6 | x | 1.6x |
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Average Exchange | ||||||||||||||||||||
Average % Stock Premium | Ratio Premium | |||||||||||||||||||
Transactions Since 1/1/02 | 1 Day | 1 Week | 1 Month | 1 Week | 1 Month | |||||||||||||||
Nuance Transaction | 84.6 | % | 89.7 | % | 99.1 | % | 79.9 | % | 79.9 | % | ||||||||||
High | 141.4 | % | 138.1 | % | 161.2 | % | 146.7 | % | 149.2 | % | ||||||||||
3rd Quartile | 54.3 | % | 57.1 | % | 53.7 | % | 49.2 | % | 57.3 | % | ||||||||||
Mean | 39.4 | % | 41.3 | % | 45.6 | % | 40.4 | % | 42.7 | % | ||||||||||
Median | 30.5 | % | 34.3 | % | 40.1 | % | 33.6 | % | 34.6 | % | ||||||||||
1st Quartile | 21.3 | % | 22.5 | % | 22.9 | % | 21.6 | % | 19.0 | % | ||||||||||
Low | 4.1 | % | 3.7 | % | (6.8 | )% | 9.1 | % | (15.2 | )% |
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% Contribution | |||||||||||||||||||||
Implied | Implied | Implied | |||||||||||||||||||
ScanSoft | Nuance | Agg. Value | Equity Value | Ownership | |||||||||||||||||
FY 2005E | |||||||||||||||||||||
Total Revenues | 80.2 | % | 19.8 | % | $ | 130.0 | $ | 168.1 | 24.1 | % | |||||||||||
Gross Profit | 80.3 | % | 19.7 | % | 129.2 | $ | 167.4 | 24.1 | % | ||||||||||||
FY 2006E | |||||||||||||||||||||
Total Revenues | 82.0 | % | 18.0 | % | $ | 115.7 | $ | 153.8 | 22.5 | % | |||||||||||
Gross Profit | 82.1 | % | 17.9 | % | 114.4 | 152.5 | 22.4 | % |
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Nuance’s Reasons for the Merger and Recommendation of the Nuance Board of Directors |
• | the ability to better serve the customer base and partners of each company with a comprehensive portfolio of technologies, applications and expertise that will enable customers to effectively deploy innovative speech-solutions; | |
• | the belief that a merger with ScanSoft could enhance the combined company’s ability to compete with larger, better-resourced competitors by bringing together the speech-focused talents, resources and intellectual property of the two companies; | |
• | the opportunity for each company to introduce its complementary product lines into the customer base of the other company; | |
• | the greater global presence of the combined company; | |
• | the expected synergies and cost-saving opportunities that should result from headcount reductions, office site consolidations and eliminating redundant operating expenses; and | |
• | the belief that the merger would combine two experienced and respected management teams, resulting in a combined management team that is stronger than the management teams of each of the individual companies. |
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• | the merger consideration relative to the current and historical market prices of Nuance common stock, and in particular the fact that, based on the closing price of ScanSoft common stock on May 6, 2005, the (i) 0.77 of a share of ScanSoft common stock, and (ii) $2.20 of cash, for each share of Nuance common stock represented a 84.73% premium over the closing price of Nuance common stock on May 6, 2005, the last trading day before the announcement of the proposed transaction, a 99.7% premium over the average of the closing prices of Nuance common stock during the month leading up to the announcement and a 63.31% premium over the average for the closing prices during the six months leading up to the announcement; | |
• | the fact that part of the merger consideration will be paid in cash provides some certainty as to the value to be received by Nuance stockholders, while the stock portion of the merger consideration will allow Nuance stockholders to participate in the growth and opportunities of the combined company; | |
• | the financial analyses reviewed with the Nuance board of directors on May 6, 2005 by Credit Suisse First Boston LLC and the oral opinion of Credit Suisse First Boston rendered to the Nuance board of directors on May 9, 2005, subsequently confirmed in writing, to the effect that, as of the date of the Credit Suisse First Boston opinion, and based upon and subject to the factors and assumptions set forth in its opinion, the merger consideration of (i) 0.77 of a share of ScanSoft common stock, and (ii) $2.20 of cash, for each share of Nuance common stock to be received by the holders of Nuance common stock pursuant to the merger was fair, from a financial point of view, to the holders of Nuance common stock, other than affiliates of Nuance (a copy of such written opinion is attached asAnnex C to this proxy statement/ prospectus); | |
• | the judgment of the Nuance board of directors, based on arm’s-length negotiations with ScanSoft, that the merger consideration of (i) 0.77 of a share of ScanSoft common stock, and (ii) $2.20 of cash, for each share of Nuance common stock represented the highest price that could be negotiated with ScanSoft; | |
• | the progress of negotiations with a third party that had expressed an interest in acquiring Nuance, including without limitation that (i) the Nuance board of directors determined that the price proposal from the other company was not superior to that offered by ScanSoft, and (ii) the judgment of the Nuance board of directors that further negotiations with the other party would not yield a substantial improvement in terms; | |
• | the prospects for our business and the potential stockholder value that could be expected to be generated if we were to remain an independent, publicly traded company, including our business strategy going forward, our cash reserves, the uncertainty of being able to expand our product lines and sales channels and continued consolidation in our industry and increased competition, especially from competitors with greater name recognition and financial and other resources, and the difficulty of achieving substantial revenue growth; | |
• | the terms and conditions of the merger agreement including: |
• | the fact that the merger agreement enables the Nuance board of directors, in the exercise of its fiduciary duties, to authorize Nuance to participate in discussions and negotiations with and furnish non-public information to a third party in connection with an unsolicited bid to acquire Nuance, change its recommendation in favor of the merger with ScanSoft, and potentially enter into a transaction with another acquirer, subject to certain limitations as set forth in the merger agreement, and in certain circumstances, subject to the payment of a termination fee of $6.63 million, which constitutes approximately 3% of the merger consideration; |
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• | Nuance is not obligated to pay the $6.63 million termination fee upon a termination of the merger agreement due to the Nuance stockholders failing to approve the merger unless prior to such termination there has been public disclosure of an acquisition proposal and within 12 months following the termination of the merger agreement, Nuance consummates an acquisition or enters into an agreement providing for an acquisition of Nuance; and | |
• | the limited number and nature of the conditions to ScanSoft’s obligation to close the merger and the limited risk of non-satisfaction of such conditions; |
• | the intent that the stock portion of the merger consideration be tax-free to Nuance’s U.S. stockholders; | |
• | the competitive and market environments in which Nuance and ScanSoft operate; | |
• | the results of the due diligence investigation of ScanSoft conducted by Nuance’s management, financial advisor, accountants and legal counsel; | |
• | the Nuance board of directors’ own knowledge of Nuance, ScanSoft and their respective businesses; and | |
• | the likelihood the merger will be completed on a timely basis, including the likelihood that the merger will be approved by the appropriate regulatory authorities. |
• | the risks that the integration of the businesses, products and personnel of the two companies will not be successfully implemented and may require a significant amount of management time and resources; | |
• | the risk that the potential synergies and cost-saving opportunities identified by ScanSoft and Nuance will not be fully realized or not fully realized in the time frame anticipated; | |
• | in the event that the transaction is not consummated, the possible negative effects of the announcement of the merger on our relationships with customers and suppliers, employee morale and potential loss of key employees, and the impact on our sales, operating results and stock price, and the negative impact that the transaction costs incurred in connection with the proposed merger would have on our cash reserves and operating results; | |
• | the possibility that the reactions of existing and potential competitors to the combination of the two businesses could adversely impact the competitive environment in which the companies operate; | |
• | because Nuance stockholder will receive shares of ScanSoft common stock as part of the merger consideration, the price volatility of ScanSoft’s common stock which may reduce the market price of the ScanSoft common stock that Nuance stockholders will receive upon the closing of the merger; | |
• | the restrictions that the merger agreement imposes on actively soliciting competing bids, and the fact we would be obligated to pay a termination fee of $6.63 million in certain circumstances; | |
• | the limitations that the merger agreement imposes on our ability to operate our business until the transaction closes or is terminated; | |
• | the risk of diverting management’s attention from other strategic priorities to implement merger integration efforts; and | |
• | the other risks described in this joint proxy statement/prospectus in the section entitled “Risk Factors.” |
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Opinion of Nuance Financial Advisor |
• | reviewed the merger agreement and certain related documents; | |
• | reviewed certain publicly available business and financial information relating to Nuance and ScanSoft; | |
• | reviewed certain other information relating to Nuance and ScanSoft, including financial forecasts provided to or discussed with Credit Suisse First Boston by Nuance and ScanSoft, and met with |
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the managements of Nuance and ScanSoft to discuss the business and prospects of Nuance and ScanSoft; | ||
• | considered certain financial and stock market data of Nuance and ScanSoft, and compared that data with similar data for other publicly held companies in businesses which Credit Suisse First Boston deemed similar to those of Nuance and ScanSoft; | |
• | considered, to the extent publicly available, the financial terms of certain other business combinations and other transactions which have recently been effected or announced; and | |
• | considered such other information, financial studies, analyses and investigations and financial, economic and market criteria which Credit Suisse First Boston deemed relevant. |
• | their ability to retain key employees; | |
• | the strategic benefits and potential costs savings and other synergies (including the amount, timing and achievability thereof) anticipated to result from the merger; | |
• | the existing technology, products and services of Nuance and ScanSoft and the validity of, and risks associated with, the future technology, products and services of Nuance and ScanSoft; | |
• | their ability to integrate the businesses of Nuance and ScanSoft; and |
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Implied price per Nuance share | $5.46 | |
Implied fully-diluted Nuance equity value | $212 million | |
Implied fully-diluted Nuance aggregate value | $185 million | |
Implied pro forma fully-diluted equity ownership of Nuance stockholders in ScanSoft | 19.1% |
Premium of Price per Share | ||||||||
Implied by Merger | ||||||||
Consideration Over Average | ||||||||
Period ending May 4, 2005 | Average Closing Price | Closing Price | ||||||
May 4, 2005 | $ | 3.05 | 79 | % | ||||
Last 5 trading days | $ | 2.88 | 90 | % | ||||
Last 30 trading days | $ | 2.83 | 93 | % |
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Based on Nuance | Based on Price per | Based on ScanSoft | |||||||||||
Closing Share Price | Share Implied by | Closing Share Price | |||||||||||
on May 4, 2005 | Merger Consideration | on May 4, 2005 | |||||||||||
Multiple of implied fully-diluted aggregate value to: | |||||||||||||
2004 revenues | 1.5x | 3.2x | 2.5x | ||||||||||
2005 estimated revenues | 1.3x | 2.8x | 1.9x | ||||||||||
(Nuance Case 1) | (Nuance Case 1) | ||||||||||||
2005 estimated revenues | 1.4x | 3.0x | |||||||||||
(Nuance Case 2) | (Nuance Case 2) |
Period Prior to and Including May 4, 2005 | Average Closing Price | |||
May 4, 2005 | $ | 3.05 | ||
Last 5 trading days | $ | 2.88 | ||
Last 10 trading days | $ | 2.87 | ||
Last 30 trading days | $ | 2.83 | ||
Last 60 trading days | $ | 3.03 | ||
Last 90 trading days | $ | 3.21 | ||
Last 180 trading days | $ | 3.73 | ||
Last 360 trading days | $ | 4.92 |
Implied Price Per Nuance Share | $ | 4.78 - $6.36 |
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Implied Price Per Nuance Share | $ | 2.69 - $4.00 |
Voice Recognition Software Vendors | Enhanced Services Vendors | |
• ScanSoft, Inc. | • Verisign, Inc. | |
• Intervoice, Inc. | • Comverse Technology, Inc. | |
• Brooktrout, Inc. | • Openwave Systems Inc. | |
• Fonix Corporation | • Ulticom, Inc. |
Fully-Diluted Aggregate | Price per Share/ | ||||||||||||||||
Value/ Revenues | Earnings per Share | ||||||||||||||||
2005E | 2006E | 2005E | 2006E | ||||||||||||||
Voice recognition software companies: | |||||||||||||||||
Multiple range | 1.0x - 1.9x | 0.9x - 1.7x | 17.6x - 81.3x | 12.5x - 29.5x | |||||||||||||
Enhanced services companies: | |||||||||||||||||
Multiple range | 2.0x - 3.7x | 1.7x - 3.1x | 20.7x - 46.4x | 15.6x - 31.8x |
Implied Price per | |||||
Nuance Share | |||||
Multiple of: | |||||
Fully-diluted aggregate value to Nuance Case 1 estimated revenues for 2005 and 2006 | $ | 2.55 - $4.51 | |||
Fully-diluted aggregate value to Nuance Case 2 estimated revenues for 2005 and 2006 | $ | 2.42 - $3.98 | |||
Share price to Nuance Case 1 estimated earnings per share for 2006 | $ | 2.68 - $4.74 |
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Announcement Date | Target | Acquiror | ||||
04/07/05 | Concord Communications, Inc. | Computer Associates International, Inc. | ||||
03/22/05 | Eidos plc | SCi Entertainment Group Plc | ||||
03/21/05 | Lenel Systems International, Inc. | United Technologies Corporation | ||||
03/07/05 | Marlborough Stirling Plc | Vertex Data Science Limited | ||||
03/01/05 | Blue Martini Software, Inc. | Multi-Channel Holdings, Inc. | ||||
02/22/05 | JDV Ltd. | IWL Ltd. | ||||
02/17/05 | Financial Models Company Inc. | SS&C Technologies, Inc. | ||||
01/27/05 | MAPICS, Inc. | Infor Global Solutions, Inc. | ||||
01/25/05 | Corio, Inc. | IBM Corp. | ||||
01/24/05 | Speedware Corp., Inc. | Activant Solutions, Inc. | ||||
01/18/05 | Cedara Software Corp. | Merge eFilm | ||||
01/18/05 | IMPAC Medical Systems, Inc. | Elekta AB | ||||
01/07/05 | Vastera Inc. | JP Morgan Chase and Company | ||||
01/04/05 | Tecnomatix Technologies, Ltd | UGS Corp. | ||||
12/29/04 | Financial Models Company Inc. | 1066821 Ontario, Inc. | ||||
12/17/04 | BHC Investments (Fiserv) Inc. | Fidelity Investments | ||||
12/03/04 | i-Many, Inc. | Selectica, Inc. | ||||
12/01/04 | Nassda Corporation | Synopsys Inc. | ||||
11/15/04 | Digital Illusions CE AB | Electronic Arts Inc. | ||||
11/15/04 | Phonetic Systems, Ltd | ScanSoft, Inc. | ||||
11/15/04 | Alphameric PLC-Retail Division | Torex Retail PLC | ||||
11/08/04 | Yayoi Co., Ltd. | Livedoor Co., Ltd. | ||||
11/08/04 | Mosaic Software Holdings Limited | S1 Corp. | ||||
10/20/04 | nCUBE Corp. | C-COR Inc. | ||||
10/06/04 | Netegrity, Inc. | Computer Associates International, Inc. | ||||
10/06/04 | Encoda Systems Holdings, Inc. | Harris Corp. | ||||
10/05/04 | QAS Ltd. | Experian, Inc. | ||||
10/05/04 | AD OPT Technologies Inc. | Kronos Inc. | ||||
06/29/04 | Inet Technologies, Inc. | Tektronix, Inc. | ||||
04/29/04 | Marimba, Inc. | BMC Software, Inc. | ||||
03/25/04 | DigitalThink, Inc. | Convergys Corp. | ||||
01/29/04 | Poorman-Douglas Corp. | EPIQ systems, Inc. | ||||
01/28/04 | Sanchez Comp. Assoc., Inc. | Fidelity National Financial, Inc. | ||||
01/23/04 | FreeMarkets, Inc. | Ariba, Inc. |
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Fully-Diluted Aggregate | Price per Share/ | |||||||||||||||
Value/ Revenues | Earnings per Share | |||||||||||||||
LTM | NTM | LTM | NTM | |||||||||||||
Multiple range | 0.8x - 8.9x | 0.6x - 8.3x | 13.5x - 206.3x | 15.8x - 58.6x |
Implied Price Per Nuance Share | $ | 1.44 - $6.20 |
Premium Over | Premium Over | |||||||
Stock Price One | Stock Price Thirty | |||||||
Day Prior to | Days Prior to | |||||||
207 Global Technology Transactions | Transaction | Transaction | ||||||
25thPercentile | 13.8 | % | 16.7 | % | ||||
Median Premium | 26.2 | % | 35.4 | % | ||||
Mean Premium | 34.4 | % | 39.9 | % | ||||
75thPercentile | 43.4 | % | 57.0 | % |
Implied Price Per Nuance Share | $3.43 - $4.62 |
Premium Over | Premium Over | |||||||
Stock Price One | Stock Price Thirty | |||||||
Day Prior to | Days Prior to | |||||||
35 Software Transactions | Transaction | Transaction | ||||||
Mean Premium | 34 | % | 39 | % | ||||
Median Premium | 36 | % | 42 | % |
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Implied Price Per Nuance Share | $ | 3.53 - $4.88 |
Implied Price Per Nuance Share | $3.59 - $4.42 | |||
Implied Exchange Ratio | 0.847x - 1.042x |
Percentage Accretion/ | |||||
(Dilution) | |||||
Estimated pro forma earnings per share for the 12 months period ending September 30, 2006 based on: | |||||
Nuance Case I (including estimated synergies) | 12.9 | % | |||
Nuance Case I (excluding estimated synergies) | (13.5 | )% | |||
Nuance Case II (including estimated synergies) | (0.2 | )% | |||
Nuance Case II (excluding estimated synergies) | (26.6 | )% |
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Interests of ScanSoft Directors and Executive Officers in the Merger and the Warburg Pincus Financing |
Interests of Nuance Directors and Executive Officers in the Merger |
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Aggregate | Aggregate | Weighted | Weighted | |||||||||||||||||||||||||
Shares of | Aggregate | Aggregate | Shares | Average | Average | |||||||||||||||||||||||
Nuance | Shares | Shares | Subject | Exercise | Exercise | |||||||||||||||||||||||
Common | Subject to | Subject | to | Price of | Price of | |||||||||||||||||||||||
Stock | Options | to Vested | Unvested | Outstanding | Vested | Relationship to | ||||||||||||||||||||||
Name | Outstanding | Outstanding | Options | Options | Options | Options | Nuance | |||||||||||||||||||||
Berger, Charles | 0 | 1,484,000 | 720,454 | 763,546 | $ | 2.41 | $ | 2.18 | Executive Officer & Director | |||||||||||||||||||
Bergeron, Sandra | 0 | 50,000 | 20,832 | 29,168 | $ | 2.98 | $ | 2.98 | Director | |||||||||||||||||||
Carlson, Curtis | 0 | 90,000 | 85,000 | 5,000 | $ | 8.04 | $ | 8.26 | Director | |||||||||||||||||||
Croen, Ronald | 330,333 | 1,028,236 | 993,232 | 35,004 | $ | 6.19 | $ | 6.31 | Director | |||||||||||||||||||
Federman, Irwin | 40,000 | 90,000 | 85,000 | 5,000 | $ | 8.04 | $ | 8.26 | Director | |||||||||||||||||||
Herzig, Alan | 76,333 | 115,000 | 110,000 | 5,000 | $ | 6.78 | $ | 6.89 | Director | |||||||||||||||||||
Morgenthaler, Gary | 89,419 | 90,000 | 84,999 | 5,001 | $ | 8.04 | $ | 8.26 | Director | |||||||||||||||||||
Nagel, David | 0 | 50,000 | 37,498 | 12,502 | $ | 4.39 | $ | 4.39 | Director | |||||||||||||||||||
Quigley, Phillip | 7,000 | 160,000 | 155,000 | 5,000 | $ | 7.12 | $ | 7.20 | Director | |||||||||||||||||||
Blasing, Karen | 0 | 310,000 | 154,062 | 155,938 | $ | 5.24 | $ | 5.50 | Executive Officer | |||||||||||||||||||
Cross, Glenn | 0 | 200,000 | 58,333 | 141,667 | $ | 4.26 | $ | 4.26 | Executive Officer | |||||||||||||||||||
Lee, Eng Yew | 10,024 | 255,209 | 172,709 | 82,500 | $ | 6.98 | $ | 7.74 | Executive Officer | |||||||||||||||||||
Neilsson, Douglas Clark | 1,944 | 205,000 | 54,166 | 150,834 | $ | 6.21 | $ | 7.87 | Executive Officer | |||||||||||||||||||
Sharp, R. Douglas | 2,000 | 258,730 | 126,186 | 132,544 | $ | 5.74 | $ | 6.87 | Executive Officer | |||||||||||||||||||
Smith, Lynda Kate | 6,000 | 350,000 | 208,853 | 141,147 | $ | 6.10 | $ | 6.81 | Executive Officer | |||||||||||||||||||
Taylor, Donna | 14,085 | 316,250 | 239,895 | 76,355 | $ | 7.26 | $ | 8.04 | Executive Officer |
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(i) No gain or loss will be recognized by a Nuance stockholder who receives ScanSoft common stock in exchange for Nuance common stock, except that gain realized will be recognized to the extent of cash received in the merger; |
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(ii) The tax basis of the ScanSoft common stock received by a Nuance stockholder in the merger will be the same as the tax basis in the Nuance common stock exchanged therefor, increased by the gain recognized and reduced by the cash consideration received in the merger and the tax basis allocable to fractional shares; | |
(iii) The holding period of the ScanSoft common stock received by a Nuance stockholder in the merger will include the holding period of the Nuance common stock exchanged therefore; | |
(iv) No gain or loss will be recognized by Nuance or ScanSoft in the merger; and | |
(v) In the case of cash received in lieu of fractional shares, such fractional shares shall be treated as having been issued and then immediately redeemed for cash in a separate transaction. The sale of a fractional share generally will result in capital gain or loss to the stockholder measured by the difference between the proceeds of the sale and the basis of the fractional share. Any such capital gain will be long term capital gain if the Nuance stockholder’s holding period for his or her Nuance stock is more than one year. |
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• | an effective registration statement under the Securities Act covering the resale of those shares; | |
• | an exemption under paragraph (d) of Rule 145 under the Securities Act; or | |
• | any other applicable exemption under the Securities Act. |
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Structure of the Merger |
Effective Time and Timing of Closing |
Merger Consideration |
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Reorganization for Tax Purposes; Tax Adjustment |
Fractional Shares |
Exchange of Nuance Stock Certificates for ScanSoft Stock Certificates |
• | certificates representing the number of whole shares of ScanSoft common stock to which they are entitled pursuant to the merger agreement; | |
• | cash representing the cash portion of the consideration to which they are entitled pursuant to the merger agreement; and | |
• | cash in lieu of any fractional share of ScanSoft common stock. |
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Appraisal Rights |
Distributions with Respect to Unexchanged Shares; Adjustments |
Transfers of Ownership and Lost Stock Certificates |
Treatment of Nuance Stock Options |
• | each such option will be exercisable for such whole number of shares of ScanSoft common stock (rounded down to the nearest share) equal to the product obtained by multiplying the number of shares of Nuance common stock issuable upon the exercise of such option, by the “option exchange ratio,” and |
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• | the exercise price per share for the ScanSoft common stock shall be equal to the quotient (rounded up to the nearest cent) of the exercise price per share for such option, divided by the “option exchange ratio.” |
• | each such assumed option will be exercisable for that such number of shares of ScanSoft common stock equal to the number of shares of Nuance common stock issuable upon exercise of such option, multiplied by 0.77, and an amount of cash equal to the number of shares of Nuance common stock issuance upon exercise of such option, multiplied by $2.20, and | |
• | the exercise price per share for the ScanSoft common stock and cash shall be equal to the quotient of the exercise price per share for such option, divided by 0.77. |
Treatment of Rights Under the Nuance Stock Purchase Plan |
Treatment of Unvested Nuance Common Stock |
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Representations and Warranties |
• | corporate organization, qualifications to do business, corporate standing and corporate power; | |
• | absence of any breach of the certificate of incorporation and bylaws and the certificates of incorporation, bylaws and similar organizational documents of subsidiaries; | |
• | ownership of subsidiary capital stock and the absence of restrictions or encumbrances with respect to the capital stock of any significant subsidiary; | |
• | capitalization; | |
• | corporate authorization to enter into and consummate the transactions contemplated by the merger agreement and the enforceability of the merger agreement; | |
• | governmental and regulatory approvals required to complete the merger; | |
• | absence of any conflict or violation of any applicable legal requirements, corporate charter and bylaws, and the charter, bylaws and similar organizational documents of subsidiaries as a result of entering into and consummating the transactions contemplated by the merger agreement; | |
• | the effect of entering into and consummating the transactions contemplated by the merger agreement on material contracts; | |
• | filings and reports with the SEC; | |
• | financial statements; | |
• | the absence of undisclosed liabilities; | |
• | absence of any material adverse change or certain other changes in each party’s respective businesses between the date of such party’s last audited balance sheet and May 9, 2005, the date of the merger agreement; | |
• | taxes; | |
• | intellectual property; | |
• | compliance with applicable laws; | |
• | possession of and compliance with permits required for the operation of business; | |
• | litigation; | |
• | payment, if any, required to be made to brokers and agents on account of the merger; | |
• | transactions with affiliates; | |
• | employee benefit plans and labor relations; | |
• | real property and environmental matters; | |
• | existence of material contracts and absence of breaches of material contracts; |
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• | accuracy of information supplied in this joint proxy statement/prospectus and the related registration statement filed by ScanSoft with the SEC; | |
• | insurance policies in place; | |
• | approvals by the board of directors; | |
• | the taking of any action necessary so that the transactions contemplated by the merger agreement, including the merger, will not result in the grant of any rights to any person under each of the party’s respective rights plans; and | |
• | the receipt of a fairness opinion. |
• | the inapplicability of certain state takeover statutes to ScanSoft during the pendency of the merger agreement. |
• | the sufficiency of cash on hand at closing to pay the full aggregate amount of the cash consideration in the merger, and the effectiveness of the agreements entered into in connection with the Warburg Pincus financing. |
Covenants of Nuance |
• | entering into any new line of business; | |
• | declaring, setting aside or paying dividends or making any other distributions, subject to certain exceptions relating to distributions by subsidiaries of Nuance and repurchases of unvested shares at cost under stock option or purchase agreements existing as of May 9, 2005 to which an employee is party; | |
• | purchasing, redeeming or acquiring its capital stock or the capital stock of its subsidiaries other than repurchases of unvested shares at cost under stock option or purchase agreements existing as of May 9, 2005 to which an employee is party; | |
• | issuing, delivering, selling, authorizing or encumbering its capital stock, or securities convertible into its capital stock, or entering into any agreement or obligation to do the same, subject to certain exceptions, including (i) the issuance of shares in connection with option or warrant exercises and |
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pursuant to the Nuance employee stock purchase plan, (ii) the granting of stock options in the ordinary course of business and consistent with past practices to newly hired employees, and (iii) the granting of stock options to purchase up to 250,000 shares of Nuance common stock in the ordinary course of business and consistent with past practices to other non-executive officer employees; | ||
• | modifying or amending its certificate of incorporation and bylaws or the certificate of incorporation, bylaws or similar organizational documents of its subsidiaries; | |
• | acquiring or agreeing to acquire by merger or consolidation with, or by purchasing any equity or voting interest in or a portion of the assets of, any business of any person or entity, or otherwise acquiring any assets outside of the ordinary course of business; | |
• | entering into binding agreements, agreement in principles, letters of intent, memorandums of understanding or similar agreements with respect to any joint venture, strategic partnership or alliance, other than in connection with certain customer arrangements; | |
• | selling, leasing, licensing, encumbering or otherwise disposing of any property material to its business, except (i) sales of inventory in the ordinary course of business consistent with past practice, (ii) the sale, lease or disposition (other than through licensing) of property or assets which are not material, individually or in the aggregate, to the business of Nuance and its subsidiaries, (iii) the sale of goods or non-exclusive licenses of intellectual property in the ordinary course of business and consistent with past practices, and (iv) dispositions of other immaterial assets in the ordinary course of business and consistent with past practices; | |
• | making any loans, advances or capital contributions to, or investments in, any other person, other than employee advances for travel, business and entertainment expenses made in the ordinary course of business consistent with past practice, provided such employee loans are in compliance with applicable law; | |
• | making any material change in its methods or principles of accounting since December 31, 2004, except as required by generally accepted accounting principles or the SEC; | |
• | making or changing any material tax election or adopting or changing any accounting method; | |
• | revaluing any of its assets, except as required by generally accepted accounting principles or the SEC; | |
• | paying, discharging, settling or satisfying any claims (including any tax claim), liabilities or obligations, or litigation (whether or not commenced prior to May 9, 2005, the date of the merger agreement) other than (i) in the ordinary course of business consistent with past practice, or the payment of obligations incurred in the ordinary course of business in accordance with their terms, or (ii) the payment of obligations required by an agreement existing as of May 9, 2005 in accordance with its terms; | |
• | knowingly waiving the benefits of, agreeing to modify in any manner, terminating, releasing any person from or knowingly fail to enforce any confidentiality or similar agreement to which Nuance or any of its subsidiaries is a party or a beneficiary; | |
• | except as required by applicable law or existing contract, increasing the compensation of, or making severance or termination payment to, any director or officer or other key employee of Nuance; or making any increase in or commitment to increase any Nuance employee benefit plan, subject to certain exceptions; | |
• | waiving any stock repurchase rights, accelerating, amending or changing the period of exercisability of any options to purchase shares of Nuance common stock, or repricing any options or authorizing cash payments in exchange for any option to purchase shares of Nuance common stock; |
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• | entering into any employment, severance, termination or indemnification agreement with any Nuance employee or entering into any collective bargaining agreement, subject to certain exceptions, including the entering into offer letters and letter agreements in the ordinary course of business and consistent with past practices with employees who are terminable “at will”; | |
• | making any material oral or written representation or commitment with respect to any material aspect of any Nuance employee benefit plan that is not materially in accordance with the existing written terms and provision of such Nuance employee benefit plan; | |
• | granting any stock appreciation right, phantom stock award, stock-related award or performance award to any person; | |
• | entering into any agreement with any Nuance employee, the benefits of which are contingent or the terms of which are materially altered in favor of the Nuance employee upon the occurrence of a change in control; | |
• | granting any exclusive rights with respect to any intellectual property of Nuance, subject to certain exceptions with respect to custom work product; | |
• | entering into or renewing any contracts containing any non-competition, exclusivity or other material restrictions on Nuance or the combined company following the closing of the merger, subject to certain exceptions with respect to custom work product; | |
• | entering into any agreement or commitment the effect of which would be to grant to a third party following the merger any actual or potential right of license to any intellectual property owned by ScanSoft or any of its subsidiaries; | |
• | hiring or offering to hire employees, subject to certain limited exceptions; | |
• | incurring any indebtedness for borrowed money or guarantee any such indebtedness of another person or issuing or selling any debt securities or any option to acquire any such debt securities; | |
• | making any individual or series of related payments outside of the ordinary course of business or commit to make capital expenditures in excess of $200,000 individually and $500,000 in the aggregate during any three month period; | |
• | modifying, terminating or amending in any material respect any lease, sublease or material contract of Nuance, subject to limited exceptions, or knowingly waiving, releasing or assigning any material rights or claims thereunder; | |
• | entering into any contract outside of the ordinary course of business, or requiring Nuance or any of its subsidiaries to pay in excess of an aggregate of $500,000 under each agreement; and | |
• | agreeing in writing or otherwise to take any of the foregoing actions. |
Covenants of ScanSoft |
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• | causing, permitting or proposing any amendments to its certificate of incorporation or bylaws or the certificate of incorporation or bylaws of its subsidiaries that would materially impair or adversely affect the ability of ScanSoft to consummate the merger; | |
• | declaring, setting aside or paying any dividends on or make any other distributions in respect of any ScanSoft capital stock unless the exchange ratio is appropriately adjusted; | |
• | adopting a plan of liquidation or dissolution; | |
• | purchasing, redeeming or otherwise acquiring, directly or indirectly, shares of its or its subsidiaries’ capital stock for an aggregate repurchase price in excess of $5,000,000, except repurchases of unvested shares at cost in connection with the termination of the employment relationship with any employee pursuant to stock option or purchase agreements in effect on May 9, 2005, the date of the merger agreement; | |
• | performing any acquisition that is in excess of $15,000,000 individually or $45,000,000 in the aggregate, or that is likely to materially delay the merger; | |
• | causing, permitting or proposing any material amendment to the agreements related to the Warburg Pincus financing; | |
• | issue or agree to issue a material amount of its capital stock or securities convertible into common stock, subject to limited exceptions, including (i) pursuant to ScanSoft’s stock option plans, (ii) pursuant to convertible securities outstanding as of May 9, 2005, (iii) in conjunction with employment or consulting arrangements, and (iv) pursuant to the Warburg Pincus financing; | |
