Exhibit 10.2
NUANCE COMMUNICATIONS
1994 FLEXIBLE STOCK INCENTIVE PLAN
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1. Establishment, Purpose, and Definitions.
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(a) There is hereby adopted the 1994 Flexible Stock Incentive Plan
(the "Plan") of NUANCE COMMUNICATIONS (the "Company").
(b) The purpose of the Plan is to provide a means whereby eligible
individuals (as defined in paragraph 4 below) can acquire Common Stock of the
Company (the "Stock"). The Plan provides employees (including officers and
directors who are employees) of the Company and of its Affiliates an opportunity
to purchase shares of Stock pursuant to options which may qualify as incentive
stock options (referred to as "incentive stock options") under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), and employees,
officers, directors, independent contractors, and consultants of the Company and
of its Affiliates an opportunity to purchase shares of Stock pursuant to options
which are not described in Sections 422 or 423 of the Code (referred to as
"nonqualified stock options"). The Plan also provides for the sale of Stock to
eligible individuals in connection with the performance of services for the
Company or its Affiliates.
(c) The term "Affiliates" as used in the Plan means parent or
subsidiary corporations, as defined in Sections 424(e) and (f) of the Code (but
substituting "the Company" for "employer corporation"), including parents or
subsidiaries which become such after adoption of the Plan.
2. Administration of the Plan.
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(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board"). The Board may delegate the responsibility for
administering the Plan to a committee, under such terms and conditions as the
Board shall determine (the "Committee"). In the event that the Company shall be
subject to Rule 16b-3 promulgated under the Securities Act of 1934, as amended
("Rule 16b-3"): (1) the Committee shall consist of two or more members of the
Board or such lesser number of members of the Board as permitted by Rule 16b-3,
and (ii) none of the members of the Committee shall receive, while serving on
the Committee, or during the one-year period preceding appointment to the
Committee, a grant or award of equity securities under (x) the Plan or (y) any
other plan of the Company or its Affiliates under which the participants are
entitled to acquire Stock (including restricted Stock), stock options, stock
bonuses, related rights or stock appreciation rights of the Company or any of
its Affiliates, other than pursuant to transactions in any such other plan which
do not disqualify a director from being a disinterested
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person under Rule 16b-3. The limitations set forth in this Section 2(a) shall
automatically incorporate any additional requirements that may in the future be
necessary for the Plan to comply with Rule 16b-3. Members of the Committee shall
serve at the pleasure of the Board. The Committee shall select one of its
members as chairman, and shall hold meetings at such times and places as it may
determine. A majority of the Committee shall constitute a quorum and acts of the
Committee at which a quorum is present, or acts reduced to or approved in
writing by all the members of the Committee, shall be the valid acts of the
Committee. For purposes of the Plan, the term "Administrator" shall mean the
Board or, in the event that the Board shall delegate the responsibility for
administering the Plan to a Committee, such Committee.
(b) The Administrator shall determine which eligible individuals (as
defined in paragraph 4, below) shall be granted options under the Plan, the
timing of such grants, the terms thereof (including any restrictions on the
Stock), and the number of shares subject to such options.
(c) The Administrator may amend the terms of any outstanding option
granted under this Plan, but any amendment which would adversely affect the
Optionee's rights under an outstanding option shall not be made without the
Optionee's written consent. The Administrator may, with the Optionee's written
consent, cancel any outstanding stock option or accept any outstanding stock
option in exchange for a new option.
(d) The Administrator shall also determine which eligible individuals
(as defined in paragraph 4, below) shall be issued Stock under the Plan, the
timing of such grants, the terms thereof (including any restrictions), and the
number of shares to be granted. The Stock shall be issued for such consideration
(if any) as the Administrator deems appropriate. Stock issued subject to
restrictions shall be evidenced by a written agreement (the "Restricted Stock
Purchase Agreement"). The Administrator may amend any Restricted Stock Purchase
Agreement, but any amendment which would adversely affect the shareholder's
rights to the Stock shall not be made without his or her written consent.
(e) The Administrator shall have the sole authority, in its absolute
discretion to adopt, amend, and rescind such rules and regulations as, in its
opinion, may be advisable for the administration of the Plan, to construe and
interpret the Plan, the rules and the regulations, and the instruments
evidencing options or Stock granted under the Plan and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
All decisions, determinations, and interpretations of the Administrator shall be
binding on all participants.
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(f) Without limitation of the foregoing, the Administrator shall have
the right, with the Optionee's consent, to terminate the restrictions applicable
to any stock issued pursuant to the Plan.
3. Stock Subject to the Plan.
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(a) An aggregate of not more than 3,380,000 shares of Stock shall be
available for the grant of stock options or the issuance of Stock under the
Plan. If an option is surrendered (except surrender for shares of Stock) or for
any other reason ceases to be exercisable in whole or in part, the shares which
were subject to such option but as to which the option had not been exercised
shall continue to be available under the Plan. Any Stock which is retained by
the Company upon exercise of an option in order to satisfy the exercise price
for such option or any withholding taxes due with respect to such option
exercise shall be treated as issued to the Optionee and will thereafter not be
available under the Plan.