• | except as required by GAAP or the SEC, revaluing any of its assets or making any change in accounting methods, principles or practices; | |
• | adopting any resolution that is intended to treat the shares of ScanSoft common stock issued pursuant to the merger differently under the ScanSoft’s rights agreement than other outstanding shares of ScanSoft common stock, subject to certain exceptions; and | |
• | agreeing in writing or otherwise to take any of the foregoing actions. |
Other Covenants |
• | Preparation of Registration Statement and Proxy Statement. Nuance and ScanSoft agreed to promptly prepare and file the joint proxy statement/prospectus included as part of the registration statement, and ScanSoft agreed to promptly prepare and file the registration statement following the execution of the merger agreement. Both parties also agreed to use commercially reasonable efforts to have the registration statement declared effective by the SEC as promptly as practicable, and ScanSoft agreed to take any action required by applicable state securities laws. Nuance agreed to furnish information regarding Nuance and its stockholders as reasonably required. | |
• | Meeting of Stockholders. Nuance agreed to take all actions necessary to hold the Nuance special meeting to consider and vote upon the adoption of the merger agreement and the approval of the merger. ScanSoft agreed to take all actions necessary to hold the ScanSoft special meeting to consider and vote upon the approval of the issuance of shares of ScanSoft common stock in connection with the merger, the Warburg Pincus financing, and the assumption of the options in the merger. | |
• | Treatment as a Reorganization. ScanSoft, Nova Acquisition Corporation, Nova Acquisition LLC and Nuance have agreed not to, and agreed not to permit any of their respective subsidiaries to, |
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take any action prior to or following the closing that would reasonably be expected to cause the merger to fail to qualify as a reorganization within Section 368(a) of the Internal Revenue Code. | ||
• | Stock Exchange Listing. ScanSoft has agreed to use all commercially reasonable efforts to authorize for listing on the NASDAQ National Market the shares of ScanSoft common stock issuable in connection with the merger, subject to official notice of issuance. | |
• | Access to Information. Each party has agreed to afford the other party’s accountants, counsel and other identified representatives reasonable access during normal business hours to its properties, books, records and personnel during the period prior to the effective time of the merger to obtain all reasonable information concerning its business as may be reasonably requested, except as prohibited or restricted by applicable law or the confidentiality agreement between the parties. | |
• | Public Announcements. Nuance and ScanSoft have agreed to consult with one another before issuing any press release or otherwise making any public statements about the merger or related transactions, unless otherwise required by any applicable laws or regulations. | |
• | Notification of Certain Matters. ScanSoft and Nuance each agreed to give prompt notice to the other of any representation or warranty in the merger agreement becoming untrue or inaccurate, or any failure to comply with or satisfy in any material respect any covenant or condition to be complied with or satisfied under the merger agreement, in each case where the respective party could not satisfy the closing condition with respect to representations or warranties. | |
• | Affiliates. Nuance has agreed to use all commercially reasonable efforts to obtain a letter agreement from all Nuance stockholders who may be affiliates of Nuance or ScanSoft pursuant to which those stockholders would, among other things, agree not to transfer shares of ScanSoft common stock they receive pursuant to the merger in violation of the Securities Act and related rules and regulations. | |
• | Third Party Consents. Nuance has agreed to use all commercially reasonable efforts to obtain any material consents, waivers or approvals under any of its contracts which are required to be obtained in connection with the consummation of the merger. | |
• | Form S-8 Filing. ScanSoft has agreed to file with the SEC a registration statement on Form S-8 covering the shares of ScanSoft common stock issuable upon exercise of ScanSoft stock options resulting from the assumption of Nuance stock options in the merger. | |
• | Termination of 401(k) Plans and Other Plans. Nuance has agreed to adopt resolutions to terminate its 401(k) and other group severance, separation and salary continuation plans effective no later than the date immediately preceding the effective date of the merger, if so requested by ScanSoft, no later than 5 days prior to the effective date of the merger. | |
• | Nuance Rights Plan. Nuance shall not redeem its rights plan or amend, modify or terminate its rights plan, unless it is required to do so by order of a court of competent jurisdiction or the Nuance board has concluded, in good faith, after receipt of advice from outside counsel, that, in light of a superior offer with respect to it, the failure to effect such amendment, modification or termination is reasonably likely to result in a breach of the Nuance board’s fiduciary obligations to its stockholders under applicable law. | |
• | Section 16 Matters. Provided that Nuance delivers to ScanSoft certain information, ScanSoft and Nuance have agreed to take all such steps as may be required to cause any dispositions of Nuance common stock resulting from the transactions contemplated by the merger agreement by each individual who is subject to the reporting requirements of Section 16(b) of the Exchange Act with respect to Nuance to be exempt under Rule 16b-3 promulgated under the Exchange Act. |
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• | Disqualified Individuals. Within five business days prior to the closing of the merger, Nuance shall deliver to ScanSoft a schedule which sets forth each person who Nuance reasonably believes is, with respect to Nuance or any Nuance ERISA affiliate, a “disqualified individual” within the meaning of Section 280G of the Internal Revenue Code and the regulations promulgated thereunder. | |
• | Spreadsheet. Nuance shall deliver to ScanSoft at or prior to the closing of the merger a spreadsheet that sets forth (i) the names of all holders of Nuance options and unvested shares and their respective address and taxpayer identification number, (ii) the number of shares of Nuance common stock subject to Nuance options and the number of unvested shares held by such persons, (iii) the exercise price per share in effect for each Nuance option, (iv) the vesting status and schedule with respect to each Nuance option and the unvested shares held by such persons, and (v) the tax status of each Nuance option under Section 422 of the Internal Revenue Code. |
Name Change and Trading Symbol |
Indemnification and Insurance |
Employee Benefits |
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Board of Directors of ScanSoft Following the Merger |
Regulatory Approvals |
• | those filings or submissions required under the Hart-Scott-Rodino Act, as well as any other comparable merger notification or control laws of any applicable jurisdiction, as agreed by the parties; and | |
• | any filings required under the Securities Act, the Exchange Act, any applicable state or securities or “blue sky” laws and the securities laws of any foreign country. |
• | consult with the other with respect to the filings or submissions described above, coordinate with the other in preparing and exchanging information with respect to such filing or submissions and provide the other party an opportunity to review and comment on such filings or submissions; | |
• | promptly notify the other upon the receipt of any comments or requests for amendments or supplements to any filings or submissions made pursuant to, or information provided to comply with, any applicable laws, regulations and any other requirements of any governmental entity; and | |
• | promptly provide the other copies of any filing or submission made with any governmental entity. |
Commercially Reasonable Efforts to Obtain Regulatory Approvals |
Conditions to Completion of the Merger |
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• | the merger agreement shall have been adopted and the merger shall have been duly approved by the stockholders of Nuance as required under applicable law and marketplace rules; | |
• | both the issuance of shares of ScanSoft common stock in the merger and the Warburg Pincus financing shall have been duly approved by the stockholders of ScanSoft, as required under applicable law and marketplace rules; | |
• | no law, regulation or order has been enacted or issued by a governmental entity of competent jurisdiction which is in effect and has the effect of making the merger, the issuance of shares of ScanSoft common stock in the merger or the Warburg Pincus financing illegal or otherwise prohibiting completion of the merger, the issuance of shares of ScanSoft common stock in the merger or the Warburg Pincus financing; | |
• | the SEC has declared ScanSoft’s registration statement, of which this joint proxy statement/prospectus is a part, effective, and no stop order suspending its effectiveness has been issued and no proceedings for suspension of the registration statement’s effectiveness, or a similar proceeding in respect of this joint proxy statement/prospectus, has been initiated or threatened in writing by the SEC; | |
• | all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act with respect to the merger and the Warburg Pincus financing have expired or terminated early and all foreign antitrust approvals required to be obtained prior to the merger have been obtained; | |
• | there is no pending suit, action or proceeding asserted by any governmental agency (i) challenging or seeking to restrain or prohibit the consummation of the merger, the issuance of shares of ScanSoft common stock in the merger or the Warburg Pincus financing or (ii) seeking to require ScanSoft or Nuance to effect an action of divestiture, and no specified governmental authority shall have made any statement or communication that would reasonably be construed to indicate a governmental authority is likely to commence any such suit, action or proceeding; | |
• | ScanSoft and Nuance have each received from its respective tax counsel an opinion to the effect that the merger will constitute a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code, and such opinions have not been withdrawn, provided that if one of their counsels does not render such an opinion, the opinion of the other counsel shall satisfy this condition; and | |
• | the shares of ScanSoft common stock to be issued pursuant to the merger have been authorized for listing on the NASDAQ National Market, subject to official notice of issuance. |
• | the representations and warranties of the other party were true and correct on May 9, 2005 and are true and correct as of the date the merger is to be completed as if made at and as of that time, except: |
• | to the extent the representations and warranties of the other party address matters only as of a particular date, then they must be true and correct as of that date; and | |
• | if any of the representations and warranties are not true and correct but the failure of such representations or warranties to be true and correct have not resulted, and would not reasonably be expected to result in, individually or in the aggregate with other such failures to be true and correct, a material adverse change, as defined below, to the other party; |
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• | the other party has performed or complied in all material respects with all of its agreements and covenants required by the merger agreement to be performed or complied with by it before completion of the merger; and | |
• | no material adverse change, as defined below, on the other party has occurred since May 9, 2005 and is continuing. |
Alternative Transactions — Nuance |
• | solicit or initiate, or knowingly encourage, knowingly facilitate or induce the making, submission or announcement of any acquisition proposal, as defined below; | |
• | participate in any discussions or negotiations regarding, or furnish to any person any nonpublic information with respect to, or take any other action to facilitate or induce any inquiries or the making of any proposal that constitutes, or that may reasonably be expected to lead to any acquisition proposal; | |
• | engage in any discussions with any person with respect to any acquisition proposal, except as provided below; | |
• | approve, endorse or recommend any acquisition proposal, except as provided below; or | |
• | enter into any letter of intent, agreement or commitment regarding any acquisition proposal. |
• | furnish nonpublic information with respect to Nuance pursuant to a confidentiality agreement containing customary limitations and with terms at least as restrictive as the confidentiality agreement in place between ScanSoft and Nuance, provided that Nuance gives concurrent written notice to ScanSoft of its intention to furnish this information and furnishes such nonpublic information to ScanSoft (to the extent such nonpublic information has not been previously so furnished); and | |
• | engage in discussions or negotiations with the third party with respect to the acquisition proposal, provided that it gives ScanSoft concurrent written notice of its intention to enter into such negotiations; |
• | the Nuance board of directors has concluded in good faith, following the receipt of the advice of its outside legal counsel, that such action is required for it to comply with its fiduciary duties to its stockholders under applicable law; and | |
• | the Nuance board of directors has in good faith concluded, following the receipt of the advice of its financial advisor, that such acquisition proposal is, or is reasonably likely to result in, a superior offer, as defined below. |
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• | any purchase or acquisition by any person or group of more than a 15% interest in the total outstanding voting securities of Nuance or any of its subsidiaries or any tender offer or exchange offer that, if consummated, would result in any person or group beneficially owning 15% or more of the total outstanding voting securities of Nuance or any of its subsidiaries; | |
• | any merger, consolidation, business combination or similar transaction involving Nuance or any of its subsidiaries; | |
• | any sale, lease (other than in the ordinary course of business), exchange, transfer, exclusive or other material license outside the ordinary course of business, acquisition or disposition of more than 15% of the assets of Nuance (including its subsidiaries taken as a whole); or | |
• | any liquidation or dissolution of Nuance. |
Nuance Board of Directors Recommendations |
• | to unanimously recommend that its stockholders vote in favor of the adoption of the merger agreement and approval of the merger; and | |
• | not to withdraw, amend or modify, or to propose to withdraw amend or modify, its unanimous recommendation of the merger in a manner adverse to ScanSoft. |
• | such superior offer has been made and has not been withdrawn; | |
• | the Nuance special meeting of stockholders has not occurred; |
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• | Nuance has delivered to ScanSoft (i) a written notice at least five business days before effecting its change of recommendation, which notice states that Nuance has received a superior offer and the material terms of such offer, including the identity of the person or persons making such offer, that the Nuance board of directors intends to change its recommendation and the manner in which it intends to do so or may intend to do so, (ii) provided to ScanSoft a copy of all written materials delivered to the person or group making the superior offer in connection with such superior offer, and (iii) made available to ScanSoft all materials and information made available to the person or group making the superior offer in connection with such superior offer (to the extent such material and information has not been previously furnished); | |
• | the Nuance board of directors has not breached any of its non-solicitation obligations under the merger agreement; and | |
• | the Nuance board of directors has concluded in good faith, after receipt of advice of its legal counsel, that, in light of such superior offer, the change of recommendation is required in order for the Nuance board of directors to comply with its fiduciary duties to Nuance’s stockholders under applicable law. |
Non-Solicitation — ScanSoft |
• | solicit or initiate, or knowingly encourage, knowingly facilitate or induce the making, submission or announcement of any ScanSoft acquisition proposal, as defined below; | |
• | participate in any discussions or negotiations regarding, or furnish to any person any nonpublic information with respect to, or take any other action to facilitate or induce any inquiries or the making of any proposal that constitutes, or that may reasonably be expected to lead to any ScanSoft acquisition proposal; | |
• | engage in any discussions with any person with respect to any acquisition proposal, except as provided below; | |
• | approve, endorse or recommend any ScanSoft acquisition proposal, except as provided below; or | |
• | enter into any letter of intent, agreement or commitment regarding any ScanSoft acquisition proposal. |
• | furnish nonpublic information with respect to ScanSoft, provided that prior to furnishing such information ScanSoft notifies Nuance of its intention to furnish this information; |
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• | engage in negotiations with the third party with respect to the ScanSoft acquisition proposal, provided that it provides Nuance concurrent written notice of its intention to enter into negotiations; and | |
• | enter into any letter of intent or similar document or any contract relating to any ScanSoft acquisition proposal, provided that ScanSoft may not enter into any such letter of intent or contract if the terms of such transaction would be reasonably expected to materially interfere with or materially delay the consummation of the merger. |
• | any purchase or acquisition by any person or group of more than a 50% interest in the total outstanding voting securities of ScanSoft or any of its subsidiaries or any tender offer or exchange offer that, if consummated, would result in any person or group beneficially owning 50% or more of the total outstanding voting securities of ScanSoft or any of its subsidiaries; | |
• | any merger, consolidation, business combination or similar transaction involving ScanSoft or any of its subsidiaries where the stockholders of ScanSoft prior to such transaction would own less than 50% of the equity interests of the surviving entity after such transaction; | |
• | any sale, lease (other than in the ordinary course of business), exchange, transfer, exclusive or other material license outside the ordinary course of business, acquisition or disposition of more than 15% of the assets of ScanSoft (including its subsidiaries taken as a whole); or | |
• | any liquidation or dissolution of ScanSoft. |
ScanSoft Board of Directors Recommendations |
• | unanimously recommend that its stockholders vote in favor of the issuance of shares of ScanSoft common stock in connection with the merger, the Warburg Pincus financing and the assumption of the Nuance options in the merger; and | |
• | not withdraw, amend or modify, or propose to withdraw amend or modify, its unanimous recommendation of such matters. |
Definition of Material Adverse Change |
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Termination of the Merger Agreement |
• | by mutual written consent of ScanSoft and Nuance; | |
• | by ScanSoft or Nuance if the merger is not completed by January 9, 2006, except that this right to terminate the merger agreement is not available to any party whose action or failure to act has been a principal cause of or resulted in the failure of the merger to occur on or before that date, and the action or failure to act constitutes a breach of the merger agreement; | |
• | by ScanSoft or Nuance, if there is any order of a court or other action or inaction of any governmental entity having the effect of permanently restraining, enjoining or prohibiting the completion of the merger which is final and nonappealable; | |
• | by ScanSoft or Nuance if either the proposal for the issuance of shares of ScanSoft common stock in connection with the merger or the proposal for the Warburg Pincus financing fail to receive the requisite affirmative vote by ScanSoft stockholders at the ScanSoft special meeting or at any adjournment of that meeting, except that the right to terminate the merger agreement is not available to ScanSoft where the failure to obtain ScanSoft stockholder approvals was caused by ScanSoft’s action or failure to act and the action or failure to act constitutes a material breach by ScanSoft of the merger agreement; | |
• | by ScanSoft or Nuance if the proposal for the adoption of the merger agreement and approval of the merger fails to receive the requisite affirmative vote at the Nuance special meeting or at any adjournment of that meeting, except that this right to terminate the merger agreement is not available to Nuance where the failure to obtain Nuance stockholder approval was caused by |
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Nuance’ action or failure to act, and the action or failure to act constitutes a material breach by Nuance of the merger agreement; | ||
• | by ScanSoft, if any of the following “triggering events” occur with respect to Nuance: |
• | the Nuance board of directors withdraws, amends or modifies, in a manner adverse to ScanSoft, its unanimous recommendation described in the section entitled “Agreements Related to the Merger — The Merger Agreement — Nuance Board of Directors Recommendations” beginning on page 99 of this joint proxy statement/prospectus; | |
• | the Nuance board of directors fails to reaffirm (publicly, if ScanSoft requests) its recommendation that its stockholders vote in favor of the adoption of the merger agreement and approval of the merger within 10 business days after being requested in writing by ScanSoft to reaffirm such recommendation; | |
• | the Nuance board of directors approves or recommends any acquisition proposal of the type described in the section entitled “Agreements Related to the Merger — The Merger Agreement — Alternative Transactions — Nuance” beginning on page 98 of this joint proxy statement/prospectus; | |
• | Nuance shall have entered into any letter of intent or similar document or any contract accepting any acquisition proposal of the type described in the section entitled “Agreements Related to the Merger — The Merger Agreement — Alternative Transactions — Nuance” beginning on page 98 of this joint proxy statement/prospectus; or | |
• | a tender or exchange offer relating to Nuance securities is initiated by a third party and Nuance does not send to its securityholders, pursuant to Rule 14e-2 promulgated under the Exchange Act within 10 business days after the tender or exchange offer is first published, sent or given, a statement disclosing that its board of directors recommends rejection of the tender or exchange offer; |
• | by Nuance upon a breach of any representation, warranty, covenant or agreement on the part of ScanSoft in the merger agreement or if any representation or warranty of ScanSoft has become untrue so that the condition to completion of the merger regarding ScanSoft’s representations and warranties or covenants would not be met. However, if the breach or inaccuracy is curable by ScanSoft by the termination date of the merger agreement through the exercise of commercially reasonable efforts, then Nuance may not terminate the merger agreement for 30 days after receipt of written notice from Nuance to ScanSoft of the breach, so long as ScanSoft continues to use all commercially reasonable efforts to cure the breach during this period. If the breach is cured during those 30 days, or if Nuance is otherwise in material breach of the merger agreement, Nuance may not exercise this termination right; | |
• | by ScanSoft upon a breach of any representation, warranty, covenant or agreement on the part of Nuance in the merger agreement or if any representation or warranty of Nuance has become untrue so that the condition to completion of the merger regarding Nuance’ representations and warranties or covenants would not be met. However, if the breach or inaccuracy is curable by Nuance by the termination date of the merger agreement through the exercise of commercially reasonable efforts, then ScanSoft may not terminate the merger agreement for 30 days after receipt of written notice from ScanSoft to Nuance of the breach, so long as Nuance continues to use all commercially reasonable efforts to cure the breach during this period. If the breach is cured during those 30 days, or if ScanSoft is otherwise in material breach of the merger agreement, ScanSoft may not exercise this termination right; | |
• | by ScanSoft or Nuance upon a material breach of the other of its obligations regarding non-solicitation under the merger agreement; | |
• | by ScanSoft, if a material adverse change to Nuance shall have occurred since May 9, 2005 and be continuing; or |
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• | by Nuance, if a material adverse change to ScanSoft shall have occurred since May 9, 2005 and be continuing. |
Payment of Termination Fee |
• | the merger agreement has been terminated because the ScanSoft stockholders failed to approve the issuance of shares of ScanSoft common stock in connection with the merger or the Warburg Pincus financing at the ScanSoft special meeting or an adjournment of that meeting; | |
• | because (i) the ScanSoft board shall for any reason have withdrawn or withheld or shall have amended in a manner adverse to Nuance the ScanSoft board’s unanimous recommendation in favor of the stock issuance in connection with the merger and the Warburg Pincus financing, or (ii) ScanSoft shall have failed to include in this proxy statement/prospectus the unanimous recommendation of the ScanSoft board that holders of ScanSoft vote in favor of the stock issuance in connection with the merger and the Warburg Pincus financing; and | |
• | the ScanSoft board fails to reaffirm its recommendation that its stockholders vote in favor of the stock issuance in connection with the merger and the Warburg Pincus financing within 10 business days after being requested in writing by Nuance to reaffirm such recommendation. |
• | a “triggering event” (as defined above) shall be deemed to have occurred; or | |
• | if all of the following conditions are met: |
• | between May 9, 2005 and the termination of the merger agreement there has been public disclosure of an acquisition proposal by a third party with respect to Nuance of the type described in the section entitled “Agreements Related to the Merger — The Merger Agreement — Alternative Transactions — Nuance” beginning on page 98 of this joint proxy statement/prospectus; | |
• | the merger agreement has been terminated on any of the following bases: |
• | the merger has not been completed by January 9, 2006; or | |
• | Nuance stockholders failed to adopt the merger agreement and approve the merger at the Nuance special meeting or an adjournment of that meeting; and |
• | either of the following has occurred: |
• | within 12 months following termination of the merger agreement, Nuance is the subject of an acquisition of the type described below; or | |
• | within 12 months following termination of the merger agreement, Nuance enters into an agreement contemplating an acquisition of it in the type described below. |
• | a merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving Nuance pursuant to which its stockholders immediately preceding such transaction hold less than 60% of the aggregate equity interests in the surviving or resulting entity of such transaction, or any direct or indirect parent thereof; |
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• | a sale or other disposition by Nuance of assets representing in excess of 40% of the aggregate fair market value of its business, immediately prior to such sale; or | |
• | the acquisition by any person or group, including by way of a tender offer or an exchange offer or issuance by Nuance, directly or indirectly, of beneficial ownership or a right to acquire beneficial ownership of shares representing in excess of 40% of the voting power of the then outstanding shares of Nuance capital stock. |
Costs and Expenses |
Agreement to Vote |
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Transfer Restrictions |
Termination |
• | the completion of the merger; or | |
• | the termination of the merger agreement in accordance with its terms. |
Agreement to Vote |
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Transfer Restrictions |
Termination |
• | the completion of the merger; or | |
• | the termination of the merger agreement in accordance with its terms. |
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Financing Terms |
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Timing of Closing |
Conditions to the Completion of the Warburg Pincus Financing |
• | there shall be no injunction which prohibits the consummation of any of the transactions contemplated by the Warburg Pincus financing; |
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• | the merger shall have closed or shall close simultaneously with the closing of the Warburg Pincus financing; | |
• | all applicable waiting periods under the HSR Act and under any applicable material foreign or other antitrust laws shall have expired or been terminated; | |
• | approval of the Warburg Pincus financing by the ScanSoft stockholders; | |
• | the Warburg Pincus financing transaction documents (other than the warrants, which will be delivered to Warburg Pincus within two (2) business days following the closing of the Warburg Pincus financing), including but not limited to the Amended and Restated Stockholders Agreement (which was entered into as of May 5, 2005), shall have been duly executed and delivered by ScanSoft to Warburg Pincus and by Warburg Pincus to ScanSoft, as the case may be, at or prior to the closing of the Warburg Pincus financing; and | |
• | ScanSoft shall have entered into an amendment to its rights agreement prior to the Closing, which amendment was entered into as of May 5, 2005, such that the acquisition by Warburg Pincus of the shares of ScanSoft and warrants to purchase shares of ScanSoft common stock does not constitute or otherwise trigger a “Triggering Event”, “Distribution Date” or “Shares Acquisition Date” as such terms are defined in the rights agreement, as amended. |
Certain Covenants |
Representations and Warranties |
• | due organization and good standing of ScanSoft; | |
• | absence of violation by ScanSoft and certain of its subsidiaries with their respective charter documents; | |
• | ownership of its subsidiaries by ScanSoft; | |
• | ScanSoft’s outstanding capital stock, options and voting debt; | |
• | corporate authorization by ScanSoft to enter into the Stock Purchase Agreement and to consummate the Warburg Pincus financing; | |
• | absence of any breach of organizational documents, material legal requirement or certain material agreements by ScanSoft as a result of the Warburg Pincus financing; | |
• | third party consents required to be obtained by ScanSoft in connection with the Warburg Pincus financing; |
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• | filing of reports by ScanSoft with the SEC; | |
• | financial statements of ScanSoft included in its SEC reports; | |
• | absence of certain material changes since December 31, 2004; and | |
• | no violation of Section 203 of the Delaware General Corporation Law in connection with the Warburg Pincus financing. |
• | due organization and good standing of Warburg Pincus; | |
• | authorization of Warburg Pincus to enter into the Stock Purchase Agreement and to consummate the Warburg Pincus financing; | |
• | investment intent of Warburg Pincus; | |
• | “accredited investor” status; | |
• | experience and sophistication in business and financial matters; | |
• | ScanSoft equity securities beneficially owned by Warburg Pincus; | |
• | absence of general solicitation for the sale of securities issued in the Warburg Pincus financing; and | |
• | registration requirements for the securities issued in the Warburg Pincus financing. |
Amendments and Waivers |
Termination |
• | by the mutual consent of ScanSoft and Warburg Pincus; | |
• | upon termination of the merger agreement; or | |
• | by either ScanSoft or Warburg Pincus if the closing does not occur by February 1, 2006 (provided that the right to terminate shall not be available if the merger agreement is still in effect). |
The Amended and Restated Stockholders Agreement |
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• | acquire, offer, seek or propose to acquire, or agree to acquire, directly or indirectly, by purchase or otherwise, any shares of voting stock of ScanSoft except for an amount equal to the Permitted Amount (as such term is defined in the Amended and Restated Stockholders Agreement, a copy of which is attached hereto asAnnex G); | |
• | make or in any way participate, directly or indirectly, in any “solicitation” of “proxies” (as such terms are used in the rules of the SEC) to vote or seek to advise or influence any person or entity with respect to the voting of ScanSoft’s voting stock (other than in the capacity as a member of the ScanSoft board in a manner consistent with his or her fiduciary duties); | |
• | make any public announcement or submit a proposal to offer any extraordinary transaction involving ScanSoft or any of its securities or assets; | |
• | form, join or in any way participate in a Section 13(d) group (as defined in the Exchange Act) in connection with any of the foregoing; | |
• | otherwise seek to control or influence the management or ScanSoft board of directors or policies of ScanSoft; or | |
• | direct or instruct their representatives, associates or affiliates to do any of the foregoing. |
• | restrictions relating to transferring their voting stock in connection with a proxy solicitation that is opposed to the recommendation of the ScanSoft board; | |
• | restrictions on transferring more than five percent (5%) of their voting stock in connection with a third party tender offer or an exchange offer which the ScanSoft board has not recommended; or | |
• | transferring more than five percent (5%) of their voting stock to a competitor of ScanSoft that has not been approved by the ScanSoft board unless Warburg Pincus complies with certain rights of first refusal which Warburg Pincus has granted to ScanSoft. |
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Vote Required |
The Assumption |
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Need for Stockholder Approval |
Vote Required |
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Six Months Ended | |||||||||||||||||||||||||||||
March 31, | Year Ended December 31, | ||||||||||||||||||||||||||||
Nine Months Ended | |||||||||||||||||||||||||||||
2005 | 2004 | Sep. 30, 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||
Product licenses | $ | 84,763 | $ | 67,320 | $ | 95,765 | $ | 128,681 | $ | 101,524 | $ | 55,509 | $ | 41,977 | |||||||||||||||
Professional services(2) | 28,928 | 18,010 | 33,187 | — | — | — | — | ||||||||||||||||||||||
Related parties | — | 4,316 | 1,955 | 6,718 | 5,095 | 7,208 | 5,984 | ||||||||||||||||||||||
Total revenue | 113,691 | 89,646 | 130,907 | 135,399 | 106,619 | 62,717 | 47,961 | ||||||||||||||||||||||
Costs and Expenses: | |||||||||||||||||||||||||||||
Cost of revenue: | |||||||||||||||||||||||||||||
Cost of product licenses(1) | 9,983 | 8,045 | 10,348 | 26,123 | 16,419 | 12,849 | 12,692 | ||||||||||||||||||||||
Cost of professional services(1) | 19,270 | 12,637 | 22,949 | — | — | — | — | ||||||||||||||||||||||
Cost of revenue from amortization of intangible assets | 5,508 | 5,851 | 8,431 | 10,516 | 9,470 | 14,192 | 11,569 | ||||||||||||||||||||||
Total cost of revenue | 34,761 | 26,533 | 41,728 | 36,639 | 25,889 | 27,041 | 24,261 | ||||||||||||||||||||||
Gross margin | 78,930 | 63,113 | 89,179 | 98,760 | 80,730 | 35,676 | 23,700 | ||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||
Research and development(1) | 19,236 | 18,087 | 26,162 | 33,938 | 27,633 | 13,968 | 14,967 | ||||||||||||||||||||||
Sales and marketing(1) | 38,126 | 34,351 | 49,134 | 48,706 | 32,990 | 18,562 | 18,287 | ||||||||||||||||||||||
General and administrative(1) | 13,259 | 9,625 | 17,807 | 16,258 | 10,678 | 6,749 | 8,824 | ||||||||||||||||||||||
Amortization of other intangible assets | 1,648 | 1,519 | 1,967 | 2,297 | 1,682 | 13,328 | 11,017 | ||||||||||||||||||||||
Stock-based compensation expense | 1,354 | 494 | 1,301 | 330 | 103 | — | — | ||||||||||||||||||||||
Restructuring and other charges, net | 659 | 1,428 | 801 | 3,693 | 1,041 | — | 4,811 | ||||||||||||||||||||||
Acquired in-process research and development | — | — | — | — | — | — | 18,291 | ||||||||||||||||||||||
Total operating expenses | 74,282 | 65,504 | 97,172 | 105,222 | 74,127 | 52,607 | 76,197 | ||||||||||||||||||||||
Income (loss) from operations | 4,648 | (2,391 | ) | (7,993 | ) | (6,462 | ) | 6,603 | (16,931 | ) | (52,497 | ) | |||||||||||||||||
Other income (expense): | |||||||||||||||||||||||||||||
Interest income | 307 | 233 | 429 | 465 | 354 | 209 | 112 | ||||||||||||||||||||||
Interest expense | (566 | ) | (486 | ) | (340 | ) | (793 | ) | (369 | ) | (166 | ) | (620 | ) | |||||||||||||||
Other (expense) income, net | (307 | ) | 718 | (141 | ) | 1,003 | (1 | ) | (306 | ) | 226 | ||||||||||||||||||
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Six Months Ended | ||||||||||||||||||||||||||||
March 31, | Year Ended December 31, | |||||||||||||||||||||||||||
Nine Months Ended | ||||||||||||||||||||||||||||
2005 | 2004 | Sep. 30, 2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||||
Income (loss) before income taxes | 4,082 | (1,926 | ) | (8,045 | ) | (5,787 | ) | 6,587 | (17,194 | ) | (52,779 | ) | ||||||||||||||||
Provision for (benefit from) income taxes | 1,943 | (443 | ) | 1,333 | (269 | ) | 254 | (317 | ) | 472 | ||||||||||||||||||
Net income (loss) | $ | 2,139 | $ | (1,483 | ) | $ | (9,378 | ) | $ | (5,518 | ) | $ | 6,333 | $ | (16,877 | ) | $ | (53,251 | ) | |||||||||
Net income (loss) per share, basic and diluted | $ | 0.02 | $ | (0.01 | ) | $ | (0.09 | ) | $ | (0.07 | ) | $ | 0.09 | $ | (0.34 | ) | $ | (1.26 | ) | |||||||||
Weighted average common shares outstanding, basic | 105,264 | 101,213 | 103,780 | 78,398 | 67,010 | 49,693 | 42,107 | |||||||||||||||||||||
Weighted average common shares outstanding, diluted | 112,812 | 101,213 | 103,780 | 78,398 | 72,796 | 49,693 | 42,107 | |||||||||||||||||||||
(1) Excludes stock-based compensation expense as follows: | ||||||||||||||||||||||||||||
Cost of product licenses | $ | 5 | $ | — | $ | — | $ | 11 | $ | — | $ | — | $ | — | ||||||||||||||
Cost of professional services | 55 | 20 | 66 | — | — | — | — | |||||||||||||||||||||
Research and development | 164 | 43 | 228 | 15 | — | — | — | |||||||||||||||||||||
Sales and marketing | 361 | 101 | 420 | 116 | — | — | ||||||||||||||||||||||
General and administrative | 769 | 330 | 587 | 188 | 103 | — | — | |||||||||||||||||||||
$ | 1,354 | $ | 494 | $ | 1,301 | $ | 330 | $ | 103 | $ | — | $ | — | |||||||||||||||
(2) | As a result of the Speechworks acquisition in August 2003, professional services became a material component of ScanSoft’s business. As a result of the acquisition, and ScanSoft’s implementation of Oracle in January 2004, ScanSoft began to separately track and disclose professional services revenues and cost of revenue. Prior to 2004, it did not separately disclose professional services revenue and cost of revenue as they were immaterial and it is not practical to reclassify these revenues and associated costs, retrospectively. |
As of | ||||||||||||||||||||||||
As of | ||||||||||||||||||||||||
Mar. 31, | Sep. 30, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | |||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Consolidated Balance Sheet Data: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 25,882 | $ | 22,963 | $ | 42,584 | $ | 18,853 | $ | 14,324 | $ | 2,571 | ||||||||||||
Marketable securities | 3,858 | 24,728 | — | — | — | 62 | ||||||||||||||||||
Working capital | (29,269 | ) | 27,940 | 44,305 | 16,842 | 9,318 | (6,484 | ) | ||||||||||||||||
Total assets | 452,690 | 392,653 | 401,940 | 143,690 | 142,070 | 109,480 | ||||||||||||||||||
Long-term liabilities | 33,632 | 45,360 | 48,340 | 725 | 6,143 | 2,172 | ||||||||||||||||||
Total stockholders’ equity | 309,009 | 301,745 | 303,226 | 119,378 | 114,534 | 87,461 |
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Six Months Ended | |||||||||||||||||||||||||||||
March 31, | Year Ended December 31, | ||||||||||||||||||||||||||||
2005(2) | 2004(3) | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||||||||||
Revenue: | |||||||||||||||||||||||||||||
License | $ | 11,570 | $ | 14,301 | $ | 26,409 | $ | 28,207 | $ | 26,783 | $ | 20,759 | $ | 37,551 | |||||||||||||||
Service | 8,188 | 7,746 | 15,806 | 14,266 | 8,191 | 10,861 | 9,324 | ||||||||||||||||||||||
Maintenance | 8,356 | 7,383 | 15,662 | 12,565 | 9,111 | 7,680 | 4,943 | ||||||||||||||||||||||
Total revenue | 28,114 | 29,430 | 57,877 | 55,038 | 44,085 | 39,300 | 51,818 | ||||||||||||||||||||||
Cost of Revenue: | |||||||||||||||||||||||||||||
License | 167 | 176 | 396 | 370 | 641 | 275 | 53 | ||||||||||||||||||||||
Service(1) | 5,920 | 4,888 | 10,460 | 9,982 | 7,680 | 11,970 | 8,608 | ||||||||||||||||||||||
Maintenance | 1,263 | 1,594 | 2,634 | 2,548 | 3,374 | 4,022 | 2,091 | ||||||||||||||||||||||
Total cost of revenue | 7,350 | 6,658 | 13,490 | 12,900 | 11,695 | 16,267 | 10,752 | ||||||||||||||||||||||
Gross profit | 20,764 | 22,772 | 44,387 | 42,138 | 32,390 | 23,033 | 41,066 | ||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||
Sales and marketing(1) | 13,909 | 13,432 | 26,727 | 28,179 | 39,712 | 39,125 | 34,072 | ||||||||||||||||||||||
Research and development(1) | 6,353 | 7,915 | 14,504 | 15,310 | 14,153 | 18,779 | 20,160 | ||||||||||||||||||||||
General and administrative(1) | 6,562 | 4,570 | 11,037 | 11,533 | 13,393 | 13,487 | 9,978 | ||||||||||||||||||||||
Acquired in-process research and development | — | — | — | — | — | — | 1,500 | ||||||||||||||||||||||
Amortization of goodwill and workforce | — | — | — | — | — | 1,911 | 319 | ||||||||||||||||||||||
Non-cash compensation expense | — | 82 | 73 | 28 | 928 | 5,321 | 4,862 | ||||||||||||||||||||||
Restructuring charges and asset impairments | (70 | ) | (41 | ) | 19,737 | 9,375 | 37,275 | 62,191 | — | ||||||||||||||||||||
Total operating expenses | 26,754 | 25,958 | 72,078 | 64,425 | 105,461 | 140,814 | 70,891 | ||||||||||||||||||||||
Loss from operations | (5,990 | ) | (3,186 | ) | (27,691 | ) | (22,287 | ) | (73,071 | ) | (117,781 | ) | (29,825 | ) | |||||||||||||||
Interest and other income, net | 922 | 370 | 1,097 | 1,180 | 2,687 | 7,990 | 6,701 | ||||||||||||||||||||||
Loss before provision of income taxes | �� | (5,068 | ) | (2,816 | ) | (26,594 | ) | (21,107 | ) | (70,384 | ) | (109,791 | ) | (23,124 | ) | ||||||||||||||
Provision for (benefit from) income taxes | (110 | ) | (22 | ) | (415 | ) | (1,806 | ) | 800 | 574 | 350 | ||||||||||||||||||
Net loss | $ | (4,958 | ) | $ | (2,794 | ) | $ | (26,179 | ) | $ | (19,301 | ) | $ | (71,184 | ) | $ | (110,365 | ) | $ | (23,474 | ) | ||||||||
Net loss per share, basic and diluted | $ | (0.14 | ) | $ | (0.08 | ) | $ | (0.74 | ) | $ | (0.56 | ) | $ | (2.11 | ) | $ | (3.40 | ) | $ | (1.03 | ) | ||||||||
Weighted average common shares outstanding, basic and diluted | 36,025 | 34,947 | 35,487 | 34,471 | 33,666 | 32,480 | 22,717 | ||||||||||||||||||||||
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(1) | Excludes stock-based compensation expense as follows: |
Six Months Ended | ||||||||||||||||||||||||||||
March 31, | Year Ended December 31, | |||||||||||||||||||||||||||
2005 | 2004 | 2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Cost of professional services | $ | — | $ | 1 | $ | — | $ | 1 | $ | 58 | $ | 192 | $ | — | ||||||||||||||
Research and development | — | 78 | 73 | 6 | 423 | 2,436 | 2,293 | |||||||||||||||||||||
Sales and marketing | — | 2 | — | 2 | 264 | 1,973 | 1,171 | |||||||||||||||||||||
General and administrative | — | 1 | — | 19 | 183 | 720 | 1,398 | |||||||||||||||||||||
$ | — | $ | 82 | $ | 73 | $ | 28 | $ | 928 | $ | 5,321 | $ | 4,862 | |||||||||||||||
(2) | Six month results for the period ended March 31, 2005 were derived from Nuance’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the SEC, Nuance’s consolidated financial statements for the nine months ended September 30, 2004 included in its Quarterly Report on Form 10-Q for the three months ended September 30, 2004, as filed with the SEC, and Nuance’s consolidated financial statements for the three months ended March 31, 2005 included in its Quarterly Report on Form 10-Q for the three months ended March 31, 2005, as filed with the SEC. |
(3) | Six month results for the period ended March 31, 2004 were derived from Nuance’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2003, as filed with the SEC, Nuance’s consolidated financial statements for the nine months ended September 30, 2003 included in its Quarterly Report on Form 10-Q for the three months ended September 30, 2003, as filed with the SEC, and Nuance’s consolidated financial statements for the three months ended March 31, 2004 included in its Quarterly Report on Form 10-Q for the three months ended March 31, 2004, as filed with the SEC. |
As of | As of December 31, | |||||||||||||||||||||||
March 31, | ||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Consolidated Balance Sheet Data: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 69,547 | $ | 53,583 | $ | 40,206 | $ | 43,771 | $ | 132,618 | $ | 219,047 | ||||||||||||
Marketable securities | 18,029 | 37,493 | 66,599 | 83,737 | 41,977 | 8,728 | ||||||||||||||||||
Working capital | 74,469 | 81,113 | 99,661 | 110,034 | 128,672 | 226,366 | ||||||||||||||||||
Total assets | 122,490 | 130,257 | 141,497 | 161,670 | 208,231 | 279,338 | ||||||||||||||||||
Long-term liabilities | 50,772 | 53,286 | 43,612 | 43,122 | 21,911 | 2,552 | ||||||||||||||||||
Total stockholders’ equity | 44,675 | 49,216 | 72,561 | 89,273 | 154,825 | 251,991 |
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Six Months Ended | Nine Months Ended | |||||||||
Mar. 31, 2005 | Sep. 30, 2004 | |||||||||
(In thousands, except per share data) | ||||||||||
Product licenses | $ | 99,585 | $ | 121,121 | ||||||
Professional services | 32,735 | 39,918 | ||||||||
Maintenance | 13,727 | 18,420 | ||||||||
Revenue, related parties | — | 1,955 | ||||||||
Total revenue | 146,047 | 181,414 | ||||||||
Costs and expenses: | ||||||||||
Cost of revenue: | ||||||||||
Cost of product licenses | 10,741 | 11,504 | ||||||||
Cost of professional services and maintenance | 26,561 | 32,630 | ||||||||
Cost of revenue from amortization of intangible assets | 8,097 | 12,552 | ||||||||
Total cost of revenue | 45,399 | 56,686 | ||||||||
Gross margin | 100,648 | 124,728 | ||||||||
Operating expenses: | ||||||||||
Research and development | 29,403 | 44,490 | ||||||||
Selling, general and administrative | 78,186 | 106,078 | ||||||||
Amortization of other intangible assets | 6,040 | 6,358 | ||||||||
Stock-based compensation expense | 2,113 | 2,560 | ||||||||
Restructuring and other charges, net | 589 | 20,557 | ||||||||
Total operating expenses | 116,331 | 180,043 | ||||||||
Loss from operations | (15,683 | ) | (55,315 | ) | ||||||
Interest income | 860 | 673 | ||||||||
Interest expense | (2,521 | ) | (3,716 | ) | ||||||
Other income (expense), net | (315 | ) | (326 | ) | ||||||
Loss before income taxes | (17,659 | ) | (58,684 | ) | ||||||
Provision for income taxes | 1,865 | 977 | ||||||||
Net loss | $ | (19,524 | ) | $ | (59,661 | ) | ||||
Net loss per common share: | ||||||||||
Basic and diluted | $ | (0.13 | ) | $ | (0.41 | ) | ||||
Weighted average common shares: | ||||||||||
Basic and diluted | 147,434 | 146,235 |
As of March 31, | ||||
2005 | ||||
Pro Forma Combined Balance Sheet Data: | ||||
Cash and cash equivalents | $ | 69,844 | ||
Marketable securities | 20,720 | |||
Working capital | 14,133 | |||
Total assets | 714,925 | |||
Long-term liabilities | 75,456 | |||
Total stockholders’ equity | 496,895 |
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Director | |||||||||||
Name | Age | Position | Since | ||||||||
Class I Directors | |||||||||||
Ronald Croen | 50 | Chairman of the board of directors of Nuance | 1995 | ||||||||
David Nagel | 59 | Consultant | 2004 | ||||||||
Class II Directors | |||||||||||
Curtis Carlson | 59 | President and CEO of SRI International | 1998 | ||||||||
Alan Herzig | 71 | Consultant | 1994 | ||||||||
Philip Quigley | 62 | Chairman and CEO (Retired), Pacific Telesis Group | 2000 | ||||||||
Class III Directors | |||||||||||
Charles Berger | 51 | President and CEO of Nuance | 2003 | ||||||||
Sandra Bergeron | 46 | Executive Vice President of McAfee, Inc. | 2005 | ||||||||
Gary Morgenthaler | 56 | General Partner of Morgenthaler Ventures | 1997 |
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• | the full name and address of the candidate; | |
• | the number of shares of Nuance’s common stock beneficially owned by the candidate; | |
• | a certification that the candidate consents to being named in the proxy statement and intends to serve on the board of directors if elected; and | |
• | biographical information, including work experience during the past five years, other board positions, and educational background, such as provided under “Other Information — Information Regarding Directors of Nuance,” above. |
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Name | Age | Position | ||||
Charles Berger | 51 | President and Chief Executive Officer | ||||
Karen Blasing | 49 | Vice President and Chief Financial Officer | ||||
Glenn Cross | 48 | Senior Vice President of Global Sales and Services | ||||
Eng Yew Lee | 44 | Vice President, Technical Services | ||||
Douglas Clark Neilsson | 57 | Vice President, Secretary and General Counsel | ||||
Douglas Sharp | 45 | Vice President, Engineering | ||||
Lynda Kate Smith | 43 | Vice President and Chief Marketing Officer | ||||
Donna Allen Taylor | 60 | Vice President, Human Resources and Chief People Officer |
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Summary Compensation |
Annual Compensation | Long Term | All Other | |||||||||||||||||||
Compensation | Compensation | ||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Options (#)(5) | ($)(6) | ||||||||||||||||
Charles Berger(1) | 2004 | 284,131 | 140,239 | — | 11,056 | ||||||||||||||||
President and Executive Officer | 2003 | 207,291 | 140,239 | 1,200,000 | 7,571 | ||||||||||||||||
2002 | — | — | — | — | |||||||||||||||||
Rodwin Hamlin(2) | 2004 | 227,491 | 109,111 | — | 5,924 | ||||||||||||||||
Senior Vice President of | 2003 | 225,000 | 161,075 | — | 9,931 | ||||||||||||||||
Global Sales and Services | 2002 | 225,000 | 150,000 | 240,000 | 3,095 | ||||||||||||||||
Karen Blasing(3) | 2004 | 220,000 | 68,376 | 75,000 | 10,924 | ||||||||||||||||
Vice President and | 2003 | 220,000 | 92,246 | 30,000 | 9,922 | ||||||||||||||||
Chief Financial Officer | 2002 | 165,000 | 77,000 | 150,000 | 5,824 | ||||||||||||||||
Lynda K. Smith | 2004 | 210,000 | 61,460 | 75,000 | 6,346 | ||||||||||||||||
Vice President, Marketing | 2003 | 200,000 | 84,560 | 100,000 | 5,843 | ||||||||||||||||
2002 | 200,000 | 60,000 | — | 4,700 | |||||||||||||||||
Donna Allen Taylor | 2004 | 200,000 | 61,460 | 40,000 | 7,740 | ||||||||||||||||
Vice President, | 2003 | 200,000 | 84,560 | 45,000 | 3,499 | ||||||||||||||||
Human Resources | 2002 | 196,250 | 60,568 | 60,000 | 2,959 | ||||||||||||||||
Douglas Clark Neilsson(4) | 2004 | 210,000 | 30,870 | 130,000 | 7,764 | ||||||||||||||||
Vice President and | 2003 | — | — | — | — | ||||||||||||||||
General Counsel | 2002 | — | — | — | — |
(1) | Mr. Berger became an executive officer of Nuance in April 2003. |
(2) | Mr. Hamlin served as an executive officer of Nuance from August 2002 to July 2004. His compensation for 2004 includes his severance payments in 2004. |
(3) | Ms. Blasing became an executive officer of Nuance in April 2002. |
(4) | Mr. Neilsson became an executive officer of Nuance in January 2004. |
(5) | Number of shares of common stock of Nuance underlying options. |
(6) | Consists of premiums paid by Nuance for medical, dental, vision and life insurance. |
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Nuance Stock Option Grants and Exercises |
Option Grants During Last Fiscal Year |
Individual Grants | |||||||||||||||||||||||||
Potential Realizable Value | |||||||||||||||||||||||||
Number of | % of Total | at Assumed Annual Rates | |||||||||||||||||||||||
Securities | Options | Per Share | of Stock Price Appreciation | ||||||||||||||||||||||
Underlying | Granted in | Exercise | for Option Term | ||||||||||||||||||||||
Options | Last Fiscal | Price | Expiration | ||||||||||||||||||||||
Name | Granted | Year | ($/Share) | Date | 5% ($) | 10% ($) | |||||||||||||||||||
Charles Berger | — | — | $ | — | — | $ | — | $ | — | ||||||||||||||||
President and | |||||||||||||||||||||||||
Chief Executive Officer | |||||||||||||||||||||||||
Rodwin Hamlin | 50,000 | 2.50 | % | $ | 8.10 | 1/26/2014 | $ | 254,702 | $ | 645,401 | |||||||||||||||
Senior Vice President of | |||||||||||||||||||||||||
Global Sales and Services | |||||||||||||||||||||||||
Karen Blasing | 75,000 | 3.76 | % | $ | 8.10 | 1/26/2014 | $ | 382,053 | $ | 968,199 | |||||||||||||||
Vice President, | |||||||||||||||||||||||||
Chief Financial Officer | |||||||||||||||||||||||||
Lynda Kate Smith | 75,000 | 3.76 | % | $ | 8.10 | 1/26/2014 | $ | 382,053 | $ | 968,199 | |||||||||||||||
Vice President, Marketing | |||||||||||||||||||||||||
Donna Allen Taylor | 40,000 | 2.00 | % | $ | 8.10 | 1/26/2014 | $ | 203,762 | $ | 516,373 | |||||||||||||||
Vice President, Human Resources | |||||||||||||||||||||||||
Douglas Clark Neilsson | 130,000 | 6.51 | % | $ | 7.87 | 1/06/2014 | $ | 643,222 | $ | 1,630,558 | |||||||||||||||
Vice President and General Counsel |
Option Grants in Fiscal Year 2005 |
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Nuance Aggregate Option Exercises In 2004 and Year-End Option Values |
Number of Securities | |||||||||||||||||||||||||
Underlying Unexercised | Value of Unexercised | ||||||||||||||||||||||||
Options at | In-the-Money Options at | ||||||||||||||||||||||||
Shares | December 31, 2004 | December 31, 2004 | |||||||||||||||||||||||
Acquired on | Value | ||||||||||||||||||||||||
Name | Exercise | Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||||||||||||
Charles Berger | — | $ | — | 525,000 | 675,000 | $ | 1,029,000 | $ | 1,323,000 | ||||||||||||||||
President and | |||||||||||||||||||||||||
Chief Executive Officer | |||||||||||||||||||||||||
Rodwin Hamlin | 95,000 | $ | 169,124 | — | — | $ | — | $ | — | ||||||||||||||||
Senior Vice President | |||||||||||||||||||||||||
of Global Sales and Services | |||||||||||||||||||||||||
Karen Blasing | — | $ | — | 93,750 | 141,250 | $ | 23,513 | $ | 27,788 | ||||||||||||||||
Vice President, | |||||||||||||||||||||||||
Chief Financial Officer | |||||||||||||||||||||||||
Lynda Kate Smith | — | $ | — | 139,583 | 160,417 | $ | 78,374 | $ | 92,626 | ||||||||||||||||
Vice President, Marketing | |||||||||||||||||||||||||
Donna Allen Taylor | — | $ | — | 200,000 | 91,250 | $ | 35,269 | $ | 41,681 | ||||||||||||||||
Vice President, Human Resources | |||||||||||||||||||||||||
Douglas Clark Neilsson | — | $ | — | 32,500 | 97,500 | $ | — | $ | — | ||||||||||||||||
Vice President and | |||||||||||||||||||||||||
General Counsel |
Employment Agreements of Nuance |
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Change in Control Arrangements of Nuance |
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Shares of Nuance | |||||||||
Common Stock | |||||||||
Beneficially Owned | |||||||||
Name and Address of Beneficial Owner | Number | Percent | |||||||
5% Stockholders: | |||||||||
Chilton Investment Co, Inc.(1) | 2,536,928 | 7.0 | % | ||||||
1266 East Main Street 7th floor | |||||||||
Stamford, Connecticut 06902 | |||||||||
SRI International(2) | 2,335,580 | 6.5 | % | ||||||
333 Ravenswood Avenue | |||||||||
Menlo Park, California 94025 | |||||||||
Cisco Systems, Inc.(3) | 1,919,000 | 5.3 | % | ||||||
170 West Tasman Drive | |||||||||
San Jose, California 95134 | |||||||||
Name of Beneficial Owner | |||||||||
Directors and Named Executive Officers: | |||||||||
Sandra Bergeron(4) | 8,333 | * | |||||||
Ronald Croen(5) | 1,300,323 | 3.5 | % | ||||||
Curtis Carlson(6) | 80,000 | * | |||||||
Irwin Federman(7) | 120,000 | * | |||||||
Alan Herzig(8) | 181,333 | * | |||||||
Gary Morgenthaler(9) | 166,419 | * | |||||||
David Nagel(10) | 25,000 | * | |||||||
Philip Quigley(11) | 157,000 | * | |||||||
Charles Berger(12) | 665,445 | 1.8 | % | ||||||
Karen Blasing(13) | 138,125 | * | |||||||
Rod Hamlin(14) | — | * | |||||||
Lynda Kate Smith(15) | 194,099 | * | |||||||
Donna Allen Taylor (16) | 243,667 | * | |||||||
Douglas Clark Neilsson (17) | 46,834 | * | |||||||
All directors and executive officers as a group (17 persons) (18) | 3,657,209 | 9.35 | % |
* | Less than 1% |
(1) | This ownership information is as of December 31, 2004, and was obtained from a Schedule 13G filed with the SEC by Chilton Investments on February 14, 2005. |
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(2) | Consists of shares held by Technology Venture Management, a wholly-owned subsidiary of SRI. The board of directors of SRI has voting and dispositive authority with respect to the shares held by Technology Venture Management. From time to time, the board of directors of SRI delegates such voting and dispositive authority to Samuel Armacost, Curtis Carlson, one of Nuance’s directors, and Alan Herzig, one of Nuance’s directors. Each of these individuals disclaims beneficial ownership of these shares except to the extent of his pecuniary interest therein. | |
(3) | This ownership information is as of December 31, 2004, and was obtained from a Schedule 13G filed with the SEC by Cisco Systems on February 14, 2005. | |
(4) | All shares subject to options exercisable within 60 days of April 15, 2005. | |
(5) | Includes 330,333 shares held by Mr. Croen and 969,990 shares subject to options exercisable within 60 days of April 15, 2005. | |
(6) | All shares subject to options exercisable within 60 days of April 15, 2005. | |
(7) | Includes 40,000 shares held by Mr. Federman and 80,000 shares subject to options exercisable within 60 days of April 15, 2005. | |
(8) | Includes 72,333 shares held by Mr. Herzig, 4,000 shares held by the Herzig Family Foundation and 105,000 shares subject to options exercisable within 60 days of April 15, 2005. | |
(9) | Includes 42,385 shares held by Mr. Morganthaler, 44,034 shares held by the Morgenthaler Family Partnership and 80,000 shares subject to options exercisable within 60 days of April 15, 2005. |
(10) | All shares subject to options exercisable within 60 days of April 15, 2005. |
(11) | Includes 7,000 shares held by Philip J & Teresa Quigley Family Trust and 150,000 shares subject to options exercisable within 60 days of April 15, 2005. |
(12) | Includes 4,000 shares held by Mr. Berger and 661,455 shares subject to options exercisable within 60 days of April 15, 2005. |
(13) | All shares subject to options exercisable within 60 days of April 15, 2004. |
(14) | Mr. Hamlin resigned his position with Nuance in July 2004. |
(15) | Includes 4,000 shares held by Ms. Smith and 190,099 shares subject to options exercisable within 60 days of April 15, 2005. |
(16) | Includes 14,085 shares held by Ms. Taylor and 229,582 shares subject to options exercisable within 60 days of April 15, 2004. |
(17) | Includes 793 shares held by Mr. Neilsson and 46,041 shares subject to options exercisable within 60 days of April 15, 2004. |
(18) | Includes 3,053,871 shares subject to options exercisable within 60 days of April 15, 2004. |
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Number of Shares | ||||||||||||||||
Remaining Available for | ||||||||||||||||
Per Share | Future Issuance | |||||||||||||||
Number of Shares to be | Weighted Average | Under Equity Compensation | ||||||||||||||
Issued Upon Exercise of | Exercise Price of | Plans (Excluding Shares | ||||||||||||||
Outstanding Options | Outstanding | Reflected in Column (a)) | ||||||||||||||
Plan Category | (#)(a) | Options ($)(b) | (#)(c) | |||||||||||||
Equity compensation plans approved by stockholders | 1994 plan | 79,376 | $ | 1.18 | — | |||||||||||
1998 plan | 1,768,824 | $ | 9.85 | — | ||||||||||||
2000 plan | 6,400,049 | $ | 5.81 | 1,583,761 | ||||||||||||
ESPP | 2,523,977 | $ | 3.78 | 466,805 | ||||||||||||
Equity compensation plans not approved by stockholders | 2001 plan | 1,227,228 | $ | 3.48 | 110,513 | |||||||||||
Total | All plans | 11,999,454 | $ | 5.71 | 2,161,079 |
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Compensation Committee of the Board of Directors of Nuance | |
Alan Herzig | |
Philip Quigley |
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• | Reviewing, on a continuing basis, the adequacy of Nuance’s system of internal controls; | |
• | Pre-approving audit and non-audit services by the independent auditors; | |
• | Reviewing Nuance’s external audit and the annual audited financial statements and quarterly unaudited financial statements; | |
• | Reviewing, approving and monitoring Nuance’s code of business conduct and ethics and standards of business conduct; and | |
• | Reviewing legal matters, compliance with employee benefit plans, and related party transactions. |
Audit Committee of Nuance | |
Irwin Federman | |
Alan Herzig | |
Phil Quigley |
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![(PERFORMANCE GRAPH)](https://capedge.com/proxy/DEFM14A/0000950135-05-004398/b55111nfb5511102.gif)
04/13/00 | 12/31/00 | 12/31/01 | 12/31/02 | 12/31/03 | 12/31/04 | ||||||||||||||||||||||||||
Nuance Communications, Inc. | 100.00 | 127.07 | 26.81 | 7.31 | 22.51 | 12.20 | |||||||||||||||||||||||||
SIC Code Index | 100.00 | 71.11 | 62.33 | 43.86 | 53.77 | 59.88 | |||||||||||||||||||||||||
NASDAQ Market Index | 100.00 | 67.14 | 53.26 | 36.82 | 55.06 | 57.03 | |||||||||||||||||||||||||
* | $100 invested on 4/13/00 in stock or index — including reinvestment of dividends. Fiscal year ending December 31. |
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• | 280,000,000 shares of common stock, par value $0.001 per share; and | |
• | 40,000,000 shares of preferred stock, par value $0.001 per share, 100,000 shares of which have been designated as Series A Participating Preferred Stock. The rights, preferences and privileges of the Series A Participating Preferred Stock are described further in “ScanSoft Rights Plan” below. |
• | 250,000,000 shares of common stock, par value $0.001 per share; and | |
• | 5,000,000 shares of preferred stock, par value $0.001 per share, 250,000 shares of which have been designated as Series A Preferred Stock. The rights, preferences and privileges of the Series A Preferred Stock are described further in “Nuance Rights Plan” below. |
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ScanSoft Rights Plan |
• | ScanSoft merges into another entity; | |
• | an acquiring entity merges into ScanSoft; or | |
• | ScanSoft sells more than 50% in the aggregate of its assets or earning power. |
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Nuance Rights Plan |
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• | Nuance merges into another entity; | |
• | an acquiring entity merges into Nuance; | |
• | Nuance sells more than 50% in the aggregate of its assets or earning power. |
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1. ScanSoft’s registration statement on Form 8-A, as filed with the SEC on October 20, 1995; | |
2. ScanSoft’s registration statement on Form 8-A/A, as filed with the SEC on May 17, 2005; | |
3. ScanSoft’s transitional annual report on Form 10-K/T for the transition period from January 1, 2004 to September 30, 2004, as filed with the SEC on January 6, 2005; | |
4. ScanSoft’s quarterly report on Form 10-Q for the quarter ended December 31, 2004, as filed with the SEC on February 9, 2005; | |
5. ScanSoft’s quarterly report on Form 10-Q for the quarter ended March 31, 2005, as filed with the SEC on May 10, 2005; | |
6. ScanSoft’s definitive proxy statement, as filed with the SEC on January 28, 2005; | |
7. ScanSoft’s current report on Form 8-K/A, as filed with the SEC on March 24, 2003, reporting under Items 2 and 7; | |
8. ScanSoft’s current report on Form 8-K/A, as filed with the SEC on August 27, 2004, reporting under Items 4.02 and 9.01; | |
9. ScanSoft’s current report on Form 8-K, as filed with the SEC on October 26, 2004, reporting under Items 4.01, 5.03 and 9.01; | |
10. ScanSoft’s current report on Form 8-K, as filed with the SEC on November 2, 2004, reporting under Items 1.01 and 9.01; | |
11. ScanSoft’s current report on Form 8-K, as filed with the SEC on November 18, 2004, reporting under Items 1.01, 8.01 and 9.01; | |
12. ScanSoft’s current report on Form 8-K, as filed with the SEC on December 10, 2004, reporting under Items 2.01 and 9.01; |
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13. ScanSoft’s current report on Form 8-K, as filed with the SEC on February 1, 2005, reporting under Items 2.01 and 9.01; | |
14. ScanSoft’s current report on Form 8-K, as filed with the SEC on February 7, 2005, reporting under Items 2.01 and 9.01; | |
15. ScanSoft’s current report on Form 8-K, as filed with the SEC on February 17, 2005, reporting under Item 1.01; | |
16. ScanSoft’s current report on Form 8-K/A, as filed with the SEC on February 18, 2005, reporting under Item 9.01; | |
17. ScanSoft’s current report on Form 8-K, as filed with the SEC on March 17, 2005, reporting under Item 3.02; | |
18. ScanSoft’s current report on Form 8-K, as filed with the SEC on March 17, 2005, reporting under Items 1.01 and 9.01; | |
19. ScanSoft’s current report on Form 8-K/A, as filed with the SEC on April 8, 2005, reporting under Item 9.01; | |
20. ScanSoft’s current report on Form 8-K/A, as filed with the SEC on April 18, 2005, reporting under Item 9.01; | |
21. ScanSoft’s current report on Form 8-K, as filed with the SEC on May 9, 2005, reporting under Item 1.01; | |
22. ScanSoft’s current report on Form 8-K, as filed with the SEC on May 10, 2005, reporting under Items 1.01, 3.02, 3.03 and 9.01; | |
23. ScanSoft’s current report on Form 8-K, as filed with the SEC on May 17, 2005, reporting under Items 1.01, 8.01 and 9.01; | |
24. ScanSoft’s current report on Form 8-K, as filed with the SEC on June 23, 2005, reporting under Item 8.01; and | |
25. ScanSoft’s current report on Form 8-K, as filed with the SEC on July 22, 2005, reporting under Items 2.05 and 5.02. |
1. Nuance’s registration statement on Form 8-A, as filed with the SEC on December 12, 2002; | |
2. Nuance’s annual report on Form 10-K for the fiscal year ended December 31, 2004, as filed with the SEC on March 16, 2005; | |
3. Nuance’s quarterly report on Form 10-Q for the quarter ended March 31, 2005, as filed with the SEC on May 10, 2005; | |
4. Nuance’s definitive proxy statement, as filed with the SEC on May 2, 2005; | |
5. Nuance’s current report on Form 8-K, as filed with the SEC on March 29, 2005, reporting under Items 1.01 and 5.02; | |
6. Nuance’s current report on Form 8-K, as filed with the SEC on May 9, 2005, reporting under Items 2.02, 8.01 and 9.01; | |
7. Nuance’s current report on Form 8-K, as filed with the SEC on May 11, 2005, reporting under Items 1.01 and 9.01; | |
8. Nuance’s current report on Form 8-K, as filed with the SEC on May 24, 2005, reporting under Item 8.01; and | |
9. Nuance’s current report on Form 8-K, as filed with the SEC on June 24, 2005, reporting under Item 8.01. |
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Requests for documents relating to ScanSoft should be directed to: | Requests for documents relating to Nuance should be directed to: | |
ScanSoft, Inc. | Nuance Communications, Inc. | |
Investor Relations | Legal Department | |
1 Wayside Road | 1380 Willow Road | |
Burlington, Massachusetts 01803 | Menlo Park, California 94025 | |
(781) 565-5000 | (650) 847-0000 |
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Page | |||||
Unaudited Pro Forma Combined Financial Statements | |||||
Introduction to the Unaudited Pro Forma Combined Financial Statements | F-2 | ||||
Unaudited Pro Forma Combined Balance Sheet as of March 31, 2005 | F-4 | ||||
Unaudited Pro Forma Combined Statement of Operations for the Nine Months Ended September 30, 2004 | F-5 | ||||
Unaudited Pro Forma Combined Statement of Operations for the Six Months Ended March 31, 2005 | F-7 | ||||
Notes to Unaudited Pro Forma Combined Financial Statements | F-9 |
F-1
Table of Contents
F-2
Table of Contents
F-3
Table of Contents
Historical | Historical | Pro Forma | Pro Forma | |||||||||||||||
ScanSoft(A) | Nuance(B) | Adjustments | Combined | |||||||||||||||
(In thousands) | ||||||||||||||||||
ASSETS | ||||||||||||||||||
Current assets: | ||||||||||||||||||
Cash and cash equivalents | $ | 25,882 | $ | 69,547 | (25,585 | )(1) | $ | 69,844 | ||||||||||
Marketable securities | 2,691 | 18,029 | — | 20,720 | ||||||||||||||
Accounts receivable, net | 45,540 | 9,072 | — | 54,612 | ||||||||||||||
Inventory | 954 | — | — | 954 | ||||||||||||||
Prepaid expenses and other current assets | 5,713 | 4,864 | — | 10,577 | ||||||||||||||
Total current assets | 80,780 | 101,512 | (25,585 | ) | 156,707 | |||||||||||||
Long-term marketable securities | 1,167 | — | — | 1,167 | ||||||||||||||
Goodwill | 300,818 | — | 112,707 | (2) | 413,525 | |||||||||||||
Other intangible assets, net | 54,390 | 477 | 52,623 | (2) | 107,490 | |||||||||||||
Property and equipment, net | 9,944 | 3,742 | — | 13,686 | ||||||||||||||
Restricted cash | — | 11,109 | — | 11,109 | ||||||||||||||
Other assets | 5,591 | 5,650 | — | 11,241 | ||||||||||||||
Total assets | $ | 452,690 | $ | 122,490 | $ | 139,745 | $ | 714,925 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||
Current liabilities: | ||||||||||||||||||
Accounts payable | $ | 13,715 | $ | 1,511 | $ | — | $ | 15,226 | ||||||||||
Accrued compensation | 11,221 | 2,844 | — | 14,065 | ||||||||||||||
Accrued expenses | 15,539 | 4,983 | 6,331 | (3) | 26,853 | |||||||||||||
Deferred revenue | 16,418 | 7,378 | (369 | )(4) | 23,427 | |||||||||||||
Note payable | 27,895 | — | — | 27,895 | ||||||||||||||
Deferred acquisition payment | 16,414 | — | — | 16,414 | ||||||||||||||
Deferred payment obligation for technology license | 2,825 | — | — | 2,825 | ||||||||||||||
Restructuring accrual | 342 | 10,327 | (480 | )(5) | 10,189 | |||||||||||||
Other current liabilities | 5,680 | — | 5,680 | |||||||||||||||
Total current liabilities | 110,049 | 27,043 | 5,482 | 142,574 | ||||||||||||||
Deferred revenue | 110 | 507 | (25 | )(4) | 592 | |||||||||||||
Long-term notes payable, net of current portion | 45 | — | — | 45 | ||||||||||||||
Deferred tax liability | 3,085 | — | — | 3,085 | ||||||||||||||
Deferred acquisition payment | 15,649 | — | — | 15,649 | ||||||||||||||
Long-term restructuring accrual | 12,497 | 50,228 | (8,923 | )(5) | 53,802 | |||||||||||||
Other liabilities | 2,246 | 37 | — | 2,283 | ||||||||||||||
Total liabilities | 143,681 | 77,815 | (3,466 | ) | 218,030 | |||||||||||||
Stockholders’ equity: | ||||||||||||||||||
Preferred stock | 4,631 | — | — | 4,631 | ||||||||||||||
Common stock | 109 | 36 | 6 | (6) | 151 | |||||||||||||
Additional paid-in capital | 480,341 | 332,666 | (139,508 | )(6) | 673,499 | |||||||||||||
Treasury stock, at cost | (11,176 | ) | — | — | (11,176 | ) | ||||||||||||
Deferred compensation | (4,881 | ) | — | (5,314 | )(6) | (10,195 | ) | |||||||||||
Accumulated other comprehensive income (loss) | (332 | ) | 900 | (900 | )(6) | (332 | ) | |||||||||||
Accumulated deficit | (159,683 | ) | (288,927 | ) | 288,927 | (6) | (159,683 | ) | ||||||||||
Total stockholders’ equity | 309,009 | 44,675 | 143,211 | 496,895 | ||||||||||||||
Total liabilities and stockholders’ equity | $ | 452,690 | $ | 122,490 | $ | 139,745 | $ | 714,925 | ||||||||||
(A) | As reported in ScanSoft’s Quarterly Report on Form 10-Q for the three months ended March 31, 2005 as filed with the SEC. |