(b) If there is any change in the Stock subject to the Plan, a Stock
Option Agreement or a Restricted Stock Purchase Agreement through merger,
consolidation, reorganization, recapitalization, reincorporation, stock split,
stock dividend, or other change in the capital structure of the Company,
appropriate adjustments shall be made by the Administrator in order to preserve
but not to increase the benefits to the individual, including adjustments to the
aggregate number, kind and price per share of shares subject to the Plan, a
Stock Option Agreement or a Restricted Stock Purchase Agreement.
4. Eligible Individuals. Individuals who shall be eligible to have
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granted to them the options or Stock provided for by the Plan shall be such
employees, officers, directors, independent contractors and consultants of the
Company or an Affiliate as the Administrator, in its discretion, shall designate
from time to time. Notwithstanding the foregoing, only employees of the Company
or an Affiliate (including officers and directors who are bona fide employees)
shall be eligible to receive incentive stock options.
5. The Option Price. The exercise price of the Stock covered by each
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incentive stock option shall be not less than the per share fair market value of
such Stock on the date the option is granted. The exercise price of the Stock
covered by each nonqualified stock option shall be as determined by the
Administrator. Notwithstanding the foregoing, in the case of an incentive stock
option granted to a person possessing more than ten percent of the combined
voting power of the Company or an Affiliate, the exercise price shall be not
less than 110 percent of the fair market value of the Stock on the date the
option is granted. The exercise price of an option shall be subject to
adjustment to the extent provided in paragraph 3(b), above.
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6. Terms and Conditions of Options.
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(a) Each option granted pursuant to the Plan will be evidenced by a
written Stock Option Agreement executed by the Company and the person to whom
such option is granted.
(b) The Administrator shall determine the term of each option granted
under the Plan; provided, however, that the term of an incentive stock option
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shall not be for more than ten (10) years and that, in the case of an incentive
stock option granted to a person possessing more than ten percent of the
combined voting power of the Company or an Affiliate, the term shall be for no
more than five (5) years.
(c) In the case of incentive stock options, the aggregate fair market
value (determined as of the time such option is granted) of the Stock with
respect to which incentive stock options are exercisable for the first time by
an eligible employee in any calendar year (under this Plan and any other plans
of the Company or its Affiliates) shall not exceed $100,000.
(d) The Stock Option Agreement may contain such other terms,
provisions and conditions consistent with this Plan as may be determined by the
Administrator. If an option, or any part thereof is intended to qualify as an
incentive stock option, the Stock Option Agreement shall contain those terms and
conditions which are necessary to so qualify it.
7. Terms and Conditions of Stock Purchases.
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(a) Each sale or grant of stock pursuant to the Plan will be evidenced
by a written Restricted Stock Purchase Agreement executed by the Company and the
person to whom such stock is sold or granted.
(b) The Restricted Stock Purchase Agreement may contain such other
terms, provisions and conditions consistent with this Plan as may be determined
by the Administrator, including not by way of limitation, restrictions on
transfer, forfeiture provisions, repurchase provisions and vesting provisions.
8. Use of Proceeds. Cash proceeds realized from the sale of Stock under
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the Plan shall constitute general funds of the Company.
9. Amendment, Suspension, or Termination of the Plan.
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(a) The Board may at any time amend, suspend or terminate the Plan as
it deems advisable; provided that such amendment, suspension or termination
complies with all applicable requirements of state and federal law,
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including any applicable requirement that the Plan or an amendment to the Plan
be approved by the Company's shareholders, and provided further that, except as
provided in paragraph 3(b), above, the Board shall in no event amend the Plan in
the following respects without the consent of shareholders then sufficient to
approve the Plan in the first instance:
(i) To increase the maximum number of shares subject to incentive
stock options issued under the Plan; or
(ii) To change the designation or class of persons eligible to
receive incentive stock options under the Plan.
(b) No option may be granted nor any Stock issued under the Plan
during any suspension or after the termination of the Plan, and no amendment,
suspension or termination of the Plan shall, without the affected individual's
consent, alter or impair any rights or obligations under any option previously
granted under the Plan. The Plan shall terminate with respect to the grant of
incentive stock options on September _____, 2004, unless previously terminated
by the Board pursuant to this paragraph 9.
10. Assignability. Each option granted pursuant to this Plan shall, during
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optionee's lifetime, be exercisable only by such optionee, and neither the
option nor any right hereunder shall be transferable by optionee by operation of
law or otherwise other than by will or the laws of descent and distribution.
Stock subject to a Restricted Stock Purchase Agreement shall be transferable
only as provided in such Agreement.