(B) | Derived from Nuance’s Quarterly Report on Form 10-Q for the three months ended March 31, 2005 as filed with the SEC. |
F-4
Table of Contents
Historical | Historical | Pro Forma | Historical | Pro Forma | Historical | Pro Forma | Historical | Pro Forma | Historical | Pro Forma | Pro Forma | ||||||||||||||||||||||||||||||||||||||
ScanSoft(A) | Telelogue(B) | Adjustments | Rhetorical(C) | Adjustments | ART(D) | Adjustments | Phonetic(E) | Adjustments | Nuance(F) | Adjustments | Combined | ||||||||||||||||||||||||||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||||||||||||||||||||||||||||||||||||
Product licenses | $ | 95,765 | $ | 295 | $ | — | $ | 1,411 | $ | — | $ | 3,460 | $ | — | $ | 1,208 | $ | — | $ | 19,002 | $ | (20 | )(7) | $ | 121,121 | ||||||||||||||||||||||||
Professional services | 27,999 | — | — | — | — | — | — | 667 | — | 11,252 | — | 39,918 | |||||||||||||||||||||||||||||||||||||
Maintenance | 5,188 | — | — | — | — | — | — | 1,922 | — | 11,310 | — | 18,420 | |||||||||||||||||||||||||||||||||||||
Revenue, related parties | 1,955 | — | — | — | — | — | — | — | — | — | — | 1,955 | |||||||||||||||||||||||||||||||||||||
Total revenue | 130,907 | 295 | — | 1,411 | — | 3,460 | — | 3,797 | — | 41,564 | (20 | ) | 181,414 | ||||||||||||||||||||||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||||||||||||||||||||||||||||
Cost of revenue: | |||||||||||||||||||||||||||||||||||||||||||||||||
Cost of product licenses | 10,348 | 409 | — | 90 | — | 132 | — | 484 | — | 61 | (20 | )(7) | 11,504 | ||||||||||||||||||||||||||||||||||||
Cost of professional services and maintenance | 22,949 | — | — | — | — | — | — | — | — | 9,681 | — | 32,630 | |||||||||||||||||||||||||||||||||||||
Cost of revenue from amortization of intangible assets | 8,431 | — | — | — | — | — | 552 | (15) | — | 161 | (12) | 256 | 3,152 | (8) | 12,552 | ||||||||||||||||||||||||||||||||||
Total cost of revenue | 41,728 | 409 | — | 90 | — | 132 | 552 | 484 | 161 | 9,998 | 3,132 | 56,686 | |||||||||||||||||||||||||||||||||||||
Gross Margin | 89,179 | (114 | ) | — | 1,321 | — | 3,328 | (552 | ) | 3,313 | (161 | ) | 31,566 | (3,152 | ) | 124,728 | |||||||||||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||||
Research and development | 26,162 | 839 | — | 1,413 | — | 2,425 | — | 2,362 | — | 11,289 | — | 44,490 | |||||||||||||||||||||||||||||||||||||
Selling, general and administrative | 66,941 | 1,246 | — | 2,095 | — | 1,898 | — | 6,512 | — | 27,386 | — | 106,078 | |||||||||||||||||||||||||||||||||||||
Amortization of other intangible assets | 1,967 | — | 55 | (20) | 25 | 116 | (18) | — | 647 | (15) | — | 663 | (12) | 54 | 2,831 | (8) | 6,358 | ||||||||||||||||||||||||||||||||
Stock-based compensation expense | 1,301 | — | — | 47 | — | — | — | — | — | 73 | 1,139 | (9) | 2,560 | ||||||||||||||||||||||||||||||||||||
Restructuring and other charges, net | 801 | — | — | — | — | — | — | — | — | 19,756 | — | 20,557 | |||||||||||||||||||||||||||||||||||||
Total operating expenses | 97,172 | 2,085 | 55 | 3,580 | 116 | 4,323 | 647 | 8,874 | 663 | 58,558 | 3,970 | 180,043 | |||||||||||||||||||||||||||||||||||||
Loss from operations | (7,993 | ) | (2,199 | ) | (55 | ) | (2,259 | ) | (116 | ) | (995 | ) | (1,199 | ) | (5,561 | ) | (824 | ) | (26,992 | ) | (7,122 | ) | (55,315 | ) | |||||||||||||||||||||||||
Interest income | 429 | — | — | 45 | — | 39 | (113 | )(16) | — | (197 | )(13) | 1,046 | (576 | )(10) | 673 | ||||||||||||||||||||||||||||||||||
Interest expense | (340 | ) | — | — | — | — | — | (492 | )(17) | — | (675 | )(14) | (3 | ) | (2,206 | )(11) | (3,716 | ) | |||||||||||||||||||||||||||||||
Other income (expense), net | (141 | ) | (1 | ) | — | 13 | — | 48 | — | 36 | — | (281 | ) | — | (326 | ) | |||||||||||||||||||||||||||||||||
Loss before income taxes | (8,045 | ) | (2,200 | ) | (55 | ) | (2,201 | ) | (116 | ) | (908 | ) | (1,804 | ) | (5,525 | ) | (1,696 | ) | (26,230 | ) | (9,904 | ) | (58,684 | ) | |||||||||||||||||||||||||
Provision for (benefit from) income taxes | 1,333 | — | — | — | — | 102 | — | — | — | (458 | ) | — | 977 | ||||||||||||||||||||||||||||||||||||
Net loss | $ | (9,378 | ) | $ | (2,200 | ) | $ | (55 | ) | $ | (2,201 | ) | $ | (116 | ) | $ | (1,010 | ) | $ | (1,804 | ) | $ | (5,525 | ) | $ | (1,696 | ) | $ | (25,772 | ) | $ | (9,904 | ) | $ | (59,661 | ) | |||||||||||||
Net loss per common share: | |||||||||||||||||||||||||||||||||||||||||||||||||
Basic and Diluted | $ | (0.09 | ) | $ | (0.41 | ) | |||||||||||||||||||||||||||||||||||||||||||
Weighted average common shares: | |||||||||||||||||||||||||||||||||||||||||||||||||
Basic and Diluted | 103,780 | 449 | (19) | 42,006 | (6) | 146,235 |
F-5
Table of Contents
(A) | Derived from ScanSoft’s Annual Report on Form 10-K/T for the transition period from January 1, 2004 to September 30, 2004, as filed with the SEC. |
(B) | Derived from Telelogue’s unaudited financial information for the period from January 1, 2004 through June 15, 2004 (date of acquisition). | |
(C) | Derived from Rhetorical’s audited financial statements for the period from January 1, 2004 through September 30, 2004. | |
(D) | Derived from ART’s unaudited financial statements for the period from January 1, 2004 through September 30, 2004. | |
(E) | Derived from Phonetic’s unaudited financial statements for the period from January 1, 2004 through September 30, 2004. | |
(F) | Derived from Nuance’s unaudited consolidated financial statements for the nine months ended September 30, 2004 included in its in its Quarterly Report on Form 10-Q for the three months ended September 30, 2004, as filed with the SEC. |
F-6
Table of Contents
Historical | Historical | Pro Forma | Historical | Pro Forma | Historical | Pro Forma | Historical | Pro Forma | Pro Forma | ||||||||||||||||||||||||||||||||
ScanSoft(A) | Rhetorical(B) | Adjustments | ART(C) | Adjustments | Phonetic(D) | Adjustments | Nuance(E) | Adjustments | Combined | ||||||||||||||||||||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||||||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||||||||||||
Product licenses | $ | 84,763 | $ | 186 | $ | — | $ | 2,678 | $ | — | $ | 393 | $ | — | $ | 11,570 | $ | (5 | )(7) | $ | 99,585 | ||||||||||||||||||||
Professional services | 24,394 | — | — | — | — | 153 | — | 8,188 | — | 32,735 | |||||||||||||||||||||||||||||||
Maintenance | 4,534 | — | — | — | — | 837 | — | 8,356 | — | 13,727 | |||||||||||||||||||||||||||||||
Revenue, related parties | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Total revenue | 113,691 | 186 | — | 2,678 | — | 1,383 | — | 28,114 | (5 | ) | 146,047 | ||||||||||||||||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||||||||||||||||||||
Cost of revenue: | |||||||||||||||||||||||||||||||||||||||||
Cost of product licenses | 9,983 | — | — | 459 | — | 305 | — | (1 | ) | (5 | )(7) | 10,741 | |||||||||||||||||||||||||||||
Cost of professional services and maintenance | 19,270 | 11 | — | — | — | 97 | — | 7,183 | — | 26,561 | |||||||||||||||||||||||||||||||
Cost of revenue from amortization of intangible assets | 5,508 | — | — | — | 245 | (15) | — | 72 | (12) | 168 | 2,104 | (8) | 8,097 | ||||||||||||||||||||||||||||
Total cost of revenue | 34,761 | 11 | — | 459 | 245 | 402 | 72 | 7,350 | 2,099 | 45,399 | |||||||||||||||||||||||||||||||
Gross Margin | 78,930 | 175 | — | 2,219 | (245 | ) | 981 | (72 | ) | 20,764 | (2,104 | ) | 100,648 | ||||||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||||||||||
Research and development | 19,236 | — | — | 1,382 | — | 2,470 | — | 6,315 | — | 29,403 | |||||||||||||||||||||||||||||||
Selling, general and administrative | 51,385 | — | — | 1,423 | — | 4,907 | — | 20,471 | — | 78,186 | |||||||||||||||||||||||||||||||
Amortization of other intangible assets | 1,648 | 1,863 | 25 | (18) | — | 286 | (15) | — | 295 | (12) | 38 | 1,885 | (8) | 6,040 | |||||||||||||||||||||||||||
Stock-based compensation expense | 1,354 | — | — | — | — | — | — | — | 759 | (9) | 2,113 | ||||||||||||||||||||||||||||||
Restructuring and other charges, net | 659 | — | — | — | — | — | — | (70 | ) | — | 589 | ||||||||||||||||||||||||||||||
Total operating expenses | 74,282 | 1,863 | 25 | 2,805 | 286 | 7,377 | 295 | 26,754 | 2,644 | 116,331 | |||||||||||||||||||||||||||||||
Income (loss) from operations | 4,648 | (1,688 | ) | (25 | ) | (586 | ) | (531 | ) | (6,396 | ) | (367 | ) | (5,990 | ) | (4,748 | ) | (15,683 | ) | ||||||||||||||||||||||
Interest income | 307 | 11 | — | 12 | (46 | )(16) | (2 | ) | (110 | )(13) | 1,072 | (384 | )(10) | 860 | |||||||||||||||||||||||||||
Interest expense | (566 | ) | — | — | — | (182 | )(17) | (1 | ) | (300 | )(14) | (1 | ) | (1,471 | )(11) | (2,521 | ) | ||||||||||||||||||||||||
Other income (expense), net | (307 | ) | (18 | ) | — | (56 | ) | — | 215 | — | (149 | ) | — | (315 | ) | ||||||||||||||||||||||||||
Income (loss) before income taxes | 4,082 | (1,695 | ) | (25 | ) | (630 | ) | (759 | ) | (6,184 | ) | (777 | ) | (5,068 | ) | (6,603 | ) | (17,659 | ) | ||||||||||||||||||||||
Provision for (benefit from) income taxes | 1,943 | — | — | 32 | — | — | — | (110 | ) | — | 1,865 | ||||||||||||||||||||||||||||||
Net income (loss) | $ | 2,139 | $ | (1,695 | ) | $ | (25 | ) | $ | (662 | ) | $ | (759 | ) | $ | (6,184 | ) | $ | (777 | ) | $ | (4,958 | ) | $ | (6,603 | ) | $ | (19,524 | ) | ||||||||||||
Net income (loss) per common share: | |||||||||||||||||||||||||||||||||||||||||
Basic and Diluted | $ | 0.02 | $ | (0.13 | ) | ||||||||||||||||||||||||||||||||||||
Weighted average common shares outstanding: | |||||||||||||||||||||||||||||||||||||||||
Basic | 105,264 | 164 | (19) | 42,006 | (6) | 147,434 | |||||||||||||||||||||||||||||||||||
Diluted | 112,812 | 164 | (19) | 42,006 | (6) | 147,434 |
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(A) | Derived from ScanSoft’s unaudited consolidated financial statements for the six months ended March 31, 2004 included in its Quarterly Report on Form 10-Q for the three months ended March 31, 2005, as filed with the SEC. | |
(B) | Derived from Rhetorical’s unaudited financial statements for the period from October 1, 2004 through December 6, 2004 (date of acquisition) | |
(C) | Derived from ART’s unaudited financial statements for the period from October 1, 2004 through January 21, 2005 (date of acquisition) | |
(D) | Derived from Phonetic’s unaudited financial statements for the period from October 1, 2004 through February 1, 2005 (date of acquisition) | |
(E) | Derived from Nuance’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the SEC, Nuance’s unaudited consolidated financial statements for the nine months ended September 30, 2004 included in its Quarterly Report on Form 10-Q for the three months ended September 30, 2004, as filed with the SEC, and Nuance’s unaudited consolidated financial statements for the three months ended March 31, 2005 included in its Quarterly Report on Form 10-Q for the three months ended March 31, 2005, as filed with the SEC. |
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Estimated Purchase Consideration | ||||||
Cash | $ | 79,585 | ||||
Common Stock | 114,093 | |||||
Employee Stock Options | 19,107 | |||||
Transaction Costs | 6,331 | |||||
Total Estimated Purchase Consideration | $ | 219,116 | ||||
Preliminary Allocation of Purchase Consideration | ||||||
Current Assets | $ | 95,512 | ||||
Property & Equipment | 3,742 | |||||
Restricted Cash | 11,109 | |||||
Other Assets | 5,650 | |||||
Identifiable Intangible Assets | 53,100 | |||||
Goodwill | 112,707 | |||||
Total Assets Acquired | 281,820 | |||||
Current Liabilities | (26,194 | ) | ||||
Long-Term Liabilities | (41,824 | ) | ||||
Total Liabilities Assumed | (68,018 | ) | ||||
Deferred Compensation | 5,314 | |||||
$ | 219,116 | |||||
(1) Adjustment to cash and cash equivalents related to the payment of $2.20 per common share outstanding upon closing, totaling an estimated $79,585,000, and payment of Nuance’s estimated transaction costs, totaling $6,000,000. These disbursements are offset by cash received of $60,000,000 related to the proposed Warburg Pincus financing. | |
(2) Adjustment to eliminate Nuance’s historical intangible balance of $477,000, and record the assumed intangibles and goodwill totaling $53,100,000 and $109,357,000, respectively. | |
(3) Adjustment to record estimated transaction costs, totaling $6,331,000. | |
(4) Adjustment of $369,000 and $25,000 to reduce current and long-term deferred revenue to the fair value of the related obligations. These adjustments represent a 5% decrease from Nuance’s historical carrying value attributable to estimated selling expenses. |
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(5) Adjustments of $480,000 and $8,923,000 to reduce the current and long-term lease-related restructuring accruals, respectively, to fair value. The difference between the undiscounted and discounted payments will be recorded as non-cash interest expense over the remaining lease term. | |
(6) Adjustment to eliminate Nuance’s historical equity balances. | |
Adjustment to record common stock of $28,000 and Additional Paid in Capital of $114,065,000 related to the estimated issuance of 27,854,803 shares of ScanSoft common stock at a value of $4.10. | |
Adjustment to record Additional Paid in Capital of $19,107,000 and deferred compensation of $5,314,000, related to the estimated issuance of vested and unvested employee stock options, respectively, in accordance with the merger agreement. These stock options were accounted for in accordance with FIN 44. The stock options were valued using the Black-Scholes model. The assumptions used in the valuation included a ScanSoft current stock price of $4.10, risk free interest rate of 3.8%, volatility of 55%, and an expected life of 3.5 years. Upon closing, ScanSoft will recalculate the value of the stock options issued and record the fair value of the issuances as a component of the purchase consideration. The actual fair value will deviate from the estimated fair value due to the actual number of shares issued. The deferred compensation adjustment represents the estimated intrinsic value of the unvested stock options on the date of closing and will be expensed ratably over an estimated life of three and a half years, in accordance with APB 25,Accounting for Stock Issued to Employees. | |
An adjustment to record common stock of $14,000 and Additional Paid in Capital of $59,986,000 related to the proposed issuance of 14,150,943 shares of common stock, to Warburg Pincus. | |
(7) Adjustment to eliminate intercompany product license revenue and cost of product license revenue totaling $20,000 and $5,000 for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively. | |
(8) Adjustment to record amortization expense of $6,293,000 and $4,195,000 for the identifiable intangible assets associated with the Nuance acquisition offset by an adjustment to eliminate amortization expense of $310,000 and $206,000 related to intangible assets of Nuance’s existing prior to the acquisition for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively, as if the acquisition had occurred on January 1, 2004. The allocation of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed is preliminary pending collection of data to evaluate estimates of future revenues and earnings to determine a discounted cash flow valuation of certain intangibles that meet the separate recognition criteria of SFAS No. 141. ScanSoft’s preliminary assessment is that the weighted average useful life of the acquired identifiable intangible assets will be approximately seven years. The acquired identifiable intangible assets will be amortized using the straight-line method. | |
An increase in the amount of identifiable intangible assets or a change in the allocation between the acquired identifiable intangible assets and goodwill for the Nuance acquisition of $1,000,000 would result in a change in pro forma amortization expense of approximately $106,000 and $71,000 for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively. An increase in the weighted average useful life of the acquired identifiable intangible assets of one year would result in a decrease in pro forma amortization expense of approximately $907,000 and $606,000 for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively. A decrease in the weighted average useful life of the acquired identifiable intangible assets of one year would result in an increase in pro forma amortization expense of approximately $1,323,000 and $881,000 for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively. |
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(9) Adjustment to record stock-based compensation expense related to the unvested employee stock options that are to be issued in connection with the merger (discussed in (6) above). We have assumed a useful life of 3.5 years, and will expense the deferred compensation ratably over the useful life in accordance with APB 25 and FIN 44, totaling approximately $1,519,000 per year. As a result, the Company recorded an increase in stock-based compensation expense $1,139,000 and $759,000 for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively. | |
(10) Adjustment to reduce interest income by $553,000 and $369,000 for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively, in connection with the acquisition related payment of $79,585,000, and the estimated payment of Nuance’s transaction costs, offset by cash received of $60,000,000, related to the Warburg Pincus financing. | |
(11) Adjustment of $2,206,000 and $1,471,000 to record non-cash interest expense at an annual rate of 5.75%, for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively, related to the fair value adjustment made in purchase accounting for the restructuring accrual (detailed at (6) above). |
(12) Adjustment to record amortization expense of $824,000 and $367,000 for the identifiable intangible assets associated with the Phonetic acquisition for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively, as if the acquisition had occurred on January 1, 2004. The allocation of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed is preliminary pending collection of data to evaluate estimates of future revenues and earnings to determine a discounted cash flow valuation of certain intangibles that meet the separate recognition criteria of SFAS No. 141. ScanSoft’s preliminary assessment is that the weighted average useful life of the acquired identifiable intangible assets will be six years. The acquired identifiable intangible assets will be amortized using the straight-line method. | |
An increase in the amount of identifiable intangible assets or a change in the allocation between the acquired identifiable intangible assets and goodwill for the Phonetic acquisition of $100,000 would result in a change in pro forma amortization expense of approximately $12,900 and $8,600 for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively. An increase in the weighted average useful life of the acquired identifiable intangible assets from 6 years to 7 years would result in a decrease in pro forma amortization expense of approximately $144,000 and $96,000 for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively. A decrease in the weighted average useful life of the acquired identifiable intangible assets from 6 years to 5 years would result in an increase in pro forma amortization expense of approximately $136,800 and $91,200 for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively. | |
(13) Adjustment to reduce interest income by $197,000 and $110,000, for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively, related to the initial cash payment of $17,500,000 for the Phonetic acquisition. | |
(14) Adjustment of $675,000 and $300,000 to record non-cash interest expense at an annual rate of 5.75%, for the nine months ended September 30, 2004 and the six months ended March 31, 2005, |
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respectively, related to the note payable of $17,500,000 entered into with the former shareholders of Phonetic. |
(15) Adjustment to record amortization expense of $1,199,000 and $531,000 for the identifiable intangible assets associated with the ART acquisition for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively, as if the acquisition had occurred on January 1, 2004. The allocation of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed is preliminary pending collection of data to evaluate estimates of future revenues and earnings to determine a discounted cash flow valuation of certain intangibles that meet the separate recognition criteria of SFAS No. 141. ScanSoft’s preliminary assessment is that the weighted average useful life of the acquired identifiable intangible assets will be six years. The acquired identifiable intangible assets will be amortized using the straight-line method. | |
An increase in the amount of identifiable intangible assets or a change in the allocation between the acquired identifiable intangible assets and goodwill for the ART acquisition of $100,000 would result in a change in pro forma amortization expense of approximately $12,750 and $8,500 for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively. An increase in the weighted average useful life of the acquired identifiable intangible assets from 6 years to 7 years would result in a decrease in pro forma amortization expense of approximately $193,500 and $129,000 for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively. A decrease in the weighted average useful life of the acquired identifiable intangible assets from 6 years to 5 years would result in an increase in pro forma amortization expense of approximately $208,500 and $139,000 for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively. | |
(16) Adjustment to reduce interest income of $113,000 and $46,000 for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively, related to the initial cash payment of $10,000,000 for the ART acquisition. | |
(17) Adjustment to record interest expense of $492,000 and $182,000 at an annual rate as defined in the acquisition agreement, or 4%, for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively, in connection with the deferred payment for acquisitions of $16,414,000 entered into with the former shareholders of ART. |
(18) Adjustment to record amortization expense of $141,000 and $31,000 for the identifiable intangible assets associated with the acquisition of Rhetorical, offset by an adjustment to eliminate amortization expense of $25,000 and $6,000 related to intangible assets of Rhetorical existing prior to the acquisition, for the nine months ended September 30, 2004 and the six months ended March 31, respectively. | |
(19) Adjustment of 449,000 and 164,000 to common shares outstanding for the nine months ended September 30, 2004 and the six months ended March 31, 2005, respectively, to record the impact of the common shares issued in connection with the acquisition of Rhetorical. |
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Restructuring activities associated with the Phonetic acquisition resulted in severance costs, related to former Phonetic employees, of approximately $596,000. These costs have been accrued in purchase accounting in accordance with EITF No. 95-3,Recognition of Liabilities in Connection with a Purchase Business Combination and are included in current liabilities. |
(20) Adjustment to record amortization expense of $55,000 for the identifiable intangible assets associated with the Telelogue acquisition and an adjustment to eliminate charges related to the accretion of dividends on convertible preferred stock of $375,000 for the period January 1, 2004 to June 15, 2004 (date of acquisition). |
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Exhibit A | Form of Nova Voting Agreement | |||
Exhibit B | Form of Saturn Voting Agreement |
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(i) cash, without interest, in an amount equal to $2.20 per share (the“Per Share Cash Portion,” and the aggregate of the Per Share Cash Portion for all shares of Nova Common Stock, the“Cash Consideration”); and | |
(ii) 0.77 of a share (the“Per Share Stock Portion,” and the aggregate of the Per Share Stock Portion for all shares of Nova Common Stock, the“Stock Consideration,” and the Stock Consideration with the Cash Consideration, the“Merger Consideration”) of a validly issued, fully paid and nonassessable share of Saturn common stock, par value $0.001 per share (the“Saturn Common Stock”). |
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(i) At the Effective Time, each share of common stock, par value $0.001 per share, of Sub I (the“Sub I Common Stock”) issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and nonassessable share of common stock, par value $0.001 per share, of the Interim Surviving Corporation. Each certificate evidencing ownership of shares of Sub I Common Stock outstanding immediately prior to the Effective Time shall evidence ownership of such shares of capital stock of the Interim Surviving Corporation. | |
(ii) At the Second Step Merger Effective Time, each share of common stock of the Interim Surviving Corporation that is issued and outstanding immediately prior to the Second Step Merger Effective Time shall be cancelled and extinguished without any conversion thereof. | |
(iii) At the Second Step Merger Effective Time, each membership interest of Sub II issued and outstanding immediately prior to the Second Step Merger Effective Time shall be converted into and exchanged for the applicable corresponding interest of the Final Surviving Entity. Each membership interest certificate of Sub II, if any, evidencing ownership of any such interest shall continue to evidence the applicable corresponding interest in the Final Surviving Entity. |
(i) Subject to the approval of Saturn’s stockholders at the Saturn Stockholders’ Meeting (as defined inSection 5.2(b)) in accordance with Saturn’s Bylaws, each Nova Option (other than those granted under the Nova ESPP (as defined below)), whether vested or unvested, that is outstanding immediately prior to the Effective Time (A) under the Nova Stock Plans other than the Nova 1994 Flexible Stock Incentive Plan and has an exercise price per share of Nova Common Stock of $10.00 or less, and (B) under the Nova 1994 Flexible Stock Incentive Plan regardless of the exercise price (each, an“Assumed Nova Option”), will be assumed by Saturn and such Assumed Nova Option shall become an option to acquire shares of Saturn Common Stock, on the same terms and conditions as were applicable to such Assumed Nova Option immediately prior to the Effective Time, except that (1) such Assumed Nova Option shall be exercisable for that number of whole shares of Saturn Common Stock equal to the product (rounded down to the nearest whole number of shares of Saturn Common Stock) obtained by multiplying the number of shares of Nova Common Stock issuable upon the exercise of such Assumed Nova Option immediately prior to the Effective Time by the Option Exchange Ratio (as defined herein), and (2) the per share exercise price for the shares of Saturn Common Stock issuable upon exercise of such Assumed Nova Option shall be equal to the quotient (rounded up to the nearest whole cent) obtained by dividing the exercise price per share of Nova Common Stock for which the Assumed Nova Option was exercisable immediately prior to the Effective Time by the Option Exchange Ratio. The“Option Exchange Ratio” shall mean the sum of |
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the Per Share Stock Portion and the quotient of (a) the Per Share Cash Portion divided by (b) the average of the closing trading prices of Saturn Common Stock as reported on the Nasdaq National Market(“Nasdaq”) during the five (5) trading days immediately preceding the date of the Closing (it being understood that the Per Share Cash Portion and the Per Share Stock Portion as may be modified bySection 1.6(b) shall be used in calculating the Option Exchange Ratio). | |
(ii) In the event Saturn stockholder approval is not obtained for the Option Assumption (as defined inSection 5.2(b)), each Assumed Nova Option will be assumed by Saturn and such Assumed Nova Option shall become an option to acquire shares of Saturn Common Stock and cash, on the same terms and conditions as were applicable to such Assumed Nova Option immediately prior to the Effective Time, except that (1) such Assumed Nova Option shall be exercisable for (A) that number of whole shares of Saturn Common Stock equal to the product (rounded down to the nearest whole number of shares of Saturn Common Stock) obtained by multiplying the number of shares of Nova Common Stock issuable upon the exercise of such Assumed Nova Option immediately prior to the Effective Time by the Per Share Stock Portion (as adjusted pursuant toSection 1.6(b)), and (B) that amount of cash (rounded up the nearest whole cent) obtained by multiplying the number of shares of Nova Common Stock issuable upon the exercise of such Nova Option immediately prior to the Effective Time by the Per Share Cash Portion (as adjusted pursuant toSection 1.6(b)), and (2) the per share exercise price for the shares of Saturn Common Stock and cash issuable upon exercise of such Assumed Nova Option shall be equal to the quotient (rounded up to the nearest whole cent) obtained by dividing the exercise price per share of Nova Common Stock for which the Assumed Nova Option was exercisable immediately prior to the Effective Time by the Per Share Stock Portion. | |
(iii) As promptly as practicable after the Closing Date (but in any event, within 30 days following the Closing Date), Saturn shall issue to each holder of an Assumed Nova Option a document evidencing the foregoing assumption of such Assumed Nova Option, which form of assumption notice shall be subject to the reasonable review and approval of Nova. | |
(iv) Each Nova Option (other than those granted under the Nova ESPP), whether vested or unvested, that is outstanding immediately prior to the Effective Time with an exercise price per share of Nova Common Stock of more than $10.00 (each a“Terminated Nova Option”) shall be fully vested prior to the Effective Time and shall terminate as of the Effective Time. Nova shall take all reasonable actions (but not including the payment of cash or non-cash consideration without Saturn’s consent) necessary to cause the termination of all outstanding Terminated Nova Options that remain unexercised prior to the Effective Time so that all Terminated Nova Options terminate at or prior to the Effective Time. | |
(v) Nova shall cause the termination, effective immediately prior to the Effective Time, of all Nova Stock Plans. |
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(i) Nova and each of its Subsidiaries have prepared and timely filed all material required federal, state, local and foreign returns, estimates, information statements and reports and any amendments thereto(“Tax Returns”) relating to any and all Taxes concerning or attributable to Nova, its Subsidiaries or their respective operations, and such Tax Returns, as of the time of filing were true and correct in all material respects and have been completed in accordance with applicable law. | |
(ii) Nova and each of its Subsidiaries have timely paid all material Taxes required to be paid. With respect to their employees, Nova and each of its Subsidiaries have timely paid or withheld all federal and state income taxes, Federal Insurance Contribution Act, Federal Unemployment Tax Act and other material Taxes required to be paid or withheld. Furthermore, any such amounts withheld by Nova and each of its Subsidiaries with respect to their employees have been timely paid over to the appropriate Taxing authority. | |
(iii) Neither Nova nor any of its Subsidiaries has been delinquent in the payment of any material Tax, nor is there any material Tax deficiency outstanding, assessed or proposed against Nova or any of its Subsidiaries, nor has Nova or any of its Subsidiaries executed any waiver of any statute of limitations on or extending the period for the assessment or collection of any material Tax. | |
(iv) No audit or other examination of any Tax Return of Nova or any of its Subsidiaries is presently in progress, nor has Nova or any of its Subsidiaries been notified of any request for such an audit or other examination. No adjustment relating to any Tax Return filed by Nova or any of its Subsidiaries has been proposed formally or, to the knowledge of Nova, informally by any Tax authority to Nova, any of its Subsidiaries or any representative thereof. Neither Nova nor any of its Subsidiaries has been notified of any claim made by an authority in a jurisdiction where Nova or its Subsidiaries do not file Tax Returns that Nova or any of its Subsidiaries are or may be subject to taxation by that jurisdiction. | |
(v) Neither Nova nor any of its Subsidiaries has any liabilities for unpaid Taxes (other than such liabilities, including without limitation any penalties or interest thereon, that are immaterial to Nova), which have not been accrued or reserved on the Nova Balance Sheet in accordance with GAAP, and neither Nova nor any of its Subsidiaries has incurred any liability for Taxes since the date of the Nova Balance Sheet other than in the ordinary course of business. | |
(vi) Neither Nova nor any of its Subsidiaries has (a) ever been a member of an affiliated group (within the meaning of Code §1504(a)) filing a consolidated federal income Tax Return (other than a group the common parent of which was Nova), (b) ever been a party to any Tax sharing, indemnification or allocation agreement, nor does Nova or any of its Subsidiaries owe any amount under any such agreement and (c) any liability for the Taxes of any person (other than Nova or any of its Subsidiaries) under Treas. Reg. § 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract, or otherwise and (d) ever been a party to any joint venture, partnership or other agreement that, to the knowledge of Nova, could be treated as a partnership for Tax purposes. | |
(vii) Neither Nova nor any of its Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code (x) in the two years prior to the date of this Agreement or (y) in a distribution that otherwise could constitute part of a “plan” or “series of related transactions” within the meaning of Section 355(e) of the Code in conjunction with the Merger. | |
(viii) Neither Nova nor any of its Subsidiaries has engaged in a reportable transaction under Treas. Reg. § 1.6011-4(b) or in a transaction that is the same as or substantially similar to one of the |
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types of transactions that the Internal Revenue Service has determined to be a tax avoidance transaction and identified by notice, regulation, or other form of published guidance as a listed transaction, as set forth in Treas. Reg. § 1.6011-4(b)(2). |
(a) To the knowledge of Nova, (i) the operation of the business of Nova and each of its Subsidiaries as currently conducted, including their products and services, does not infringe or misappropriate in any material respect the Intellectual Property (defined below) of any third party or constitute unfair competition or unfair trade practices under the laws of any jurisdiction, and (ii) Nova and its Subsidiaries own or possess sufficient rights to all material Intellectual Property used in or necessary for the operation of their businesses as currently conducted. | |
(b) Neither Nova nor any of its Subsidiaries have received any written notice from any third party as of the date hereof, and, to the knowledge of Nova, there is no other assertion or pending threat from any third party, that the operation of the business of Nova or any of its Subsidiaries as currently conducted, or any of their products or services, infringes or misappropriates the Intellectual Property of any third party or constitutes unfair competition or unfair trade practices under the laws of any jurisdiction. Neither Nova nor any its Subsidiaries have brought or have been a party to any suits, arbitrations or other adversarial proceedings with respect to a third party’s Intellectual Property that remain unresolved. | |
(c) To the knowledge of Nova, as of the date hereof, no person is infringing or misappropriating any material Intellectual Property owned or exclusively licensed by Nova or any of its Subsidiaries. Neither Nova nor any its Subsidiaries have brought or have been a party to any suits, arbitrations or other adversarial proceedings with respect to their Intellectual Property against any third party that remain unresolved. | |
(d) Nova and its Subsidiaries are not subject to any judgment, order, writ, injunction or decree of any court or any Federal, state, local, foreign or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, or any arbitrator, which restricts or impairs the use of any material Intellectual Property of Nova and its Subsidiaries. The Intellectual Property owned or exclusively licensed by Nova is free and clear of any Liens. | |
(e) To the knowledge of Nova, Nova and each of its Subsidiaries are in compliance in all material respects with, and have not breached in any material respect any term of any contracts, licenses or other agreements in which Nova and its Subsidiaries have granted or received any Intellectual Property(“Nova IP Agreements”). To the knowledge of Nova, all third parties to such Nova IP Agreements are in compliance in all material respects with, and have not breached in any material respect, any of their terms. | |
�� (f) The Merger will not result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or impair Nova’s rights or obligations or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any of the properties or assets of Nova or any of its Subsidiaries pursuant to, any material Nova IP Agreements. The Merger will not result in the obligation for Nova or its Subsidiaries to pay any consideration, royalties or other amounts to any third party in excess of those amounts otherwise owed by Nova or its Subsidiaries immediately prior to the Merger. | |
(g) The Merger will not, as a result of any contracts, licenses or other agreements entered into by Nova, result in: (i) Saturn or its Subsidiaries (other than the Subs, but only to the extent existing prior to the Merger), being bound by any material non-compete, exclusivity obligation or other restriction on the operation of its business, or (ii) Saturn or its Subsidiaries (other than the Subs, but only to the extent existing prior to the Merger) granting to any third party any rights or licenses to any material Intellectual Property of Saturn or any affiliate of Saturn (including without limitation a covenant not to sue). |
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(h) To the knowledge of Nova, no Governmental Entity, university, college, other educational institution or research center has any claim or right in or to any product or Intellectual Property owned or exclusively licensed by Nova. Nova has not entered into any agreement granting any such rights. | |
(i) Nova does not incorporate into, combine with, or distribute in conjunction with any of its products or services any software that is subject to any “copyleft” or other obligation or condition under any “open source” or similar license, such as the GNU Public License (GPL), that requires or conditions the distribution of such product or services on the disclosure, licensing or distribution of any Nova source code. | |
(j) “Intellectual Property” shall mean any or all of the following and all rights in, arising out of, or associated therewith: (a) all United States, international and foreign patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof; (b) all inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know how, technology, technical data and customer lists, and all documentation relating to any of the foregoing; (c) all copyrights, copyrights registrations and applications therefor, and all other rights corresponding thereto throughout the world; (d) domain names, uniform resource locators, and other names and locators associated with the Internet, (e) all computer software, including all source code, object code, firmware, development tools, files, records and data, and all media on which any of the foregoing is recorded; (f) all industrial designs and any registrations and applications therefor throughout the world; (g) all trade names, logos, common law trademarks and service marks, trademark and service mark registrations and applications therefor throughout the world; (h) all databases and data collections and all rights therein throughout the world; (i) all moral and economic rights of authors and inventors, however denominated, throughout the world, and (j) any similar or equivalent rights to any of the foregoing anywhere in the world. |
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(i) Except as set forth onSection 2.13(h)(i) of the Nova Disclosure Letter, the execution of this Agreement and the consummation of the transactions contemplated hereby will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Nova Employee Plan or Nova Employee Agreement that will or may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Nova Employee. | |
(ii) Except as set forth onSection 2.13(h)(ii)of the Nova Disclosure Letter, no payment or benefit which will or may be made by Nova or its Nova ERISA Affiliates with respect to any Nova Employee could not reasonably be deductible under 280G of the Code. There is no contract, agreement, plan or arrangement to which Nova or any of its Nova ERISA Affiliates is a party or by which it is bound to compensate any Nova Employee for excise taxes paid pursuant to Section 4999 of the Code. |
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(i) any “material contracts” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) with respect to Nova and its Subsidiaries; |
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(ii) any agreement of indemnification or any guaranty of third parties other than any agreement of indemnification entered into in connection with the sale or license of services or hardware or software products in the ordinary course of business; | |
(iii) any Contract containing any covenant (A) limiting in any respect the right of Nova or any of its Subsidiaries to engage in any line of business, to make use of any Intellectual Property or compete with any person in any line of business, (B) granting any exclusive rights, (C) granting any person “Most Favored Nations” or similar status, or (D) otherwise restricting the right of Nova and its Subsidiaries to sell, distribute or manufacture any products or services or to purchase or otherwise obtain any software, components, parts or subassemblies in a manner that would be reasonably likely to have a material adverse effect on the business of Nova; | |
(iv) any Contract relating to the disposition or acquisition by Nova or any of its Subsidiaries after the date of this Agreement of a material amount of assets not in the ordinary course of business or pursuant to which Nova or any of its Subsidiaries has any material ownership interest in any other person or other business enterprise other than Nova’s Subsidiaries; | |
(v) any dealer, distributor or joint marketing agreement, under which Nova or any of its Subsidiaries have continuing obligations or costs in excess of $100,000 per year, to jointly market any product, technology or service, and which may not be canceled without penalty upon notice of ninety (90) days or less; or any agreement pursuant to which Nova or any of its Subsidiaries have jointly developed or have continuing obligations to jointly develop any product or Intellectual Property that will not be exclusively owned by Nova or any of its Subsidiaries, or any joint venture agreement; | |
(vi) any Contract to license or provide source code to any third party for any product or technology that is material to Nova and its Subsidiaries taken as a whole, other than any such Contracts entered into in the ordinary course of business; | |
(vii) any Contract (A) containing any support or maintenance obligation on the part of Nova or any of its Subsidiaries outside of the ordinary course of business consistent with past practice or (B) containing any service obligation or cost to deliver services on the part of Nova or any of its Subsidiaries in excess of $250,000 after the date hereof, other than those obligations that are terminable by Nova or any of its Subsidiaries on no more than ninety (90) days notice without liability or financial obligation to Nova or its Subsidiaries after or with respect to such termination (but excluding any Nova Employee Agreement); | |
(viii) any Contract to sell or distribute any of Nova’s products, services or technology, except agreements with distributors or sales representative in the ordinary course of business consistent with past practice; | |
(ix) any mortgages, indentures, guarantees, loans or credit agreements, security agreements or other Contracts relating to the borrowing of money or extension of credit, other than accounts receivables and payables in the ordinary course of business; | |
(x) (A) any settlement agreement entered into within five (5) years prior to the date of this Agreement relating to Intellectual Property, and (B) any settlement agreement not relating to Intellectual Property entered into within two (2) years prior to the date of this Agreement, other than (I) releases immaterial in nature or amount entered into with former employees or independent contractors of Nova in the ordinary course of business in connection with the cessation of such employee’s or independent contractor’s employment with Nova or (II) settlement agreements for cash only that do not exceed $50,000 as to each such settlement; | |
(xi) any other agreement, contract or commitment that requires payments by or obligations of Nova or any Subsidiary after the date hereof in excess of $250,000 or that requires payments to Nova or any Subsidiary after the date hereof in excess of $500,000 in any individual case not described in clauses (i) through (x) above; |
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(xii) any Nova IP Agreement (other than non-exclusive out-bound licenses of Nova’s or its Subsidiaries’ software products or services, or immaterial in-bound licenses, entered into in the ordinary course of business consistent with past practices); or | |
(xiii) any Contract, or group of Contracts with a person (or group of affiliated persons), the termination or breach of which would be reasonably expected to have a Material Adverse Change to Nova. |
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(i) Saturn and each of its Subsidiaries have prepared and timely filed all material required Tax Returns relating to any and all Taxes concerning or attributable to Saturn, its Subsidiaries or their respective operations, and such Tax Returns, as of the time of filing were true and correct in all material respects and have been completed in accordance with applicable law. | |
(ii) Saturn and each of its Subsidiaries have timely paid all material Taxes required to be paid. With respect to their employees, Saturn and each of its Subsidiaries have timely paid or withheld all federal and state income taxes, Federal Insurance Contribution Act, Federal Unemployment Tax Act and other material Taxes required to be paid or withheld. Furthermore, any such amounts withheld by Saturn and each of its Subsidiaries with respect to their employees have been timely paid over to the appropriate Taxing authority. | |
(iii) Neither Saturn nor any of its Subsidiaries has been delinquent in the payment of any material Tax, nor is there any material Tax deficiency outstanding, assessed or proposed against Saturn or any of its Subsidiaries, nor has Saturn or any of its Subsidiaries executed any waiver of any statute of limitations on or extending the period for the assessment or collection of any material Tax. | |
(iv) No audit or other examination of any Tax Return of Saturn or any of its Subsidiaries is presently in progress, nor has Saturn or any of its Subsidiaries been notified of any request for such an audit or other examination. No adjustment relating to any Tax Return filed by Saturn or any of its Subsidiaries has been proposed formally or, to the knowledge of Saturn, informally by any Tax authority to Saturn, any of its Subsidiaries or any representative thereof. Neither Saturn nor any of its Subsidiaries has been notified of any claim made by an authority in a jurisdiction where Saturn or its Subsidiaries do not file Tax Returns that Saturn or any of its Subsidiaries are or may be subject to taxation by that jurisdiction. | |
(v) Neither Saturn nor any of its Subsidiaries has any liabilities for unpaid Taxes (other than such liabilities, including without limitation any penalties or interest thereon, that are immaterial to Saturn), which have not been accrued or reserved on the Saturn Balance Sheet in accordance with GAAP, and neither Saturn nor any of its Subsidiaries has incurred any liability for Taxes since the date of the Saturn Balance Sheet other than in the ordinary course of business. | |
(vi) Neither Saturn nor any of its Subsidiaries has (a) ever been a member of an affiliated group (within the meaning of Code §1504(a)) filing a consolidated federal income Tax Return (other than a group the common parent of which was Saturn), (b) ever been a party to any Tax sharing, indemnification or allocation agreement, nor does Saturn or any of its Subsidiaries owe any amount under any such agreement and (c) any liability for the Taxes of any person (other than Saturn or any of its Subsidiaries) under Treas. Reg. § 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract, or otherwise and (d) ever been a party to any joint venture, partnership or other agreement that to the knowledge of Saturn could be treated as a partnership for Tax purposes. | |
(vii) Neither Saturn nor any of its Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code (x) in the two years prior to the date of this Agreement or (y) in a distribution that otherwise could constitute part of a “plan” or “series of related transactions” within the meaning of Section 355(e) of the Code in conjunction with the Merger. | |
(viii) Neither Saturn nor any of its Subsidiaries has engaged in a reportable transaction under Treas. Reg. § 1.6011-4(b) or in a transaction that is the same as or substantially similar to one of the types of transactions that the Internal Revenue Service has determined to be a tax avoidance transaction and identified by notice, regulation, or other form of published guidance as a listed transaction, as set forth in Treas. Reg. § 1.6011-4(b)(2). |
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(a) To the knowledge of Saturn, (i) the operation of the business of Saturn and each of its Subsidiaries as currently conducted, including their products and services, does not infringe or misappropriate in any material respect the Intellectual Property of any third party or constitute unfair competition or unfair trade practices under the laws of any jurisdiction, and (ii) Saturn and its Subsidiaries own or possess sufficient rights to all material Intellectual Property used in or necessary for the operation of their businesses as currently conducted. | |
(b) Neither Saturn nor any of its Subsidiaries have received any written notice from any third party as of the date hereof, and, to the knowledge of Saturn, there is no other assertion or pending threat from any third party, that the operation of the business of Saturn or any of its Subsidiaries as currently conducted, or any of their products or services, infringes or misappropriates the Intellectual Property of any third party or constitutes unfair competition or unfair trade practices under the laws of any jurisdiction. Neither Saturn nor any its Subsidiaries have brought or have been a party to any suits, arbitrations or other adversarial proceedings with respect to a third party’s Intellectual Property that remain unresolved. | |
(c) To the knowledge of Saturn, as of the date hereof, no person is infringing or misappropriating any material Intellectual Property owned or exclusively licensed by Saturn or any of its Subsidiaries. Neither Saturn nor any its Subsidiaries have brought or have been a party to any suits, arbitrations or other adversarial proceedings with respect to their Intellectual Property against any third party that remain unresolved. | |
(d) Saturn and its Subsidiaries are not subject to any judgment, order, writ, injunction or decree of any court or any Federal, state, local, foreign or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, or any arbitrator, which restricts or impairs the use of any material Intellectual Property of Saturn or its Subsidiaries. The Intellectual Property owned or exclusively licensed by Saturn is free and clear of any Liens. | |
(e) To the knowledge of Saturn, Saturn and each of its Subsidiaries are in compliance in all material respects with, and have not breached in any material respect any term of any contracts, licenses or other agreements in which Saturn and its Subsidiaries have granted or received any Intellectual Property(“Saturn IP Agreements”). To the knowledge of Saturn, all third parties to such Saturn IP Agreements are in compliance in all material respects with, and have not breached in any material respect, any of their terms. | |
(f) The Merger will not result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or impair Saturn’s rights or obligations or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any of the properties or assets of Saturn or any of its Subsidiaries pursuant to, any material Saturn IP Agreements. The Merger will not result in the obligation for Saturn or its Subsidiaries to pay any consideration, royalties or other amounts to any third party in excess of those amounts otherwise owed by Saturn or its Subsidiaries immediately prior to the Merger. | |
(g) The Merger will not, as a result of any contracts, licenses or other agreements entered into by Saturn, result in: (i) Saturn or its Subsidiaries (other than the Subs, but only to the extent existing prior to the Merger), being bound by any material non-compete, exclusivity obligation or other restriction on the operation of its business, or (ii) Saturn or its Subsidiaries (other than the Subs, but only to the extent existing prior to the Merger) granting to any third party any rights or licenses to any material Intellectual Property of Saturn or any affiliate of Saturn (including without limitation a covenant not to sue). | |
(h) To the knowledge of Saturn, no Governmental Entity, university, college, other educational institution or research center has any claim or right in or to any product or Intellectual Property |
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owned or exclusively licensed by Saturn. Saturn has not entered into any agreement granting any such rights. | |
(i) Saturn does not incorporate into, combine with, or distribute in conjunction with any of its products or services any software that is subject to any “copyleft” or other obligation or condition under any “open source” or similar license, such as the GNU Public License (GLP), that requires or conditions the distribution of such product or services on the disclosure, licensing or distribution of any Saturn source code. |
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(i) “Saturn Employee” shall mean any current or former or retired employee, consultant or director of Saturn or any Saturn ERISA Affiliate. | |
(ii) “Saturn Employee Agreement” shall mean each management, employment, severance, consulting, relocation, repatriation, expatriation, visa, work permit or other similar agreement, contract or understanding between Saturn or any Saturn ERISA Affiliate and any Saturn Employee, except to the extent a Saturn Employee Agreement provides for “at-will” employment and does not provide for severance payments or benefits. | |
(iii) “Saturn Employee Plans” shall mean each plan, program, policy, practice, contract, agreement or other arrangement providing for compensation, severance, termination pay, deferred compensation, performance awards, stock or stock-related awards, fringe benefits or other employee benefits or remuneration of any kind, whether written or unwritten or otherwise, funded or unfunded, including without limitation, each “employee benefit plan,” within the meaning of Section 3(3) of ERISA which is or has been maintained, contributed to, or required to be contributed to, by Saturn or any Subsidiary of Saturn or any Saturn ERISA Affiliate for the benefit of a Saturn Employee, or with respect to which Saturn or any Saturn ERISA Affiliate has or may have any liability or obligation. | |
(iv) “Saturn ERISA Affiliate” shall mean any Saturn Subsidiary or other person or entity under common control with Saturn or any Saturn Subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations issued thereunder. |
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(i) Except as set forth onSection 3.13(h)(i) of the Saturn Disclosure Letter, the execution of this Agreement and the consummation of the transactions contemplated hereby will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Saturn Employee Plan or Saturn Employee Agreement that will or may result in any payment (whether of |
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severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Saturn Employee. | |
(ii) Except as set forth onSection 3.13(h)(ii) of the Saturn Disclosure Letter, no payment or benefit which will or may be made by Saturn or its Saturn ERISA Affiliates with respect to any Saturn Employee could not reasonably be deductible under 280G of the Code. There is no contract, agreement, plan or arrangement to which Saturn or any of its Saturn ERISA Affiliates is a party or by which it is bound to compensate any Saturn Employee for excise taxes paid pursuant to Section 4999 of the Code. |
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(i) any “material contracts” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) with respect to Saturn and its Subsidiaries; | |
(ii) any agreement of indemnification or any guaranty of third parties other than any agreement of indemnification entered into in connection with the sale or license of services or hardware or software products in the ordinary course of business; | |
(iii) any Contract containing any covenant (A) limiting in any respect the right of Saturn or any of its Subsidiaries to engage in any line of business, to make use of any Intellectual Property or compete with any person in any line of business, (B) granting any exclusive rights, (C) granting any person “Most Favored Nations” or similar status, or (D) otherwise restricting the right of Saturn and its Subsidiaries to sell, distribute or manufacture any products or services or to purchase or otherwise obtain any software, components, parts or subassemblies in a manner that would be reasonably likely to have a material adverse effect on the business of Saturn; | |
(iv) any Contract relating to the disposition or acquisition by Saturn or any of its Subsidiaries after the date of this Agreement of a material amount of assets not in the ordinary course of business or pursuant to which Saturn or any of its Subsidiaries has any material ownership interest in any other person or other business enterprise other than Saturn’s Subsidiaries; | |
(v) any dealer, distributor or joint marketing agreement, under which Saturn or any of its Subsidiaries have continuing obligations or costs in excess of $250,000 per year, to jointly market any product, technology or service, and which may not be canceled without penalty upon notice of ninety (90) days or less; or any agreement pursuant to which Saturn or any of its Subsidiaries have jointly developed or have continuing obligations to jointly develop any product or Intellectual Property that will not be exclusively owned by Saturn or any of its Subsidiaries, or any joint venture agreement; | |
(vi) any Contract to license or provide source code to any third party for any product or technology that is material to Saturn and its Subsidiaries taken as a whole, other than any such Contracts entered into in the ordinary course of business; |
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(vii) any Contract (A) containing any support or maintenance obligation on the part of Saturn or any of its Subsidiaries outside of the ordinary course of business consistent with past practice or (B) containing any service obligation or cost to deliver services on the part of Saturn or any of its Subsidiaries in excess of $500,000 after the date hereof, other than those obligations that are terminable by Saturn or any of its Subsidiaries on no more than ninety (90) days notice without liability or financial obligation to Saturn or its Subsidiaries after or with respect to such termination (but excluding any Saturn Employee Agreement); | |
(viii) any Contract to sell or distribute any of Saturn’s products, services or technology, except agreements with distributors or sales representative in the ordinary course of business consistent with past practice; | |
(ix) any mortgages, indentures, guarantees, loans or credit agreements, security agreements or other Contracts relating to the borrowing of money or extension of credit, other than accounts receivables and payables in the ordinary course of business; | |
(x) (A) any settlement agreement entered into within five (5) years prior to the date of this Agreement relating to Intellectual Property, and (B) any settlement agreement not relating to Intellectual Property entered into within two (2) years prior to the date of this Agreement, other than (I) releases immaterial in nature or amount entered into with former employees or independent contractors of Saturn in the ordinary course of business in connection with the cessation of such employee’s or independent contractor’s employment with Saturn or (II) settlement agreements for cash only that do not exceed $50,000 as to each such settlement; | |
(xi) any Saturn IP Agreement (other than non-exclusive out-bound licenses of Saturn’s or its Subsidiaries’ software products or services, or immaterial in-bound licenses, entered into in the ordinary course of business consistent with past practices); or | |
(xii) any Contract, or group of Contracts with a person (or group of affiliated persons), the termination or breach of which would be reasonably expected to have a Material Adverse Change to Saturn. |
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(i) Enter into any new line of business; | |
(ii) Declare, set aside or pay any dividends on or make any other distributions (whether in cash, stock, equity securities or property) in respect of any capital stock or split, combine or reclassify any capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock, other than (A) any such transaction by a wholly-owned Subsidiary of it that remains a wholly-owned Subsidiary of it after consummation of such transaction, in the ordinary course of business consistent with past practice and (B) repurchases of unvested shares at cost in connection with the termination of the employment relationship with any employee pursuant to stock option or purchase agreements in effect on the date hereof; | |
(iii) Purchase, redeem or otherwise acquire, directly or indirectly, any shares of its capital stock or the capital stock of its Subsidiaries, except repurchases of unvested shares at cost in connection with the termination of the employment relationship with any employee pursuant to stock option or purchase agreements in effect on the date hereof; | |
(iv) Issue, deliver, sell, authorize, pledge or otherwise encumber any shares of capital stock, Voting Debt or any securities convertible into shares of capital stock or Voting Debt, or subscriptions, rights, warrants or options to acquire any shares of capital stock or Voting Debt or any securities convertible into shares of capital stock or Voting Debt, or enter into other agreements or commitments of any character obligating it to issue any such securities or rights, except that (X) Nova may issue shares of Nova Common Stock (and the Nova Rights issuable upon the issuance of such shares): (1) upon the exercise of Nova Options, warrants or other rights of Nova existing on the date hereof in accordance with their present terms; or (2) pursuant to the Nova ESPP; and (Y) Nova may, in the ordinary course of business and consistent with past practices, grant Nova Options (other than those granted under the Nova ESPP) to purchase shares of Nova Common Stock to any newly hired employees of Nova, and may, in the ordinary course of business and consistent with past practices, grant Nova Options (other than those granted under the Nova ESPP) to purchase up to 250,000 shares of Nova Common Stock (in the aggregate) to non-executive |
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officer employees of Nova in connection with Nova’s 2005 annual review, in both cases with an exercise price at least equal to the then fair market value of the Nova Common Stock; | |
(v) Cause, permit or propose any amendments to the Nova Charter Documents or any of the Subsidiary Charter Documents of Nova’s Subsidiaries; | |
(vi) Acquire or agree to acquire by merging or consolidating with, or by purchasing any equity or voting interest in or a portion of the assets of, or by any other manner, any business or any person or division thereof, or otherwise acquire or agree to acquire any assets outside of the ordinary course of business consistent with past practice; | |
(vii) Enter into any binding agreement, agreement in principle, letter of intent, memorandum of understanding or similar agreement with respect to any joint venture, strategic partnership, alliance or similar arrangement;provided, however, that this clause (vii) shall not prohibit Nova from entering into, in the ordinary course of business consistent with past practice (i) original equipment manufacturer agreements, (ii) agreements with end-user customers or (iii) agreements with distributors or sales representatives; | |
(viii) Sell, lease, license, encumber or otherwise dispose of any properties or assets except (A) sales of inventory in the ordinary course of business consistent with past practice, (B) the sale, lease or disposition (other than through licensing) of property or assets which are not material, individually or in the aggregate, to the business of Nova and its Subsidiaries, (C) the sale of goods or non-exclusive licenses of Intellectual Property in the ordinary course of business and in a manner consistent with past practice or (D) dispositions of other immaterial assets in the ordinary course of business and in a manner consistent with past practice; | |
(ix) Make any loans, advances or capital contributions to, or investments in, any other person, other than employee advances for travel and entertainment expenses or draws against commissions under existing employee agreements made in the ordinary course of business consistent with past practices provided such employee advances are in compliance with applicable law; | |
(x) Except as required by GAAP or the SEC as concurred in by its independent auditors, make any material change in its methods or principles of accounting since the date of the Nova Balance Sheet; | |
(xi) Make or change any material Tax election or adopt or change any accounting method, enter into any closing agreement, settle or compromise any claim or assessment in respect of Taxes or consent to any extension or waiver of any limitation period with respect to any claim or assessment for Taxes; | |
(xii) Except as may be required by GAAP or the SEC, revalue any of its assets or make any change in accounting methods, principles or practices; | |
(xiii) (A) Pay, discharge, settle or satisfy any material claims (including any Tax claim), liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), or litigation (whether or not commenced prior to the date of this Agreement) other than the payment, discharge, settlement or satisfaction for money, of claims, liabilities, obligations or litigation (x) in the ordinary course of business consistent with past practice or the payment of obligations incurred in the ordinary course of business in accordance with their terms; or (y) which is required by an existing agreement on the date hereof in accordance with its terms, or (B) knowingly waive the benefits of, agree to modify in any manner, terminate, release any person from or knowingly fail to enforce any confidentiality or similar agreement to which Nova or any of its subsidiaries is a party or of which Nova or any of its Subsidiaries is a beneficiary; | |
(xiv) Except as set forth onSection 4.1(b)(xiv) of the Nova Disclosure Letter, take any of the following actions: (1) increase in any manner the amount of compensation or fringe benefits of, pay any bonus to or grant severance or termination pay to any Nova Employee or director of Nova or any Subsidiary of Nova (2) make any increase in or commitment to increase any Nova Employee Plan |
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(including any severance plan), adopt or amend or make any commitment to adopt or amend any Nova Employee Plan or make any contribution, other than regularly scheduled contributions, to any Nova Employee Plan, (3) waive any stock repurchase rights, accelerate, amend or change the period of exercisability of Nova Options or Unvested Shares, or reprice any Nova Options or authorize cash payments in exchange for any Nova Options, (4) enter into any employment, severance, termination or indemnification agreement with any Nova Employee or enter into any collective bargaining agreement, (other than corporate indemnification agreements with new hires or promoted existing employees replacing persons in positions currently with indemnification agreements in place, offer letters and letter agreements entered into in the ordinary course of business consistent with past practice with employees who are terminable “at will” or employee agreements with employees who provide services outside of the United States if consistent with past practice and customary in such foreign locations), (5) make any material oral or written representation or commitment with respect to any material aspect of any Nova Employee Plan that is not materially in accordance with the existing written terms and provision of such Nova Employee Plan, (6) grant any stock appreciation right, phantom stock award, stock-related award or similar equity compensation performance award (whether payable in cash, shares or otherwise) to any person (including any Nova Employee), (7) enter into any agreement with any Nova Employee the benefits of which are (in whole or in part) contingent or the terms of which are materially altered in favor of the Nova Employee upon the occurrence of a transaction involving Nova of the nature contemplated hereby; | |
(xv) Grant any exclusive rights with respect to any Intellectual Property of such party, other than the grant of exclusive rights to custom work product created pursuant to agreements under which Nova provides professional services entered into in the ordinary course of business, provided that the grant of such exclusive rights does not extend beyond such custom work product to any Intellectual Property that is used by Nova in any Nova products or services and such custom work product is not necessary for any Nova products or services (such permitted agreements,“Nova Custom Work Contracts”); | |
(xvi) Enter into or renew any Contracts containing, or otherwise subject the Final Surviving Entity or Saturn to, any non-competition, exclusivity or other similar material restrictions on Nova or the Final Surviving Entity or Saturn, or any of their respective businesses, following the Closing,provided that the foregoing shall not restrict Nova from entering into or renewing any Nova Custom Work Contracts; | |
(xvii) Enter into any agreement or commitment the effect of which would be to grant to a third party following the Merger any actual or potential right or license to any Intellectual Property owned by Saturn or any of its Subsidiaries (other than the Final Surviving Entity); | |
(xviii) Hire or offer to hire employees, other than employees to (A) fill the open positions described onSection 4.1(b)(xviii) of the Nova Disclosure Letter and (B) replace (1) any existing employees of Nova critical to the continuing operations of Nova (as reasonably determined by Nova) who leave Nova’s employ after the date hereof or (2) any employees hired pursuant to clause (A) of this sentence who leaves Nova’s employ after the date hereof; | |