11. Payment Upon Exercise of Options.
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(a) Payment of the purchase price upon exercise of any option granted
under this Plan shall be made in cash; provided, however, that the
Administrator, in its sole discretion, may permit an optionee to pay the option
price in whole or in part (i) with shares of Stock owned by the Optionee; (ii)
by delivery on a form prescribed by the Administrator of an irrevocable
direction to a securities broker approved by the Administrator to sell shares
and deliver all or a portion of the proceeds to the Company in payment for the
Stock; (iii) by delivery of the optionee's promissory note with such recourse,
interest, security, and redemption provisions as the Administrator in its
discretion determines appropriate; or (iv) in any combination of the foregoing.
Any Stock used to exercise options shall be valued at its fair market value on
the date of the exercise of the option. In addition, the Administrator, in its
sole discretion, may authorize the surrender by an optionee of all or part of an
unexercised option and authorize a payment in consideration thereof of an amount
equal to the difference between the aggregate fair market value of the Stock
subject to such option and the aggregate option price of such Stock. In the
Administrator's
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discretion, such payment may be made in cash, shares of Stock with a fair market
value on the date of surrender equal to the payment amount, or some combination
thereof.
(b) In the event that the exercise price is satisfied by the
Administrator retaining from the shares of Stock otherwise to be issued to
Optionee shares of Stock having a value equal to the exercise price, the
Administrator may issue Optionee an additional option, with terms identical to
this option agreement, entitling Optionee to purchase additional Stock in an
amount equal to the number of shares so retained.
12. Withholding Taxes.
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(a) No Stock shall be granted or sold under the Plan to any
participant until the participant has made arrangements acceptable to the
Administrator for the satisfaction of federal, state, and local income and
social security tax withholding obligations, including without limitation
obligations incident to the receipt of Stock under the Plan, the lapsing of
restrictions applicable to such Stock, the failure to satisfy the conditions for
treatment as incentive stock options under applicable tax law, or the receipt of
cash payments. Upon exercise of a stock option or lapsing or restriction on
stock issued under the Plan, the Company may satisfy its withholding obligations
by withholding from the Optionee or requiring the shareholder to surrender
shares of the Company's Stock sufficient to satisfy federal, state, and local
income and social security tax withholding obligations.
(b) In the event that such withholding is satisfied by the Company or
the Optionee's employer retaining from the shares of Stock otherwise to be
issued to Optionee shares of Stock having a value equal to such withholding tax,
the Administrator may issue Optionee an additional option, with terms identical
to the option agreement under which the option was received, entitling Optionee
to purchase additional Stock in an amount equal to the number of shares so
retained.
13. Restrictions on Transfer of Shares. The Stock acquired pursuant to the
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Plan shall be subject to such restrictions and agreements regarding sale,
assignment, encumbrances or other transfer as are in effect among the
shareholders of the Company at the time such Stock is acquired, as well as to
such other restrictions as the Administrator shall deem advisable.
14. Corporate Transaction.
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(a) For purposes of this Section 15, a "Corporate Transaction" shall
include any of the following shareholder-approved transactions to which the
Company is a party:
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(i) a merger or consolidation in which the Company is not the
surviving entity, except for (1) a transaction the principal purpose of
which is to change the state of the Company's incorporation, or (2) a
transaction in which the Company's shareholders immediately prior to such
merger or consolidation hold (by virtue of securities received in exchange
for their shares in the Company) securities of the surviving entity
representing more than fifty percent (50%) of the total voting power of
such entity immediately after such transaction;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company unless the Company's
shareholders immediately prior to such sale, transfer or other disposition
hold (by virtue of securities received in exchange for their shares in the
Company) securities of the purchaser or other transferee representing more
than fifty percent (50%) of the total voting power of such entity
immediately after such transaction; or
(iii) any reverse merger in which the Company is the surviving
entity but in which the Company's shareholders immediately prior to such
merger do not hold (by virtue of their shares in the Company held
immediately prior to such transaction) securities of the Company
representing more than fifty percent (50%) of the total voting power of the
Company immediately after such transaction.
(b) In the event of any Corporate Transaction, any option shall
terminate and any restricted stock shall be reconveyed to or repurchased by the
Company immediately prior to the specified effective date of the Corporate
Transaction unless assumed by the successor corporation or its parent company,
pursuant to options or restricted stock agreements providing substantially equal
value and having substantially equivalent provisions as the options or
restricted stock granted pursuant to this Plan.
15. Shareholder Approval. This Plan shall only become effective with
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regard to incentive stock options upon its approval by a majority of the
shareholders voting (in person or by proxy) at a shareholders' meeting held
within 12 months of the Board's adoption of the Plan. The Administrator may
grant incentive stock options under the Plan prior to the shareholders' meeting,
but until shareholder approval of the Plan is obtained, no incentive stock
option shall be exercisable.
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