(xix) Incur any indebtedness for borrowed money or guarantee any such indebtedness of another person, issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of Nova or any of its Subsidiaries, guarantee any debt securities of another person, enter into any “keep well” or other agreement to maintain any financial statement condition of any other person or enter into any arrangement having the economic effect of any of the foregoing; | |
(xx) Make or commit to make (A) any individual or series of related payments outside of the ordinary course of business, or (B) any capital expenditures in excess of $200,000 individually and $500,000 in the aggregate during any three month period; | |
(xxi) Modify, terminate or amend in any material respect any lease, sublease or Nova Material Contract (other than modifications, terminations or amendments in the ordinary course of business |
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consistent with past practices with respect to Nova Material Contracts, so long as the subject matter of any such Nova Material Contract (including, without limitation, Nova Material Contracts with customers, resellers, suppliers or service providers) being so modified, terminated or amended is within the scope of the ordinary course of Nova’s business), or release or assign or knowingly waive any material rights or claims thereunder; | |
(xxii) Enter into any Contract outside of the ordinary course of business (except as expressly permitted by thisSection 4.1(b)), or any Contract requiring Nova or any of its Subsidiaries to pay specified sums in excess of an aggregate of $500,000 under such Contract; | |
(xxiii) Agree in writing or otherwise to take any of the actions described in (i) through (xxii) above. |
(i) cause, permit or propose any amendments to the Saturn Charter Documents or any of the Subsidiary Charter Documents of Saturn’s Subsidiaries that would materially impair or adversely affect the ability of Saturn to consummate the transactions contemplated by this Agreement, | |
(ii) issue or agree to issue a material amount of its capital stock or securities convertible into its capital stock (other than pursuant to the Saturn Stock Option Plans, pursuant to convertible securities outstanding on the date hereof, in conjunction with employment or consulting arrangements, pursuant to the Financing, and pursuant to the agreements set forth onSection 4.2(b)(ii) of the Saturn Disclosure Letter); | |
(iii) declare, set aside or pay any dividends on or make any other distributions (whether in cash, stock, equity securities or property) in respect of any Saturn capital stock other than dividends paid in Saturn Common Stock if the Per Share Stock Portion shall be appropriately adjusted, | |
(iv) adopt a plan of liquidation or dissolution, | |
(v) purchase, redeem or otherwise acquire, directly or indirectly, shares of its capital stock or the capital stock of its Subsidiaries for an aggregate repurchase price in excess of $5,000,000, except repurchases of unvested shares at cost in connection with the termination of the employment |
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relationship with any employee pursuant to stock option or purchase agreements in effect on the date hereof; | |
(vi) acquire or agree to acquire by merging or consolidating with, or by purchasing any equity or voting interest in all or a portion of the assets of, or by any other manner, any business or any person or division thereof, if either the consideration to be paid is in excess of $15,000,000 individually or $45,000,000 in the aggregate, or if such acquisition is likely to materially delay the Merger; | |
(vii) except as required by GAAP or the SEC, revalue any of its assets or make any change in accounting methods, principles or practices; | |
(viii) cause, permit or propose any material amendment or modification to that certain Stock Purchase Agreement, dated May 5, 2005, by and among Saturn and the Warburg Entities, relating to the purchase at or immediately prior to the Closing by the Warburg Entities of an aggregate of 14,150,943 shares of Saturn Common Stock for an aggregate purchase price of $59,999,998.32, and (ii) warrants to purchase an aggregate of 3,177,570 shares of Saturn Common Stock, or take any action that would cause the condition stated therein related to the amendment of the Saturn Rights Agreement to not be satisfied; | |
(ix) adopt any resolution pursuant to Section 3(c) of the Saturn Rights Agreement that is intended to treat the shares of Saturn Common Stock issued pursuant to the Merger differently under the Saturn Rights Agreement than other outstanding shares of Saturn Common Stock for purposes of the issuance of Saturn Rights in respect of such shares of Saturn Common Stock;provided, however, that nothing in this clause (ix) shall in any manner whatsoever limit the ability of Saturn to treat differently under the Saturn Rights Agreement shares of Saturn Common Stock beneficially owned by an “Acquiring Person,” as such term is defined in the Saturn Rights Agreement; or | |
(x) Agree in writing or otherwise to take any of the actions described in 4.2(b)(i) through 4.2(b)(ix) above. |
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(i) As promptly as practicable (but in no event more than 48 hours) after receipt of any Acquisition Proposal or any request for nonpublic information or inquiry which it reasonably believes would lead to an Acquisition Proposal, Nova shall provide to Saturn oral and written notice of the material terms and conditions of such Acquisition Proposal, request or inquiry, and the identity of the person or group making any such Acquisition Proposal, request or inquiry and a copy of all written materials provided in connection with such Acquisition Proposal, request or inquiry. Nova shall provide to Saturn as promptly as practicable (but in no event more than 48 hours thereafter) oral and written notice setting forth all such information as is reasonably necessary to keep Saturn informed in all material respects of the status and details (including material amendments or proposed material amendments) of any such Acquisition Proposal, request or inquiry and shall promptly provide to Saturn a copy of all written materials subsequently provided in connection with such Acquisition Proposal, request or inquiry. | |
(ii) Nova shall provide Saturn with 48 hours prior notice (or such lesser prior notice as is provided to the members of the Nova Board) of any meeting at which the Nova Board is reasonably expected to consider any Acquisition Proposal. |
(i) Furnish nonpublic information to the third party making such Acquisition Proposal,providedthat (A) (1) concurrently with furnishing any such nonpublic information to such party, its gives Saturn written notice of its intention to furnish nonpublic information and (2) it receives from the third party an executed confidentiality agreement containing customary limitations on the use and disclosure of all nonpublic written and oral information furnished to such third party on its behalf, the terms of which are at least as restrictive as the terms contained in the Confidentiality Agreement and (B) contemporaneously with furnishing any such nonpublic information to such third party, Nova |
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furnishes such nonpublic information to Saturn (to the extent such nonpublic information has not been previously so furnished); and | |
(ii) Engage in discussions or negotiations with the third party with respect to the Acquisition Proposal,providedthat concurrently with entering into negotiations with such third party, Nova gives Saturn written notice of the its intention to enter into negotiations with such third party. |
(i) A Superior Offer with respect to Nova has been made and has not been withdrawn; | |
(ii) The Nova Stockholders’ Meeting has not occurred; | |
(iii) Nova shall have (A) provided to Saturn at least five (5) days’ written notice which shall state expressly (1) that Nova has received a Superior Offer, (2) the material terms and conditions of the Superior Offer and the identity of the person or group making the Superior Offer, and (3) that the Nova Board intends to effect a Change of Recommendation and the manner in which it intends to do so, (B) provided to Saturn a copy of all written materials delivered to the person or group making the Superior Offer in connection with such Superior Offer, and (C) made available to Saturn all materials and information made available to the person or group making the Superior Offer in connection with such Superior Offer (to the extent such material and information has not been previously so furnished); | |
(iv) The Nova Board has concluded in good faith, after receipt of advice of its outside legal counsel, that, in light of such Superior Offer, the Change of Recommendation is required in order for the Nova Board to comply with its fiduciary duties to Nova’s stockholders under applicable law; and | |
(v) It shall not have breached any of the provisions set forth in thisSection 5.4. |
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(i) As promptly as practicable (but in no event more than 48 hours) after receipt of any Saturn Acquisition Proposal or any request for nonpublic information or inquiry which it reasonably believes would lead to a Saturn Acquisition Proposal, Saturn shall provide to Nova oral and written notice of the material terms and conditions of such Saturn Acquisition Proposal, request or inquiry, and the identity of the person or group making any such Saturn Acquisition Proposal, request or inquiry and a copy of all written materials provided in connection with such Acquisition Proposal, request or inquiry. Saturn shall provide to Nova as promptly as practicable (but in no event more than 48 hours thereafter) oral and written notice setting forth all such information as is reasonably necessary to keep Nova informed in all material respects of the status and details (including material amendments or proposed material amendments) of any such Saturn Acquisition Proposal, request or inquiry and shall promptly provide to Nova a copy of all written materials subsequently provided in connection with such Saturn Acquisition Proposal, request or inquiry. | |
(ii) Saturn shall provide Nova with 48 hours prior notice (or such lesser prior notice as is provided to the members of the Saturn Board) of any meeting at which the Saturn Board is reasonably expected to consider any Saturn Acquisition Proposal. |
(i) Furnish nonpublic information to the third party making such Saturn Acquisition Proposal,providedthat concurrently with furnishing any such nonpublic information to such party, Saturn provides Nova written notice of its intention to furnish nonpublic information; | |
(ii) Engage in negotiations with the third party with respect to the Acquisition Proposal,providedthat concurrently with entering into negotiations with such third party, Saturn provides Nova written notice of its intention to enter into negotiations with such third party; and | |
(iii) Enter into any letter of intent or similar document or any contract, agreement or commitment contemplating or otherwise relating to any Saturn Acquisition Proposal;provided, however, that Saturn may not enter into any such letter of intent, document, contract, agreement or commitment if the terms of such transaction would be reasonably expected to materially interfere with or materially delay the consummation of the Merger. |
(i) “Acquisition Proposal,” shall mean any offer or proposal, relating to any transaction or series of related transactions involving: (A) any purchase or acquisition by any person or “group” (as defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) of more than a fifteen percent (15%) interest in the total outstanding voting securities of Nova or any of its Subsidiaries or any tender offer or exchange offer that if consummated would result in any person or |
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group beneficially owning fifteen percent (15%) or more of the total outstanding voting securities of Nova any of its Subsidiaries, or any merger, consolidation, business combination or similar transaction involving Nova or any of its subsidiaries, (B) any sale, lease (other than in the ordinary course of business), exchange, transfer, exclusive license or other material license outside the ordinary course of business, acquisition or disposition of more than fifteen percent (15%) of the assets of Nova (including its Subsidiaries taken as a whole), or (C) any liquidation or dissolution of Nova; | |
(ii) “Saturn Acquisition Proposal,” shall mean any offer or proposal, relating to any transaction or series of related transactions involving: (A) any purchase or acquisition by any person or “group” (as defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) of more than a fifty percent (50%) interest in the total outstanding voting securities of Saturn or any of its Subsidiaries or any tender offer or exchange offer that if consummated would result in any person or group beneficially owning fifty percent (50%) or more of the total outstanding voting securities of Saturn any of its Subsidiaries, or any merger, consolidation, business combination or similar transaction involving Saturn or any of its subsidiaries wherein the equity interests held by stockholders of Saturn immediately prior to such transaction would represent less than fifty percent (50%) of the equity interests of the surviving entity immediately after such transaction, (B) any sale, lease (other than in the ordinary course of business), exchange, transfer exclusive license or other material license outside the ordinary course of business, acquisition or disposition of more than fifteen percent (15%) of the assets of Saturn (including its Subsidiaries taken as a whole), or (C) any liquidation or dissolution of Saturn. | |
(iii) “Superior Offer,” shall mean an unsolicited, bona fide written offer made by a third party to acquire, directly or indirectly, pursuant to a tender offer, exchange offer, merger, consolidation or other business combination, all or substantially all of the assets of Nova or a majority of the total outstanding voting securities of Nova and as a result of which the equity interests held by stockholders of Nova immediately preceding such transaction would represent less than fifty percent (50%) of the equity interests in the surviving or resulting entity of such transaction or any direct or indirect parent or Subsidiary thereof, on terms that the Nova Board has in good faith concluded (following the receipt of advice of its outside legal counsel and its financial adviser), taking into account, among other things, all legal, financial, regulatory and other aspects of the offer and the person making the offer, to be more favorable, from a financial point of view, to Nova’s stockholders (in their capacities as stockholders) than the terms of the Merger and is reasonably capable of being consummated. |
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(a) Stockholder Approval. The matters subject to the Required Nova Stockholder Approval and the Required Saturn Stockholder Approval shall have been approved by the requisite vote necessary under applicable law and the Nasdaq Marketplace Rules. | |
(b) No Order. No Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and which has the effect of making the Merger, the Stock Issuance or the Financing illegal or otherwise prohibiting consummation of the Merger, the Stock Issuance or the Financing. | |
(c) HSR Act. All applicable waiting periods under the HSR Act and under any applicable material foreign or other Antitrust Laws shall have expired or been terminated in connection with the Merger and the Financing. | |
(d) Registration Statement Effective; Prospectus/ Proxy Statement. The SEC shall have declared the Registration Statement effective. No stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose, and no similar proceeding in respect of the Prospectus/ Proxy Statement, shall have been initiated or threatened in writing by the SEC. | |
(e) No Governmental Restriction. There shall not be pending, and no Specified Governmental Authority shall have made, authorized or approved any statement or communication (or shall have taken, initiated, authorized or approved any other action) that would reasonably be construed to indicate that a Governmental Entity is likely to commence or is seriously considering the commencement of, any suit, action or proceeding: (i) challenging or seeking to restrain or prohibit the consummation of the Merger, the Stock Issuance or the Financing or any of the other transactions contemplated by this Agreement, the effect of which restraint or prohibition if obtained would cause the condition set forth inSection 6.1(e) to not be satisfied or (ii) seeking to require Saturn or any Subsidiary or affiliate to effect a Divestiture.“Specified Governmental Representative” shall mean any official or representative of any Governmental Entity;provided, however, that in the case of the U.S. Federal Trade Commission and the U.S. Department of Justice, Specified Governmental Representative shall not include any official or representative below the level of: (a) with respect to |
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the U.S. Federal Trade Commission, Director of the Bureau of Competition; and (b) with respect to the U.S. Department of Justice, Assistant Attorney General for the Antitrust Division.“Divestiture” shall mean (1) the sale, license or other disposition or holding separate (through the establishment of a trust or otherwise) of any assets or categories of assets of Saturn or any of its affiliates or Nova, (2) the imposition of any limitation or restriction on the ability of Saturn or any of its affiliates to freely conduct their business or Nova’s business or own such assets, or (3) the holding separate of the interests of the Final Surviving Entity or any limitation or regulation on the ability of Saturn or any of its affiliates to exercise full rights of ownership of the Final Surviving Entity. | |
(f) Tax Opinions. Saturn and Nova shall have received a written opinion from Wilson Sonsini Goodrich & Rosati, Professional Corporation and Fenwick & West LLP, respectively, in form and substance reasonably satisfactory to Saturn and Nova, respectively, to the effect that the Merger will constitute a reorganization within the meaning of Section 368(a) of the Code and such opinions shall not have been withdrawn;provided, however, that if the counsel to either Saturn or Nova does not render such opinion, this condition shall nonetheless be deemed to be satisfied with respect to such party if counsel to the other party renders an opinion to such party to the effect that the Merger will constitute a reorganization within the meaning of Section 368(a) of the Code. Nova and Saturn shall deliver to tax counsel, and tax counsel shall be entitled to rely upon, reasonable and customary tax representations in connection with rendering such opinions. | |
(g) Nasdaq Listing. The shares of Saturn Common Stock to be issued pursuant to the Merger and the transactions contemplated hereby shall have been authorized for listing on Nasdaq, subject to official notice of issuance. |
(a) Representations and Warranties. The representations and warranties of Saturn and the Subs in this Agreement, disregarding all qualifications and exceptions contained therein relating to materiality or Material Adverse Change, shall be true and correct on and as of the date of this Agreement, and shall be true and correct on and as of the Closing Date as though such representations and warranties were made on and as of such date (except for representations and warranties which address matters only as to a specified date, which representations and warranties shall be true and correct with respect to such specified date), except where the failure of such representations or warranties to be true and correct (as of the date of this Agreement and as of the Closing Date) have not resulted in, and would not reasonably be expected to result in, individually or in the aggregate with other such failures to be true and correct, a Material Adverse Change to Saturn. Nova shall have a received a certificate to such effect signed on behalf of Saturn by a duly authorized officer of Saturn. | |
(b) Agreements and Covenants. Saturn and the Subs shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by them on or prior to the Closing Date, and Nova shall have received a certificate to such effect signed on behalf of Saturn by a duly authorized officer of Saturn. | |
(c) Material Adverse Change. No Material Adverse Change to Saturn and its Subsidiaries shall have occurred since the date of this Agreement and be continuing, and Nova shall have received a certificate to such effect signed on behalf of Saturn by the Chief Executive Officer and the Chief Financial Officer of Saturn. | |
(d) Closing of Financing. The purchase by the Warburg Entities of (a) an aggregate of 14,150,943 shares of Saturn Common Stock for an aggregate purchase price of $59,999,998.32 and (b) warrants to purchase an aggregate of 3,177,570 shares of Saturn Common shall have been consummated prior to or simultaneously with the Effective Time. |
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(a) Representations and Warranties. The representations and warranties of Nova in this Agreement, disregarding all qualifications and exceptions contained therein relating to materiality or Material Adverse Change, shall be true and correct on and as of the date of this Agreement, and shall be true and correct on and as of the Closing Date as though such representations and warranties were made on and as of such date (except for representations and warranties which address matters only as to a specified date, which representations and warranties shall be true and correct with respect to such specified date), except where the failure of such representations or warranties to be true and correct (as of the date of this Agreement and as of the Closing Date) have not resulted in, and would not reasonably be expected to result in, individually or in the aggregate with other such failures to be true and correct, a Material Adverse Change to Nova. Saturn shall have a received a certificate to such effect signed on behalf of Nova by the Chief Executive Officer and Chief Financial Officer of Nova. | |
(b) Agreements and Covenants. Nova shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it at or prior to the Closing Date, and Saturn shall have received a certificate to such effect signed on behalf of Nova by the Chief Executive Officer and the Chief Financial Officer of Nova. | |
(c) Material Adverse Change. No Material Adverse Change to Nova and its Subsidiaries shall have occurred since the date of this Agreement and be continuing, and Saturn shall have received a certificate to such effect signed on behalf of Nova by the Chief Executive Officer and the Chief Financial Officer of Nova. |
(a) by mutual written consent duly authorized by the Nova Board and the Saturn Board; | |
(b) by either Nova or Saturn if the Effective Time shall not have occurred on or before January 9, 2006 (the“End Date”) for any reason;provided, however, that the right to terminate this Agreement under thisSection 7.1(b) shall not be available to any party whose action or failure to act has been a principal cause of or resulted in the failure of the Effective Time to occur on or before such date and such action or failure to act constitutes a breach of this Agreement; | |
(c) by either Nova or Saturn if a Governmental Entity of competent jurisdiction shall have issued an order, decree or ruling or taken any other action, in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger, Stock Issuance or Financing, which order, decree, ruling or other action is final and nonappealable; | |
(d) by either Nova or Saturn if the Required Nova Stockholder Approval shall not have been obtained by reason of the failure to obtain the required vote at the Nova Stockholders’ Meeting or at any adjournment thereof;provided, however, that the right to terminate this Agreement under thisSection 7.1(d) shall not be available to Nova where the failure to obtain Required Nova Stockholder Approval shall have been caused by the action or failure to act of Nova and such action or failure to act constitutes a material breach by Nova of this Agreement; |
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(e) by either Nova or Saturn if the Required Saturn Stockholder Approval shall not have been obtained by reason of the failure to obtain the required vote at the Saturn Stockholders’ Meeting or at any adjournment thereof;provided, however, that the right to terminate this Agreement under thisSection 7.1(e) shall not be available to Saturn where the failure to obtain the Required Saturn Stockholder Approval shall have been caused by the action or failure to act of Saturn and such action or failure to act constitutes a material breach by Saturn of this Agreement; | |
(f) by Nova, upon a breach of any representation, warranty, covenant or agreement on the part of Saturn set forth in this Agreement, or if any representation or warranty of Saturn shall have become untrue, in either case such that the conditions set forth inSection 6.2(a) orSection 6.2(b) would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue,provided, however, that if such inaccuracy in Saturn’s representations and warranties or breach by Saturn is curable by Saturn through the exercise of its commercially reasonable efforts, then Nova may not terminate this Agreement under thisSection 7.1(f) for 30 days after delivery of written notice from Nova to Saturn of such breach,providedSaturn commences promptly and continues to exercise commercially reasonable efforts to cure such breach (it being understood that Nova may not terminate this Agreement pursuant to thisSection 7.1(f) if it shall have materially breached this Agreement or if such breach by Saturn is cured during such 30-day period); | |
(g) by Saturn, upon a breach of any representation, warranty, covenant or agreement on the part of Nova set forth in this Agreement, or if any representation or warranty of Nova shall have become untrue, in either case such that the conditions set forth inSection 6.3(a) orSection 6.3(b) would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue,provided, however, that if such inaccuracy in Nova’s representations and warranties or breach by Nova is curable by Nova through the exercise of its commercially reasonable efforts, then Saturn may not terminate this Agreement under thisSection 7.1(g) for 30 days after delivery of written notice from Saturn to Nova of such breach,providedNova commences promptly and continues to exercise commercially reasonable efforts to cure such breach (it being understood that Saturn may not terminate this Agreement pursuant to thisSection 7.1(g) if it shall have materially breached this Agreement or if such breach by Nova is cured during such 30-day period); | |
(h) by Saturn, upon a material breach by Nova of its obligations underSection 5.4; | |
(i) by Nova, upon a material breach by Saturn of its obligations underSection 5.4; | |
(j) by Saturn, if a Material Adverse Change to Nova shall have occurred and be continuing since the date hereof; | |
(k) by Nova, if a Material Adverse Change to Saturn shall have occurred be continuing since the date hereof; | |
(l) by Saturn if a Triggering Event (as defined below) shall have occurred. For the purposes of this Agreement, a“Triggering Event” shall be deemed to have occurred if: (i) the Nova Board or any committee thereof shall for any reason have withdrawn or withheld, or shall have amended, changed, qualified or modified in a manner adverse to Saturn the Nova Board’s or committee’s unanimous recommendation in favor of, the adoption and approval of the Agreement or the Merger or transactions contemplated hereby (it being understood that the taking of a neutral position or no position with respect to an Acquisition Proposal beyond the Acquisition Proposal Assessment Period, as defined below, shall be considered an adverse modification); (ii) Nova shall have failed to include in the Prospectus/ Proxy Statement the unanimous recommendation of the Nova Board that holders of Nova Common Stock vote in favor of and adopt and approve this Agreement; (iii) the Nova Board or any committee thereof shall have approved or recommended any Acquisition Proposal; (iv) Nova shall have entered into any letter of intent or similar document or any Contract accepting any Acquisition Proposal (other than any confidentiality agreement required to be entered into pursuant toSection 5.4(c)(i)(A)(2)); (v) a tender or exchange offer relating to securities of Nova shall have |
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been commenced by a person unaffiliated with Saturn and Nova shall not have sent to its securityholders pursuant to Rule 14e-2 promulgated under the Exchange Act, within ten (10) business days (such ten (10) business day period, the“Acquisition Proposal Assessment Period”) after such tender or exchange offer is first published sent or given, a statement disclosing that the Nova Board recommends rejection of such tender or exchange offer; or (vi) the Nova Board shall have failed to reaffirm its approval or recommendation of this Agreement as promptly as practicable (but in any event within ten (10) business days) after receipt of a written request to do so from Saturn. |
(i) In the event that this Agreement is terminated by Nova or Saturn, as applicable, pursuant toSections 7.1(b),7.1(d) or7.1(l), Nova shall promptly, but in no event later than two (2) business days after the date of such termination, pay (or cause to be paid) Saturn a fee equal to Six Million Six Hundred Thirty Thousand Dollars ($6,630,000)) in immediately available funds (the“Nova Termination Fee”);provided, that in the case of termination underSection 7.1(b) or7.1(d): (A) such payment shall be made only if following the date hereof and prior to the termination of this Agreement, there has been public disclosure of an Acquisition Proposal with respect to Nova and (1) within twelve (12) months following the termination of this Agreement an Acquisition (as defined inSection 7.3(b)(v)) of Nova is consummated or (2) within twelve (12) months following the termination of this Agreement Nova enters into an agreement providing for an Acquisition of Nova, and (B) such payment shall be made promptly, but in no event later than two (2) business days after the occurrence of any such event. | |
(ii) In the event that this Agreement is terminated by Nova or Saturn (A) pursuant toSection 7.1(e), and (B) (i) because the Saturn Board shall for any reason have withdrawn or withheld, or shall have amended, changed, qualified or modified in a manner adverse to Nova the Saturn Board’s unanimous recommendation in favor of the Stock Issuance and the Financing, or (ii) Saturn shall have failed to include in the Prospectus/ Proxy Statement the unanimous recommendation of the Saturn Board that holders of Saturn Common Stock vote in favor of the Stock Issuance and the Financing at the Saturn Stockholders’ Meeting, Saturn shall promptly, but in |
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no event later than two (2) business days after the date of such termination, pay (or cause to be paid) Nova a fee equal to Six Million Six Hundred Thirty Thousand Dollars ($6,630,000)) in immediately available funds (the“Saturn Termination Fee”);provided, that such payment shall be made only if following the date hereof and prior to the termination of this Agreement, the Saturn Board shall have failed to reaffirm its approval or recommendation of the matters subject to the Required Saturn Stockholder Approval as promptly as practicable (but in any event within ten (10) business days) after receipt of a written request to do so from Nova from time to time. | |
(iii) Each of Saturn and Nova acknowledges that the agreements contained in thisSection 7.3(b) are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, the other party hereto would not enter into this Agreement; accordingly, if Nova or Saturn fails to pay in a timely manner the amounts due pursuant to thisSection 7.3(b), and, in order to obtain such payment, the other makes a claim that results in a judgment against the party failing to so pay, the failing party shall pay to the other’s reasonable costs and expenses (including reasonable attorneys’ fees and expenses) in connection with such suit, together with interest on the amounts set forth in thisSection 7.3(b) at the prime rate of Citibank, N.A. in effect on the date such payment was required to be made. Payment of the fees described in thisSection 7.3(b) shall not be in lieu of damages incurred in the event of breach of this Agreement. | |
(iv) Each of Saturn and Nova acknowledges that (1) the damages that would result from a termination described inSection 7.3(b)(i) andSection 7.3(b)(ii) above are difficult to accurately calculate; and (2) accordingly, the amount fixed as the Nova Termination Fee and the Saturn Termination Fee, as applicable, are reasonable estimates of the actual damages that would result from such a termination described inSection 7.3(b)(i) andSection 7.3(b)(ii) above. | |
(v) For the purposes of thisSection 7.3(b) only,“Acquisition,” with respect to a party hereto, shall mean any of the following transactions (other than the transactions contemplated by this Agreement): (i) a merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the party pursuant to which equity interests of the stockholders of the party immediately preceding such transaction would represent less than sixty percent (60%) of the aggregate equity interests in the surviving or resulting entity of such transaction or any direct or indirect parent thereof, (ii) a sale or other disposition by the party of assets representing in excess of forty percent (40%) of the aggregate fair market value of the party’s business immediately prior to such sale, or (iii) the acquisition by any person or group (including by way of a tender offer or an exchange offer or issuance by the party or such person or group), directly or indirectly, of beneficial ownership or a right to acquire beneficial ownership of shares representing in excess of forty percent (40%) of the voting power of the then outstanding shares of capital stock of the party. |
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ScanSoft, Inc. | |
9 Centennial Drive | |
Peabody, MA 01960 | |
Attention: General Counsel | |
Telephone No.: (978) 977-2000 | |
Telecopy No.: (978) 977-2412 | |
with a copy to: | |
Wilson Sonsini Goodrich & Rosati | |
Professional Corporation | |
650 Page Mill Road | |
Palo Alto, California 94304 | |
Attention: Larry W. Sonsini, Esq. | |
Katharine A. Martin, Esq. | |
Telephone No.: (650) 493-9300 | |
Telecopy No.: (650) 493-6811 | |
and | |
Wilson Sonsini Goodrich & Rosati | |
Professional Corporation | |
12 East 49th Street, 30th Floor | |
New York, New York 10017 | |
Attention: Robert Sanchez, Esq. | |
Adam M. Dinow, Esq. | |
Telephone No.: (212) 999-5800 | |
Telecopy No.: (212) 999-5899 |
Nuance Communications, Inc. | |
1350 Willow Road | |
Menlo Park, CA 94025 | |
Attention: Chief Executive Officer, Chief Financial Officer, and General Counsel | |
Telephone No.: (650) 847-7000 | |
Telecopy No.: (650) 847-7900 |
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with a copy to: | |
Fenwick & West LLP | |
Silicon Valley Center | |
801 California Street | |
Mountain View, California 94041 | |
Attention: Gordon K. Davidson, Esq. | |
Mark A. Leahy, Esq. | |
Telephone No.:(650) 988-8500 | |
Telecopy No.:(650) 938-5200 |
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SCANSOFT, INC. |
By: | /s/ Paul Ricci |
Name: Paul Ricci |
Title: | Chairman & CEO |
NUANCE COMMUNICATIONS, INC. |
By: | /s/ Charles W. Berger |
Name: Charles W. Berger |
Title: | President & CEO |
NOVA ACQUISITION CORPORATION |
By: | /s/ Paul Ricci |
Name: Paul Ricci |
Title: | Chairman & CEO |
NOVA ACQUISITION LLC |
By: | /s/ Paul Ricci |
Name: Paul Ricci |
Title: | CEO |
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Very truly yours, | |
THOMAS WEISEL PARTNERS LLC |
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Very truly yours, | |
/s/ CREDIT SUISSE FIRST BOSTON LLC |
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1. Certain Definitions. Capitalized terms used but not defined herein shall have the respective meanings ascribed thereto in the Merger Agreement. For all purposes of and under this Agreement, the following terms shall have the following respective meanings: |
1.1 “Expiration Date” shall mean the earlier to occur of (i) such date and time as the Merger Agreement shall have been validly terminated pursuant to its terms, or (ii) such date and time as the Merger shall become effective in accordance with the terms and conditions set forth in the Merger Agreement. | |
1.2 “Person” shall mean any individual, any corporation, limited liability company, general or limited partnership, business trust, unincorporated association or other business organization or entity, or any governmental authority. | |
1.3 “Shares” shall mean: (i) all securities of Saturn (including all shares of Saturn Common Stock and all options, warrants and other rights to acquire shares of Saturn Common Stock) Owned by Stockholder as of the date of this Agreement, and (ii) all additional securities of Saturn (including all additional shares of Saturn Common Stock and all additional options, warrants and other rights to acquire shares of Saturn Common Stock) of which Stockholder acquires Ownership during the period commencing with the execution and delivery of this Agreement until the Expiration Date. Stockholder shall be deemed to“Own” or to have acquired“Ownership” of a security if Stockholder: (i) is the record owner of such security; or (ii) is the “beneficial owner” (within the meaning of Rule 13d-3 under the Exchange Act) of such security. |
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1.4 “Transfer”. A Person shall be deemed to have effected a“Transfer” of a security if such Person directly or indirectly (i) sells, tenders, pledges, encumbers, hypothecates, grants an option with respect to, transfers, assigns or otherwise disposes of such security or any interest therein, or (ii) enters into an agreement, arrangement, understanding or commitment, whether or not in writing, to effect any of the foregoing, or (iii) reduces such Person’s Ownership of such security. |
2. Transfer of Shares. | |
2.1 Restriction on Transfer of Shares. Subject to Section 2.2, Stockholder shall not, during the term of this Agreement, directly or indirectly: (i) cause or permit any Transfer of any or all of the Shares or any interest therein; (ii) grant any proxies or powers of attorney with respect to any Shares not Transferred or deposit any Shares not Transferred into a voting trust or enter into a voting agreement with respect to any Shares not Transferred, or (iii) take any action that would make any representation or warranty of Stockholder contained herein untrue or incorrect or have the effect of preventing or disabling Stockholder from performing any of Stockholder’s obligations under this Agreement (it being understood that nothing contained in this Agreement shall be deemed to restrict the ability of Stockholder to exercise (but not Transfer) any Saturn Options held by Stockholder prior to the Expiration Date). Stockholder further agrees with and covenants to Nova that Stockholder shall not request that Saturn register the Transfer of any certificate or uncertificated interest representing any of the Shares, unless such Transfer is made in compliance with this Agreement. Stockholder agrees that, in order to ensure compliance with the restrictions referred to herein, Saturn may issue appropriate “stop transfer” instructions to its transfer agent. | |
2.2 Permitted Transfers. Section 2.1 shall not prohibit (i) a Transfer of Shares expressly contemplated by this Agreement or the Merger Agreement, (ii) sales of Shares by Stockholder in connection with 10b5-1 plans of Saturn currently in effect, (iii) pledges in effect as of the date hereof and disclosed on Schedule 2.2 hereto, (iv) a Transfer or Transfers by Stockholder of not more than 20,000 Shares in the aggregate after the date hereof, or (v) a Transfer of Shares by Stockholder: (A) if Stockholder is an individual, to any member of Stockholder’s immediate family or to a trust established for the benefit of Stockholder and/or for the benefit of one or more members of Stockholder’s immediate family or upon the death of Stockholder or (B) if Stockholder is a partnership or limited liability company, to one or more partners or members of Stockholder or to an affiliated corporation under common control with Stockholder,providedthat a Transfer referred to in clause (v) shall be permitted only if, as a precondition to such transfer, the transferee of such Shares agrees to be bound by the terms and conditions of this Agreement. | |
3. Agreement to Vote Shares. Until the Expiration Date, at every meeting of stockholders of Saturn called with respect to any of the following, and at every adjournment or postponement thereof, and on every action or approval by written consent of stockholders of Saturn with respect to any of the following, Stockholder shall vote, to the extent not voted by the Person(s) appointed under the Proxy (as defined inSection 4 hereof), the Shares Owned by Stockholder: |
3.1 in favor of (i) the approval of the transactions contemplated by the Merger Agreement, including the Stock Issuance, the Financing and the Option Assumption, and (ii) the Proxy and any action required in furtherance thereof; | |
3.2 against approval of any proposal made in opposition to, or in competition with, consummation of the Merger and the transactions contemplated by the Merger Agreement; | |
3.3 against any amendment to Saturn’s certificate of incorporation or bylaws; | |
3.4 against any other action that is intended, or could reasonably be expected to, impede, interfere with, delay, postpone, discourage or adversely affect the Merger or any of the other transactions contemplated by the Merger Agreement; |
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3.5 against any proposal that would result in a breach by Saturn of the Merger Agreement; and | |
3.6 against the election of a group of individuals to replace a majority or more of the individuals on the Board of Directors of Saturn as of the date of this Agreement. |
In all other matters, the Shares shall be voted by and in a manner determined by Stockholder in Stockholder’s sole discretion. | |
Prior to the Expiration Date, Stockholder shall not enter into any agreement or understanding with any Person to vote or give instructions in any manner inconsistent with the terms of thisSection 3. | |
4. Irrevocable Proxy. Concurrently with the execution of this Agreement, Stockholder agrees to deliver to Nova a proxy in the form attached hereto as Exhibit A (the “Proxy”), which shall be irrevocable to the fullest extent permissible by applicable law, with respect to the Shares. | |
5. Representations, Warranties and Covenants of Stockholder. | |
5.1 Stockholder hereby represents and warrants to Nova that, as of the date hereof and at all times until the Expiration Date, (i) Stockholder is and will be the beneficial owner of the shares of Saturn Common Stock (unless otherwise Transferred in accordance with this Agreement), and the options, warrants and other rights to purchase shares of Saturn Common Stock, set forth on signature page of this Agreement, with full power to vote or direct the voting of the Shares; (ii) the Shares are and will be, unless otherwise Transferred in accordance with this Agreement, free and clear of any liens, pledges, security interests, claims, options, rights of first refusal, co-sale rights, charges or other encumbrances of any kind or nature (other than pursuant to the terms of restricted stock agreements as in effect on the date hereof and except for applicable restrictions on transfer under applicable securities laws or under this Agreement and except for applicable community property laws); (iii) Stockholder does not Own any securities of Saturn other than the shares of Saturn Common Stock, and options, warrants and other rights to purchase shares of Saturn Common Stock, set forth on the signature page of this Agreement; (iv) with respect to the Shares, Stockholder has and will have full power and authority to make, enter into and carry out the terms of this Agreement and the Proxy (unless such Shares are otherwise Transferred in accordance with this Agreement) and to perform Stockholder’s obligations hereunder and thereunder; (v) the execution, delivery and performance of this Agreement by Stockholder will not violate any agreement or court order to which the Shares are subject, including, without limitation, any voting agreement or voting trust; and (vi) this Agreement has been duly and validly executed and delivered by Stockholder and constitutes a valid and binding agreement of Stockholder, enforceable against Stockholder in accordance with its terms, subject to: (A) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (B) rules of law governing specific performance, injunctive relief and other equitable remedies. | |
5.2 Stockholder agrees that it will not bring, commence, institute, maintain, prosecute, participate in or voluntarily aid any action, claim, suit or cause of action, in law or in equity, in any court or before any governmental entity, which (a) challenges the validity of or seeks to enjoin the operation of any provision of this Agreement or (b) alleges that the execution and delivery of this Agreement by Stockholder, either alone or together with the other Saturn voting agreements and proxies to be delivered in connection with the execution of the Merger Agreement, or the approval of the Merger Agreement by the board of directors of Saturn, breaches any fiduciary duty of the board of directors of Saturn or any member thereof;provided, that Stockholder may defend against, contest or settle any such action, claim, suit or cause of action brought against Stockholder that relates solely to Stockholder’s capacity as a director or officer of Saturn. | |
6. Additional Documents. Stockholder and Nova hereby covenant and agree to execute and deliver any additional documents reasonably necessary or desirable to carry out the purpose and intent of this Agreement. |
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7. Legending of Shares. If so requested by Nova, Stockholder hereby agrees that the Shares shall bear a legend stating that they are subject to this Agreement and to an irrevocable proxy. | |
8. Termination. This Agreement shall terminate automatically and be of no further force or effect as of the Expiration Date. | |
9. Fiduciary Duties. Each Stockholder is signing this Agreement solely in such Stockholder’s capacity as an owner of his, her or its respective Shares, and nothing herein shall affect, limit, prohibit, prevent or preclude such Stockholder from taking or not taking any action in his or her capacity as an officer or director of Saturn, to the extent permitted by the Merger Agreement. | |
10. Miscellaneous. | |
10.1 Waiver. No waiver by any party hereto of any condition or any breach of any term or provision set forth in this Agreement shall be effective unless in writing and signed by each party hereto. The waiver of a condition or any breach of any term or provision of this Agreement shall not operate as or be construed to be a waiver of any other previous or subsequent breach of any term or provision of this Agreement. | |
10.2 Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other Persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. | |
10.3 Binding Effect; Assignment. Except as provided or required herein, neither party may assign or delegate, in whole or in part, by operation of law or otherwise, either this Agreement or any of the rights, interests, or obligations hereunder without the prior written approval of the other party, and any such assignment without such prior written consent shall be null and void. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. | |
10.4 Amendments. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by each of the parties hereto. A copy of such written agreement shall be provided to Saturn promptly following execution thereof. | |
10.5 Other Remedies; Specific Performance. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy and nothing in this Agreement shall be deemed a waiver by any party of any right to specific performance or injunctive relief. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they are entitled at law or in equity. | |
10.6 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. The parties hereto hereby irrevocably submit to the exclusive jurisdiction of the courts of the State of Delaware and the Federal courts of the United States of America located within Newcastle County in the State of Delaware solely in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents referred to in this Agreement, and in respect of the transactions contemplated hereby and thereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or |
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enforcement hereof or thereof, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in such a Delaware State or Federal court. The parties hereby consent to and grant any such court jurisdiction over the Person of such parties and over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided inSection 10.8 or in such other manner as may be permitted by applicable law, shall be valid and sufficient service thereof. With respect to any particular action, suit or proceeding, venue shall lie solely in Newcastle County, Delaware. | |
10.7 Entire Agreement. This Agreement and the Proxy and the other agreements referred to in this Agreement set forth the entire agreement and understanding of Nova and Stockholder with respect to the subject matter hereof and thereof, and supersede all prior discussions, agreements and understandings between Nova and Stockholder, both oral and written, with respect to the subject matter hereof and thereof. | |
10.8 Notices. All notices and other communications pursuant to this Agreement shall be deemed given or made as follows (i) on the date of delivery, delivered personally or by commercial delivery service, or (ii) on the date of confirmation of receipt, if sent via telecopy (receipt confirmed) to the parties at the following addresses or telecopy numbers (or at such other address or telecopy numbers for a party as shall be specified by like notice): |
(a) | if to Nova, to: | |
Nuance Communications, Inc. 1350 Willow Road Menlo Park, CA 94025 Attention: Chief Executive Officer, Chief Financial Officer, and General Counsel Telephone No.:(650) 847-7000 Telecopy No.: (650) 847-7900 | ||
with a copy to: | ||
Fenwick & West LLP Silicon Alley Center 801 California Street Mountain View, California 94041 Attn: Gordon Davidson, Esq. Mark Leahy, Esq. Telephone No.: (650) 988-8500 Telecopy No.: (650) 938-5200 | ||
(b) | if to Stockholder, to the address for notice set forth on the last page hereof, |
10.9 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. | |
10.10 Effect of Headings. The section headings herein are for convenience only and shall not affect the construction or interpretation of this Agreement. |
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NOVA, INC. |
By: |
Name: |
Title: |
STOCKHOLDER: | |
(Print Stockholder Name) |
By: |
(Signature) |
Name: |
(Print Name) |
Title: |
Telephone | |
Facsimile No. | |
Shares Owned: | |
shares of Saturn Common Stock | |
shares of Saturn Common Stock | |
issuable upon the exercise of outstanding options, warrants or other rights | |
Address: | |
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Signature of Stockholder: |
Print Name of Stockholder: |
Shares beneficially owned: |
shares of Saturn Common Stock | |
shares of Saturn Common Stock issuable upon the exercise of outstanding options, warrants or other rights |
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1. Certain Definitions. Capitalized terms used but not defined herein shall have the respective meanings ascribed thereto in the Merger Agreement. For all purposes of and under this Agreement, the following terms shall have the following respective meanings: |
1.1 “Expiration Date” shall mean the earlier to occur of (i) such date and time as the Merger Agreement shall have been validly terminated pursuant to its terms, or (ii) such date and time as the Merger shall become effective in accordance with the terms and conditions set forth in the Merger Agreement. | |
1.2 “Person” shall mean any individual, any corporation, limited liability company, general or limited partnership, business trust, unincorporated association or other business organization or entity, or any governmental authority. | |
1.3 “Shares” shall mean: (i) all securities of Nova (including all shares of Nova Common Stock and all options, warrants and other rights to acquire shares of Nova Common Stock) Owned by Stockholder as of the date of this Agreement, and (ii) all additional securities of Nova (including all additional shares of Nova Common Stock and all additional options, warrants and other rights to acquire shares of Nova Common Stock) of which Stockholder acquires Ownership during the period commencing with the execution and delivery of this Agreement until the Expiration Date. Stockholder shall be deemed to“Own” or to have acquired“Ownership” of a security if Stockholder: (i) is the record owner of such security; or (ii) is the “beneficial owner” (within the meaning of Rule 13d-3 under the Exchange Act) of such security. |
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1.4 “Transfer”. A Person shall be deemed to have effected a“Transfer” of a security if such Person directly or indirectly (i) sells, tenders, pledges, encumbers, hypothecates, grants an option with respect to, transfers, assigns or otherwise disposes of such security or any interest therein, or (ii) enters into an agreement, arrangement, understanding or commitment, whether or not in writing, to effect any of the foregoing, or (iii) reduces such Person’s Ownership of such security. |
2. Transfer of Shares. | |
2.1 Restriction on Transfer of Shares. Subject to Section 2.2, Stockholder shall not, during the term of this Agreement, directly or indirectly: (i) cause or permit any Transfer of any or all of the Shares or any interest therein; (ii) grant any proxies or powers of attorney with respect to any Shares not Transferred or deposit any Shares not Transferred into a voting trust or enter into a voting agreement with respect to any Shares not Transferred, or (iii) take any action that would make any representation or warranty of Stockholder contained herein untrue or incorrect or have the effect of preventing or disabling Stockholder from performing any of Stockholder’s obligations under this Agreement (it being understood that nothing contained in this Agreement shall be deemed to restrict the ability of Stockholder to exercise (but not Transfer) any Nova Options held by Stockholder prior to the Expiration Date). Stockholder further agrees with and covenants to Saturn that Stockholder shall not request that Nova register the Transfer of any certificate or uncertificated interest representing any of the Shares, unless such Transfer is made in compliance with this Agreement. Stockholder agrees that, in order to ensure compliance with the restrictions referred to herein, Nova may issue appropriate “stop transfer” instructions to its transfer agent. | |
2.2 Permitted Transfers. Section 2.1 shall not prohibit (i) a Transfer of Shares expressly contemplated by this Agreement or the Merger Agreement, (ii) sales of Shares by Stockholder in connection with 10b5-1 plans of Nova currently in effect, (iii) pledges in effect as of the date hereof and disclosed on Schedule 2.2 hereto, (iv) a Transfer or Transfers by Stockholder of not more than 20,000 Shares in the aggregate after the date hereof, or (v) a Transfer of Shares by Stockholder: (A) if Stockholder is an individual, to any member of Stockholder’s immediate family or to a trust established for the benefit of Stockholder and/or for the benefit of one or more members of Stockholder’s immediate family or upon the death of Stockholder or (B) if Stockholder is a partnership or limited liability company, to one or more partners or members of Stockholder or to an affiliated corporation under common control with Stockholder,providedthat a Transfer referred to in clause (v) shall be permitted only if, as a precondition to such transfer, the transferee of such Shares agrees to be bound by the terms and conditions of this Agreement. | |
3. Agreement to Vote Shares. Until the Expiration Date, at every meeting of stockholders of Nova called with respect to any of the following, and at every adjournment or postponement thereof, and on every action or approval by written consent of stockholders of Nova with respect to any of the following, Stockholder shall vote, to the extent not voted by the Person(s) appointed under the Proxy (as defined inSection 4 hereof), the Shares Owned by Stockholder: |
3.1 in favor of (i) the approval of the Merger and the adoption and approval of the Merger Agreement, (ii) each of the other actions contemplated by the Merger Agreement, as the Merger Agreement may be modified or amended from time to time, and (iii) the Proxy and any action required in furtherance thereof; | |
3.2 against approval of any proposal made in opposition to, or in competition with, consummation of the Merger and the transactions contemplated by the Merger Agreement; | |
3.3 against any amendment to Nova’s certificate of incorporation or bylaws; | |
3.4 against any other action that is intended, or could reasonably be expected to, impede, interfere with, delay, postpone, discourage or adversely affect the Merger or any of the other transactions contemplated by the Merger Agreement; |
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3.5 against any proposal that would result in a breach by Nova of the Merger Agreement; and | |
3.6 against the election of a group of individuals to replace a majority or more of the individuals on the Board of Directors of Nova as of the date of this Agreement. |
In all other matters, the Shares shall be voted by and in a manner determined by Stockholder in Stockholder’s sole discretion. | |
Prior to the Expiration Date, Stockholder shall not enter into any agreement or understanding with any Person to vote or give instructions in any manner inconsistent with the terms of thisSection 3. | |
4. Irrevocable Proxy. Concurrently with the execution of this Agreement, Stockholder agrees to deliver to Saturn a proxy in the form attached hereto asExhibit A (the “Proxy”), which shall be irrevocable to the fullest extent permissible by applicable law, with respect to the Shares. | |
5. Representations, Warranties and Covenants of Stockholder. | |
5.1 Stockholder hereby represents and warrants to Saturn that, as of the date hereof and at all times until the Expiration Date, (i) Stockholder is and will be the beneficial owner of the shares of Nova Common Stock (unless otherwise Transferred in accordance with this Agreement), and the options, warrants and other rights to purchase shares of Nova Common Stock, set forth on signature page of this Agreement, with full power to vote or direct the voting of the Shares; (ii) the Shares are and will be, unless otherwise Transferred in accordance with this Agreement, free and clear of any liens, pledges, security interests, claims, options, rights of first refusal, co-sale rights, charges or other encumbrances of any kind or nature (other than pursuant to the terms of restricted stock agreements as in effect on the date hereof and except for applicable restrictions on transfer under applicable securities laws or under this Agreement and except for applicable community property laws); (iii) Stockholder does not Own any securities of Nova other than the shares of Nova Common Stock, and options, warrants and other rights to purchase shares of Nova Common Stock, set forth on the signature page of this Agreement; (iv) with respect to the Shares, Stockholder has and will have full power and authority to make, enter into and carry out the terms of this Agreement and the Proxy (unless such Shares are otherwise Transferred in accordance with this Agreement) and to perform Stockholder’s obligations hereunder and thereunder; (v) the execution, delivery and performance of this Agreement by Stockholder will not violate any agreement or court order to which the Shares are subject, including, without limitation, any voting agreement or voting trust; and (vi) this Agreement has been duly and validly executed and delivered by Stockholder and constitutes a valid and binding agreement of Stockholder, enforceable against Stockholder in accordance with its terms, subject to: (A) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (B) rules of law governing specific performance, injunctive relief and other equitable remedies. | |
5.2 Stockholder agrees that it will not bring, commence, institute, maintain, prosecute, participate in or voluntarily aid any action, claim, suit or cause of action, in law or in equity, in any court or before any governmental entity, which (a) challenges the validity of or seeks to enjoin the operation of any provision of this Agreement or (b) alleges that the execution and delivery of this Agreement by Stockholder, either alone or together with the other Nova voting agreements and proxies to be delivered in connection with the execution of the Merger Agreement, or the approval of the Merger Agreement by the board of directors of Nova, breaches any fiduciary duty of the board of directors of Nova or any member thereof;provided, that Stockholder may defend against, contest or settle any such action, claim, suit or cause of action brought against Stockholder that relates solely to Stockholder’s capacity as a director or officer of Nova. | |
6. Additional Documents. Stockholder and Saturn hereby covenant and agree to execute and deliver any additional documents reasonably necessary or desirable to carry out the purpose and intent of this Agreement. |
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7. Legending of Shares. If so requested by Saturn, Stockholder hereby agrees that the Shares shall bear a legend stating that they are subject to this Agreement and to an irrevocable proxy. | |
8. Termination. This Agreement shall terminate automatically and be of no further force or effect as of the Expiration Date. | |
9. Fiduciary Duties. Each Stockholder is signing this Agreement solely in such Stockholder’s capacity as an owner of his, her or its respective Shares, and nothing herein shall affect, limit, prohibit, prevent or preclude such Stockholder from taking or not taking any action in his or her capacity as an officer or director of Nova, to the extent permitted by the Merger Agreement. | |
10. Miscellaneous. | |
10.1 Waiver. No waiver by any party hereto of any condition or any breach of any term or provision set forth in this Agreement shall be effective unless in writing and signed by each party hereto. The waiver of a condition or any breach of any term or provision of this Agreement shall not operate as or be construed to be a waiver of any other previous or subsequent breach of any term or provision of this Agreement. | |
10.2 Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other Persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. | |
10.3 Binding Effect; Assignment. Except as provided or required herein, neither party may assign or delegate, in whole or in part, by operation of law or otherwise, either this Agreement or any of the rights, interests, or obligations hereunder without the prior written approval of the other party, and any such assignment without such prior written consent shall be null and void. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. | |
10.4 Amendments. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by each of the parties hereto. A copy of such written agreement shall be provided to Nova promptly following execution thereof. | |
10.5 Other Remedies; Specific Performance. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy and nothing in this Agreement shall be deemed a waiver by any party of any right to specific performance or injunctive relief. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they are entitled at law or in equity. | |
10.6 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. The parties hereto hereby irrevocably submit to the exclusive jurisdiction of the courts of the State of Delaware and the Federal courts of the United States of America located within Newcastle County in the State of Delaware solely in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents referred to in this Agreement, and in respect of the transactions contemplated hereby and thereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or thereof, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be |
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appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in such a Delaware State or Federal court. The parties hereby consent to and grant any such court jurisdiction over the Person of such parties and over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided inSection 10.8 or in such other manner as may be permitted by applicable law, shall be valid and sufficient service thereof. With respect to any particular action, suit or proceeding, venue shall lie solely in Newcastle County, Delaware. | |
10.7 Entire Agreement. This Agreement and the Proxy and the other agreements referred to in this Agreement set forth the entire agreement and understanding of Saturn and Stockholder with respect to the subject matter hereof and thereof, and supersede all prior discussions, agreements and understandings between Saturn and Stockholder, both oral and written, with respect to the subject matter hereof and thereof. | |
10.8 Notices. All notices and other communications pursuant to this Agreement shall be deemed given or made as follows (i) on the date of delivery, delivered personally or by commercial delivery service, or (ii) on the date of confirmation of receipt, if sent via telecopy (receipt confirmed) to the parties at the following addresses or telecopy numbers (or at such other address or telecopy numbers for a party as shall be specified by like notice): |
10.9 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. | |
10.10 Effect of Headings. The section headings herein are for convenience only and shall not affect the construction or interpretation of this Agreement. |
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SATURN, INC. |
By: |
Chairman and Chief Executive Officer |
STOCKHOLDER: |
(Print Stockholder Name) |
By: |
(Signature) |
Name: |
(Print Name) |
Title: |
Telephone | |
Facsimile No. | |
Shares Owned: | |
shares of Nova Common Stock | |
shares of Nova Common Stock issuable upon the exercise of outstanding options, warrants or other rights | |
Address: | |
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Signature of Stockholder: |
Print Name of Stockholder: |
Shares beneficially owned: |
shares of Nova Common Stock | |
shares of Nova Common Stock issuable upon the exercise of outstanding options, warrants or other rights |
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Page | ||||||||
Article I PURCHASE AND SALE OF COMMON STOCK | F-3 | |||||||
Section 1.1 | Purchase and Sale of Common Stock | F-3 | ||||||
Section 1.2 | Purchase Price and Closing | F-3 | ||||||
Section 1.3 | Delivery | F-3 | ||||||
Section 1.4 | Reservation of Warrant Shares | F-3 | ||||||
Article II REPRESENTATIONS AND WARRANTIES | F-4 | |||||||
Section 2.1 | Representations and Warranties of the Company | F-4 | ||||||
Section 2.2 | Representations and Warranties of the Purchasers | F-8 | ||||||
Article III COVENANTS | F-10 | |||||||
Section 3.1 | Public Disclosure | F-10 | ||||||
Section 3.2 | Fees and Expenses | F-10 | ||||||
Section 3.3 | Further Assurances | F-10 | ||||||
Section 3.4 | Additional Listing Application | F-10 | ||||||
Section 3.5 | Closing of Project Edison | F-10 | ||||||
Section 3.6 | Legal Opinion | F-10 | ||||||
Article IV CONDITIONS | F-10 | |||||||
Section 4.1 | Conditions Precedent to the Obligations of each Party to Close and Purchase or Sell the Shares | F-10 | ||||||
Section 4.2 | Conditions Precedent to the Obligation of the Purchasers to Close and to Purchase the Shares | F-11 | ||||||
Section 4.3 | Conditions Precedent to the Obligation of the Company to Close and to Sell the Shares | F-11 | ||||||
Article V CERTIFICATE LEGEND | F-11 | |||||||
Section 5.1 | Legend | F-11 | ||||||
Article VI TERMINATION | F-12 | |||||||
Section 6.1 | Termination | F-12 | ||||||
Section 6.2 | Effect of Termination | F-12 | ||||||
Article VII MISCELLANEOUS | F-12 | |||||||
Section 7.1 | Governing Law; Jurisdiction | F-12 | ||||||
Section 7.2 | Entire Agreement; Amendment | F-13 | ||||||
Section 7.3 | Notices, etc | F-13 | ||||||
Section 7.4 | Delays or Omissions | F-13 | ||||||
Section 7.5 | Titles; Subtitles | F-14 | ||||||
Section 7.6 | Successors and Assigns | F-14 | ||||||
Section 7.7 | No Third Party Beneficiaries | F-14 | ||||||
Section 7.8 | Survival | F-14 | ||||||
Section 7.9 | Counterparts | F-14 | ||||||
Section 7.10 | Severability | F-14 | ||||||
Section 7.11 | SPECIFIC PERFORMANCE | F-14 | ||||||
Section 7.12 | Consents | F-14 | ||||||
Section 7.13 | Construction of Agreement | F-14 | ||||||
Section 7.14 | Variations of Pronouns | F-14 |
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(a) Organization; Standing and Power. The Company and each of its Subsidiaries (i) is a corporation or other organization duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, (ii) has the requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted and (iii) is duly qualified or licensed and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to so qualify or to be in good standing, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Change to the Company. For purposes of this Agreement, “Subsidiary,” when used with respect to any party, shall mean any corporation or other organization, whether incorporated or unincorporated, at least a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries. For purposes of this Agreement, the term “Material Adverse Change” when used in connection with an entity, means any change, event, violation, inaccuracy, circumstance or effect (any such item, an “Effect”), individually or when taken together with all other Effects that have occurred prior to the date of determination of the occurrence of the Material Adverse Change, that (i) is or is reasonably likely to be materially adverse to the business, assets (including intangible assets), capitalization, financial condition or results of operations of such entity taken as a whole with its subsidiaries or (ii) will or is reasonably likely to materially impede the ability of such entity to timely consummate the transactions contemplated by the Transaction Documents in accordance with the terms thereof and applicable legal requirements. | |
(b) Charter Documents. The Company is not in violation of any of the provisions of the Company Charter Documents and each Significant Subsidiary of the Company is not in violation of its respective Subsidiary Charter Documents. For purposes of this Agreement, the term: (i) “Company Charter Documents” shall mean (A) a true and correct copy of the Certificate of Incorporation (including any Certificate of Designations) and Bylaws of the Company, each as amended to date; (ii) “Significant Subsidiary” shall have the meaning provided by Rule 1-02 of Regulation S-X of the Commission; (iii) “Subsidiary Charter Documents” shall mean the certificate |
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of incorporation and bylaws, or like organizational documents of a Subsidiary; and (iv) “Commission” shall mean the Securities and Exchange Commission. | |
(c) Subsidiaries. Exhibit 21 to the Company’s transition report on Form 10-K/ T for the period beginning January 1, 2004 and ending September 30, 2004 includes all the Subsidiaries of the Company which are Significant Subsidiaries. All the outstanding shares of capital stock of, or other equity or voting interests in, each such Significant Subsidiary have been validly issued and are fully paid and nonassessable and are owned by the Company, a wholly-owned Subsidiary of the Company, or the Company and another wholly-owned Subsidiary of the Company, free and clear of all Liens, including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests, except for restrictions imposed by applicable securities laws, except as would not reasonably be expected to have a Material Adverse Change to the Company or a Material Adverse Change to such Subsidiary. Other than the Subsidiaries of the Company, neither the Company nor any of its Subsidiaries owns any capital stock of, or other equity or voting interests of any nature in, or any interest convertible, exchangeable or exercisable for, capital stock of, or other equity or voting interests of any nature in, any other person. For purposes of this Agreement, the term “Lien” shall mean pledges, claims, liens, charges, encumbrances, options and security interests of any kind or nature whatsoever. | |
(d) Capital Stock. The authorized capital stock of the Company consists of: (i) 280,000,000 shares of Common Stock, par value $0.001 per share and (ii) 40,000,000 shares of preferred stock, par value $0.001 per share, of which 100,000 shares have been designated as Series A Preferred Stock (the “Series A Preferred Stock”), all of which will be reserved for issuance upon exercise of preferred stock purchase rights (the “Rights”) issuable pursuant to the Preferred Shares Rights Agreement dated as of October 23, 1996 and amended and restated as of March 15, 2004 by and between the Company and U.S. Stock Transfer Corporation (the “Rights Agreement”), a true and complete copy of which is filed as Exhibit 1 to the Company’s Registration Statement on Form 8-A filed with the Commission on March 19, 2004, and of which 15,000,000 shares have been designated as Series B Preferred Stock (the “Series B Preferred Stock,” and together with the Series A Preferred Stock, the “Preferred Stock”). At the close of business on the date hereof: (i) 106,637,095 shares of Common Stock were issued and outstanding, excluding shares of Common Stock held by the Company in its treasury, (ii) no shares of Common Stock were issued and held by the Company in its treasury, and (iii) 3,562,238 shares of Series B Preferred Stock were issued and outstanding. No shares of Common Stock are owned or held by any Subsidiary of the Company. All of the outstanding shares of capital stock of the Company are, and each share of capital stock of the Company which may be issued as contemplated or permitted by the Transaction Documents will be, when issued, duly authorized and validly issued, fully paid and nonassessable and not subject to any preemptive rights, free and clear of all Liens. | |
(e) Stock Options. As of the close of business on the date hereof: (i) 18,588,087 shares of Common Stock are subject to issuance pursuant to outstanding options to purchase Common Stock (“Company Options”) under the stock option, stock award, stock appreciation or phantom stock plans of the Company (the “Stock Option Plans”), and (ii) 7,568,257 shares of Common Stock are reserved for future issuance under the Stock Option Plans. As of the same date, 1,147,111 shares of Common Stock are reserved for future issuance under the Employee Stock Purchase Plans. Included in the issued and outstanding Common Stock of the Company are 868,151 shares that are subject to outstanding restricted stock agreements with certain employees of the Company. All shares of the Common Stock subject to issuance under the Company Options, upon issuance in accordance with the terms and conditions specified in the instruments pursuant to which they are issuable, would be duly authorized, validly issued, fully paid and nonassessable. There are no commitments or agreements of any character to which the Company is bound obligating the Company to accelerate the vesting of any Company Option as a result of the transactions contemplated hereby (whether alone or upon the occurrence of any additional or subsequent events). There are no outstanding or |
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authorized stock appreciation, phantom stock, profit participation or other similar rights with respect to the Company. | |
(f) Voting Debt. No Voting Debt of the Company is issued or outstanding as of the date hereof. For purposes of this Agreement, the term “Voting Debt” shall mean any bonds, debentures, notes or other indebtedness of the Company or any of its Subsidiaries (i) having the right to vote on any matters on which stockholders may vote (or which is convertible into, or exchangeable for, securities having such right) or (ii) the value of which is any way based upon or derived from capital or voting stock of the Company. | |
(g) Other Securities. There are no securities, options, warrants, calls, rights, contracts, commitments, agreements, instruments, arrangements, understandings, obligations or undertakings of any kind to which the Company or any of its Subsidiaries is a party or by which any of them is bound obligating the Company or any of its Subsidiaries to (including on a deferred basis) issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock, Voting Debt or other voting securities of the Company or any of its Subsidiaries, or obligating the Company or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, contract, commitment, agreement, instrument, arrangement, understanding, obligation or undertaking. All outstanding shares of Common Stock, all outstanding Company Options, and all outstanding shares of capital stock of each Subsidiary of the Company have been issued and granted in compliance in all material respects with (i) all applicable securities laws and all other applicable Legal Requirements and (ii) all requirements set forth in applicable material Contracts. For purposes of this Agreement, the term: (A) “Legal Requirements” shall mean any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, order, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity; (B) “Contract” shall mean any written, oral or other agreement, contract, subcontract, settlement agreement, lease, binding understanding, instrument, note, option, warranty, purchase order, license, sublicense, insurance policy, benefit plan or legally binding commitment or undertaking of any nature, as in effect as of the date hereof or as may hereinafter be in effect; and (C) “Governmental Entity” shall mean any supranational, national, state, municipal, local or foreign government, any instrumentality, subdivision, court, administrative agency or commission or other governmental authority or instrumentality, or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority. | |
(h) Authority. The Company has all requisite corporate power and authority to enter into this Agreement, the Amended and Restated Stockholders Agreement in substantially the form attached hereto asExhibit C (the “Stockholders Agreement”), the Warrants, and the other agreements and documents contemplated hereby and thereby which are executed by the Company or to which the Company is a party (all of the foregoing agreements and documents, including this Agreement, are collectively referred to herein as the “Transaction Documents”). The execution and delivery of the Transaction Documents and the consummation of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of the Company and no other corporate or other proceedings on the part of the Company is necessary to authorize the execution and delivery of the Transaction Documents or to consummate the transactions contemplated thereby, subject only to: (i) the approval of the issuance of the Shares and the Warrants by the Company’s stockholders; (ii) the filing of a proxy statement with the Commission in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (iii) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act‘”) and any foreign antitrust laws, (iv) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal, foreign and state securities (or related) laws and the rules and regulations of the Nasdaq Stock Market (clauses (i) — (iv), the “Necessary Consents”). The Transaction Documents have been, or will be upon the Closing, duly executed and delivered by the Company |
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(other than the Warrants, which will be delivered within two (2) Business Days of the Closing) and, assuming due execution and delivery by the other parties hereto, constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. | |
(i) Non–Contravention. The execution and delivery of the Transaction Documents by the Company does not, and performance of the Transaction Documents by the Company and the consummation of the transactions contemplated thereby will not: (i) conflict with or violate the Company Charter Documents or any other Subsidiary Charter Documents of any Subsidiary of the Company, (ii) subject to compliance with the requirements set forth in Section 2.1(h), conflict with or violate any material Legal Requirement applicable to the Company or any of the Company’s other Subsidiaries or by which the Company or any of the Company’s other Subsidiaries or any of their respective properties is bound or affected, (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or materially impair the Company’s rights or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any of the properties or assets of the Company or any of its Subsidiaries pursuant to, any material Contract of the Company, or (iv) trigger anti-dilution rights or other rights to acquire additional equity securities of the Company. Neither the execution or delivery by the Company of the Transaction Documents nor the consummation of any of the transactions contemplated thereby, shall constitute, result in or otherwise trigger a “Triggering Event,” “Distribution Date,” or “Shares Acquisition Date,” in each case, as defined in the Rights Plan. | |
(j) Necessary Consents. No consent, approval, order or authorization of, or registration, declaration or filing with any Governmental Entity or any other person is required to be obtained or made by the Company in connection with the execution and delivery of the Transaction Documents or the consummation of the transactions contemplated thereby, except for (i) certain of the Necessary Consents and (ii) such other consents, authorizations, filings, approvals and registrations which if not obtained or made would not be material to the Company or materially adversely affect the ability of the parties hereto to consummate the transactions contemplated hereby. | |
(k) Commission Filings. The Company has filed all required registration statements, prospectuses, reports, schedules, forms, statements and other documents (including exhibits and all other information incorporated by reference) required to be filed by it with the Commission since January 1, 2002. All such required registration statements, prospectuses, reports, schedules, forms, statements and other documents (including those that the Company may file subsequent to the date hereof) are referred to herein as the “SEC Reports.” As of their respective dates, the SEC Reports (i) were prepared in accordance and complied in all material respects with the requirements of the Securities Act, or the Exchange Act, as the case may be, and the rules and regulations of the Commission thereunder applicable to such SEC Reports and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. | |
(l) Financial Statements. Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the SEC Reports (the “Company Financials”), including each SEC Report filed after the date hereof until the Closing: (i) complied as to form in all material respects with applicable securities laws and regulations thereunder, (ii) was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited interim financial statements, as may be permitted by the Commission on Form 10-Q, 8-K or any successor form under the Exchange Act), and (iii) fairly presented in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as at the respective dates thereof and the consolidated results of the Company’s operations and cash flows for the periods indicated. The balance sheet of the Company |
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contained in the SEC Reports as of December 31, 2004 is hereinafter referred to as the “Company Balance Sheet.” | |
(m) No Undisclosed Liabilities. Neither the Company nor its Subsidiaries has any liability, indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of any type, whether accrued, absolute, contingent, matured, unmatured or other (whether or not required to be reflected in the Company Financials), which individually or in the aggregate (i) has not been reflected in the Company Balance Sheet, or (ii) has not arisen in the ordinary course of business consistent with past practices since the Company Balance Sheet. | |
(o) Absence of Certain Changes or Events. Since the date of the Company Balance Sheet, the Company has conducted its business only in the ordinary course of business consistent with past practice and there has not been: (i) any Material Adverse Change to the Company, (ii) any declaration, setting aside or payment of any dividend on, or other distribution (whether in cash, stock or property) in respect of, any of the Company’s or any of its Subsidiaries’ capital stock, or any purchase, redemption or other acquisition by the Company or any of its Subsidiaries of any of the Company’s capital stock or any other securities of the Company or its Subsidiaries or any options, warrants, calls or rights to acquire any such shares or other securities except for repurchases from employees following their termination pursuant to the terms of their pre-existing stock option or purchase agreements, (iii) any split, combination or reclassification of any of the Company’s or any of its Subsidiaries’ capital stock, (iv) entry by the Company or any of its Subsidiaries into any licensing or other agreement with regard to the disposition of any material intellectual property other than licenses, distribution agreements, advertising agreements, sponsorship agreements or merchant program agreements entered into in the ordinary course of business consistent with past practice, (v) any material change by the Company in its accounting methods, principles or practices, except as required by concurrent changes in GAAP or by the Commission, (vi) any material revaluation by the Company of any of its assets, including, without limitation, writing down the value of capitalized inventory or writing off notes or accounts receivable other than in the ordinary course of business consistent with past practice, (vii) any communication from the Nasdaq Stock Market with respect to the delisting of the Common Stock, (viii) any cancellation by the Company or any of its Subsidiaries of any debts or waiver of any claims or rights of material value, (ix) any sale, transfer or other disposition outside of the ordinary course of business of any properties or assets (real, personal or mixed, tangible or intangible) by the Company or any of its Subsidiaries, or (x) any agreement, whether in writing or otherwise, to take any action described in this section by the Company or any of its Subsidiaries. | |
(q) Section 203. The Board of Directors of the Company has heretofore take all necessary action to approve, and has approved, for purposes of Section 203 of the Delaware General Corporation Law (including any successor statute thereto “Section 203”) the Purchasers’ becoming, together with their affiliates and associates, an “interested stockholder” within the meaning of Section 203, such that, as of the date hereof and from and after the Closing, Section 203 will not be applicable to any “business combination” within the meaning of Section 203 that may take place between one or more of the Purchasers and/or their respective affiliates and associates, on the one hand, and the Company, on the other, as a result of the transactions contemplated by this Agreement or otherwise. |
(a) Organization and Standing of the Purchasers. If such Purchaser is an entity, such Purchaser is a corporation, limited liability company or partnership duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization. | |
(b) Authorization and Power. Such Purchaser has the requisite power and authority to enter into and perform the Transaction Documents and to purchase the Shares being sold to it hereunder. |
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The execution, delivery and performance of the Transaction Documents by such Purchasers and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary corporate or other action, and no further consent or authorization of such Purchasers or its Board of Directors, stockholders, or partners, as the case may be, is required. The Transaction Documents constitute, or shall constitute when executed and delivered, valid and binding obligations of such Purchaser enforceable against such Purchaser in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of creditor’s rights and remedies or by other equitable principles of general application. | |
(c) Acquisition for Investment. Such Purchaser is acquiring the Securities solely for its own account and not with a view to or for sale in connection with the distribution thereof. Such Purchaser does not have a present intention to sell any of the Securities, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of any of the Securities to or through any person or entity. Such Purchaser acknowledges that it (i) has such knowledge and experience in financial and business matters such that such Purchaser is capable of evaluating the merits and risks of its investment in the Company, (ii) is able to bear the financial risks associated with an investment in the Securities, and (iii) has been given full access to such records of the Company and the Subsidiaries and to the officers of the Company as it has deemed necessary or appropriate to conduct its due diligence investigation. | |
(d) Restricted Securities. Such Purchaser understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of such Purchaser’s representations as expressed herein. Such Purchaser understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, such Purchaser must hold the Securities indefinitely unless they are registered with the Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. Such Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of such Purchaser’s control, and which the Company is under no obligation and may not be able to satisfy. Such Purchaser understands that no United States federal or state agency or any government or governmental agency has passed upon or made any recommendation or endorsement of the Securities. | |
(e) No General Solicitation. Such Purchaser acknowledges that the Securities were not offered to such Purchaser by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which such Purchaser was invited by any of the foregoing means of communications. | |
(f) Equity Owned. The Purchasers own of record an aggregate of 12,253,602 shares of the Company’s Common Stock, 3,562,238 shares of the Company’s Series B Preferred Stock and warrants to acquire an aggregate of 3,425,732 shares of the Company’s Common Stock and the Purchasers have entered into a Stock Purchase Agreement to acquire an aggregate of 3,537,736 shares of Common Stock and warrants to purchase an aggregate of 863,236 shares of Common Stock. Except as set forth above, the Purchasers do not beneficially own (in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended) any other shares of the Company’s Common Stock (other than Company Common Stock underlying Company Options issued to William Janeway that are either currently exercisable or exercisable within 60 days of the date of this Agreement). |
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(g) Accredited Investor. Such Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Act. |
(a) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, or promulgated by any court or governmental authority of competent |
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jurisdiction which prohibits the consummation of any of the transactions contemplated by the Transaction Documents. | |
(b) Project Edison. The business combination transaction known to the parties as “Project Edison” shall have closed or shall close simultaneously with the Closing. | |
(c) Governmental Approvals. All applicable waiting periods under the HSR Act and under any applicable material foreign or other Antitrust Laws shall have expired or been terminated. | |
(d) Stockholder Approval. If required under Rule 4350(i) of the Nasdaq Marketplace Rules, the Company shall have received the requisite approval of its stockholders to issue the Shares, the Warrants and/or the Warrant Shares. |
(a) Delivery of Transaction Documents. The other Transaction Documents to which the Company is a party (other than the Warrants, which will be delivered within two (2) Business Days of the Closing Date) shall have been duly executed and delivered by the Company to the Purchasers. | |
(b) Amendment of Rights Plan. Prior to the Closing, the Company shall have entered into an agreement with U.S. Stock Transfer Corporation to amend that certain Preferred Shares Rights Agreement dated as of October 23, 1996 and amended and restated as of March 15, 2004 by and between the Company and U.S. Stock Transfer Corporation (the “Rights Plan”) in substantially the form attached hereto asExhibit E to permit the acquisition by the Purchasers of the Securities so that such acquisition does not constitute or otherwise trigger a “Triggering Event”, “Distribution Date” or “Shares Acquisition Date”. |
(a) Delivery of Transaction Documents. The other Transaction Documents to which the Purchasers are party shall have been duly executed and delivered by the Purchasers to the Company. |
“THE SHARES OF COMMON STOCK REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR IF APPLICABLE, STATE SECURITIES LAWS. THESE SHARES OF COMMON STOCK MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO SCANSOFT, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.” |
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Warburg Pincus Private Equity VIII, L.P. | |
Warburg Pincus Netherlands Private Equity VIII, C.V. I | |
Warburg Pincus Germany Private Equity VIII, K.G. | |
c/o Warburg Pincus LLC | |
466 Lexington Avenue | |
New York, NY 10017 | |
Attention: Jeffrey A. Harris | |
Fax No. 212-878-6139 |
with a copy to: |
Willkie Farr & Gallagher LLP | |
787 Seventh Avenue | |
New York, NY 10019 | |
Attention: Michael A. Schwartz, Esq. | |
Fax No. 212-728-9267 |
ScanSoft, Inc. | |
9 Centennial Drive | |
Peabody, MA 01960 | |
Attention: Chief Executive Officer | |
Phone: 978-977-2000 | |
Fax: 978-977-2436 |
Wilson Sonsini Goodrich & Rosati | |
650 Page Mill Road | |
Palo Alto, CA 94304 |
Attention: | Katharine A. Martin, Esq. |
Robert D. Sanchez, Esq. | |
Fax No. 650-493-6811 |
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SCANSOFT, INC. |
By: | /s/Paul Ricci |
Name: Paul Ricci |
Title: | Chairman & CEO |
WARBURG PINCUS PRIVATE EQUITY VIII, L.P. |
By: | Warburg Pincus Partners LLC, |
its General Partner |
By: | Warburg Pincus & Co., |
its Managing Member |
By: | /s/Jeffrey A. Harris |
Name: Jeffrey A. Harris |
Title: | Partner |
WARBURG PINCUS NETHERLANDS PRIVATE EQUITY VIII, C.V. I |
By: | Warburg Pincus Partners LLC, |
its General Partner |
By: | Warburg Pincus & Co., |
its Managing Member |
By: | /s/Jeffrey A. Harris |
Name: Jeffrey A. Harris |
Title: | Partner |
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WARBURG PINCUS GERMANY PRIVATE EQUITY VIII, K.G. |
By: | Warburg Pincus Partners LLC, |
its General Partner |
By: | Warburg Pincus & Co., |
its Managing Member |
By: | /s/Jeffrey A. Harris |
Name: Jeffrey A. Harris |
Title: | Partner |
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Aggregate | |||||||||||||
Shares of | Purchase Price | Warrant | |||||||||||
Common Stock | for Common | Shares | |||||||||||
Name | Purchased | Stock | Acquired | ||||||||||
Warburg Pincus Private Equity VIII, L.P. | 13,713,679 | $ | 58,145,998.96 | 3,079,383 | |||||||||
Warburg Pincus Netherlands Private Equity VIII, C.V. I | 397,500 | $ | 1,685,400.00 | 89,258 | |||||||||
Warburg Pincus Private Equity VIII, K.G | 39,764 | $ | 168,599.36 | 8,929 | |||||||||
Total: | 14,150,943 | $ | 59,999,998.32 | 3,177,570 |
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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 consistent 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. |
(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; |
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(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 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; |
(a) 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; | |
(b) 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 | |
(c) 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 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. |
(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 Voting Stock or Voting Power proposed to be the subject of such Transfer, the proposed price therefor and |
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the other material terms upon which such disposition is proposed to be made (including, if any, a copy of a bona fide written offer). | |
(ii) The Company shall have the right, exercisable by written notice given by the Company to the Purchasers within (i) 72-hours with respect to a Transfer addressed in Section 3.2(b) above, and (ii) twenty (20) business days with respect to a Transfer addressed in Sections 3.2(a) or (c) above, after receipt of such Transfer Notice (the“Response Notice”), to purchase all or any portion of the Voting Stock or Voting Power specified in such Transfer Notice for cash at the price per share specified in the Transfer Notice or, if consideration other than cash is specified in the Transfer Notice, in an amount equal to the Fair Market Value of such non-cash consideration. | |
(iii) If the Company exercises its right of first refusal hereunder, the closing of the purchase of the Voting Stock or Voting Power with respect to which such right has been exercised shall take place within thirty (30) calendar days after the Company gives the Response Notice to the Purchasers or, if later, within five (5) business days of the determination of the Fair Market Value of any non-cash consideration. Upon exercise of its right of first refusal, the Company and the Purchasers shall be legally obligated to consummate the purchase and sale contemplated thereby and shall use their commercially reasonable efforts to secure any approvals required in connection therewith. | |
(iv) If the Company does not exercise its right of first refusal hereunder within the time specified for such exercise in subparagraph (ii) above with respect to all of the Voting Stock or Voting Power specified in such Transfer Notice, the Purchasers shall be free, during the period of ninety (90) calendar days following the expiration of such time for exercise, to Transfer or tender for Transfer the Voting Stock or Voting Power specified in such Transfer Notice with respect to which the Company has not exercised its first refusal rights to the proposed purchaser or transferee specified in such Transfer Notice and on terms not materially less favorable to the Purchasers than the terms specified in such Transfer Notice. After the expiration of such 90-day period, except as otherwise provided herein, the Purchasers may not Transfer the Voting Stock or Voting Power specified in such Transfer Notice without first complying with the provisions of this Section 3.3. |
“THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A STOCKHOLDERS AGREEMENT BY AND BETWEEN THE COMPANY AND THE HOLDER HEREOF (A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY), AND NO TRANSFER OF THE SHARES EVIDENCED HEREBY SHALL BE EFFECTIVE EXCEPT IN COMPLIANCE WITH THE TERMS THEREOF.” |
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(i) prior to the commencement of the Shelf Registration Period; | |
(ii) after the Company has effected three Demand Registrations pursuant to this Section 5.1, and such registrations have been declared or ordered effective (which, for the avoidance of doubt, shall mean that the registrations shall have been effective for an aggregate of ninety (90) calendar days, or until all Registrable Securities covered thereby have been sold, if earlier); | |
(iii) if the Holders making the request provided for in Section 5.1(a) propose to dispose of Registrable Securities that could be disposed of in a single ordinary brokerage transaction under the quantity limitation of Rule 144; or | |
(iv) if the Holders making the request provided for in Section 5.1(a) propose to dispose of Registrable Securities that may be registered on Form S-3 pursuant to a request made pursuant to Section 5.2 below. |
(a) within ten (10) calendar days after receipt of such notice, give written notice of the proposed registration, and any related qualification or compliance, to all other Holders of Registrable Securities; and | |
(b) as soon as reasonably practicable, effect such registration (a“S-3 Registration”) and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) calendar days after receipt of such written notice from the Company;provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 5.2, (i) if Form S-3 is not available to the Company for such offering, (ii) if the aggregate proceeds from the sale of Registrable Securities proposed to be sold pursuant to a Form S-3 registration statement will not exceed $10,000,000, (iii) if, the Company has effected two S-3 Registrations pursuant to this Section 5.2, and such registrations have been declared or ordered effective (which, for the avoidance of doubt, shall mean that the registrations shall have been effective for an aggregate of ninety (90) calendar days, or until all Registrable Securities covered thereby have been sold, if earlier), or (iv) if the Holders propose to dispose of Registrable Securities that could be disposed of in a single ordinary brokerage transaction under the quantity limitation of Rule 144. |
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(c) Notwithstanding the foregoing, if the Company shall furnish to the Holders requesting a registration statement pursuant to this Section 5.2, a certificate signed by the President or Chief Executive Officer of the Company stating that in the Board’s good faith judgment it would be seriously detrimental to the Company and its stockholders for such a registration statement to be filed in the near future, the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of the Holders specified in this Section 5.2;provided, however, that the Company may not utilize this right more than twice in any twelve-month period. |
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(a) if any Purchaser is not represented on the Board, such Purchaser shall be entitled to consult with and advise management of the Company on significant business issues, including management’s proposed annual operating plans, and management will meet with the Purchaser regularly during each year at the Company’s facilities at mutually agreeable times for such consultation and advice and to review progress in achieving said plans; | |
(b) each Purchaser may examine the books and records of the Company and inspect its facilities and may request information at reasonable times and intervals concerning the general status of the Company’s financial condition and operations, provided that access to highly confidential proprietary information and facilities need not be provided; and | |
(c) if any Purchaser is not represented on the Board, the Company shall, concurrently with delivery to the Board, give a representative of such Purchaser copies of all notices, minutes, consents and other material that the Company provides to its directors, except that the representative may be excluded from access to any material or meeting or portion thereof if the Board determines in good faith, upon advice of counsel, that such exclusion is reasonably necessary to preserve the attorney-client privilege, to protect highly confidential proprietary information, or for other similar reasons, provided that, upon reasonable notice, at a scheduled meeting of the Board or such other time, if any, as the Board may determine in its sole discretion, such representative may address the Board with respect to such Purchaser’s concerns regarding significant business issues facing the Company. |
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Warburg Pincus Private Equity VIII, L.P. | |
Warburg Pincus Netherlands Private Equity VIII, C.V. I | |
Warburg Pincus Germany Private Equity VIII, K.G. | |
c/o Warburg Pincus LLC | |
466 Lexington Avenue | |
New York, NY 10017 | |
Attention: Jeffrey A. Harris | |
Fax No. 212-878-6139 |
with a copy to: |
Willkie Farr & Gallagher LLP | |
787 Seventh Avenue | |
New York, NY 10019 | |
Attention: Michael A. Schwartz, Esq. | |
Fax No. 212-728-9267 |
ScanSoft, Inc. | |
9 Centennial Drive | |
Peabody, MA 01960 | |
Attention:Chief Executive Officer | |
Phone: 978-977-2000 | |
Fax: 978-977-2436 |
with a copy to: |
Wilson Sonsini Goodrich & Rosati | |
650 Page Mill Road | |
Palo Alto, CA 94304 |
Attention: | Katharine A. Martin, Esq. |
Robert D. Sanchez, Esq. | |
Fax No. 650-493-6811 |
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SCANSOFT, INC. |
By: | /s/Paul Ricci |
Name: Paul Ricci |
Title: | Chief Executive Officer |
PURCHASERS | |
WARBURG PINCUS PRIVATE EQUITY VIII, L.P. |
By: | Warburg Pincus Partners LLC, |
its General Partner |
By: | Warburg Pincus & Co., |
its Managing Member |
By: | /s/Jeffrey A. Harris |
Name: Jeffrey A. Harris |
Title: | Partner |
WARBURG PINCUS NETHERLANDS PRIVATE EQUITY VIII, C.V. I |
By: | Warburg Pincus Partners LLC, |
its General Partner |
By: | Warburg Pincus & Co., |
its Managing Member |
By: | /s/Jeffrey A. Harris |
Name: Jeffrey A. Harris |
Title: | Partner |
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WARBURG PINCUS GERMANY PRIVATE EQUITY VIII, K.G. |
By: | Warburg Pincus Partners LLC, |
its General Partner |
By: | Warburg Pincus & Co., |
its Managing Member |
By: | /s/Jeffrey A. Harris |
Name: Jeffrey A. Harris |
Title: | Partner |
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(1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in subsection (f) of § 251 of this title. | |
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to §§ 251,252,254,257,258,263 and264 of this title to accept for such stock anything except: |
a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof; | |
b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders; | |
c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or | |
d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph. |
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(3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under § 253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation. |
(1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder’s shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder’s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder’s shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or | |
(2) If the merger or consolidation was approved pursuant to § 228 or § 253 of this title, then, either a constituent corporation before the effective date of the merger or consolidation, or the surviving or resulting corporation within ten days thereafter, shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder’s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder’s shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder’s shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, |
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provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given. |
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235 MONTGOMERY STREET
23rd FLOOR
SAN FRANCISCO, CA 94104
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on August 30, 2005. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on August 30, 2005. Have your proxy card in hand when you call and then follow the instructions.
Mark, sign, and date your proxy card and return it in the postage-paid envelope we have provided or return it to Nuance Communications, Inc., c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.
NUCOMM | KEEP THIS PORTION FOR YOUR RECORDS | |||
DETACH AND RETURN THIS PORTION ONLY |
1. | To adopt the Agreement and Plan of Merger dated May 9, 2005 among Scansoft, Inc., Nova Acquisition Corporation, Nova Acquisition LLC and the Company, and to approve the merger contemplated thereby. | FOR o | AGAINST o | ABSTAIN o |
2. | To transact such other business as may properly come before the meeting or any adjournment thereof. |
Signature [PLEASE SIGN WITHIN BOX] Date | Signature (Joint Owners) Date |