-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wpsx8LShRHMrnJVYSWi5ksaso/KosPNXYkK40CVm9qPyZJtYAB8zql/zHHISZsft KMAM6pQNUzQO/qescIA4gw== 0000899140-08-001182.txt : 20080521 0000899140-08-001182.hdr.sgml : 20080521 20080521152709 ACCESSION NUMBER: 0000899140-08-001182 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20080521 DATE AS OF CHANGE: 20080521 GROUP MEMBERS: CHARLES R. KAYE GROUP MEMBERS: JOSEPH P. LANDY GROUP MEMBERS: WARBURG PINCUS & CO. GROUP MEMBERS: WARBURG PINCUS LLC GROUP MEMBERS: WARBURG PINCUS PARTNERS, LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: Nuance Communications, Inc. CENTRAL INDEX KEY: 0001002517 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 943156479 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-49737 FILM NUMBER: 08851747 BUSINESS ADDRESS: STREET 1: 1 WAYSIDE ROAD CITY: BURLINGTON STATE: MA ZIP: 01803 BUSINESS PHONE: 781-565-5000 MAIL ADDRESS: STREET 1: 1 WAYSIDE ROAD CITY: BURLINGTON STATE: MA ZIP: 01803 FORMER COMPANY: FORMER CONFORMED NAME: SCANSOFT INC DATE OF NAME CHANGE: 19990312 FORMER COMPANY: FORMER CONFORMED NAME: VISIONEER INC DATE OF NAME CHANGE: 19951020 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WARBURG PINCUS PRIVATE EQUITY VIII L P CENTRAL INDEX KEY: 0001157334 IRS NUMBER: 134161869 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 466 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2128780600 MAIL ADDRESS: STREET 1: 466 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 SC 13D/A 1 w052108b.txt FIFTH AMENDMENT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Amendment No. 5) Under the Securities Exchange Act of 1934* NUANCE COMMUNICATIONS, INC. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, $0.001 Par Value - -------------------------------------------------------------------------------- (Title of Class of Securities) 80603P107 - -------------------------------------------------------------------------------- (CUSIP Number) Scott A. Arenare, Esq. Managing Director and General Counsel Warburg Pincus LLC 466 Lexington Avenue New York, New York 10017 (212) 878-0600 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) Copies to: Steven J. Gartner, Esq. Willkie Farr & Gallagher LLP 787 Seventh Avenue New York, NY 10019-6099 (212) 728-8000 May 20, 2008 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box: [ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 240.13d-7 for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D/A - ---------------------------- CUSIP No. 80603P107 - ---------------------------- - ----------- -------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION Warburg Pincus Private Equity VIII, L.P. - ----------- -------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [ ] (b) [X] - ----------- -------------------------------------------------------------------- 3 SEC USE ONLY ----------- ------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) WC ----------- ------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------- -------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ---------------------------- --------- ----------------------------------------- 7 SOLE VOTING POWER 0 --------- ----------------------------------------- 8 SHARED VOTING POWER NUMBER OF SHARES BENEFICIALLY OWNED 51,737,426 (see Items 4 and 5) BY EACH REPORTING --------- ----------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER 0 --------- ----------------------------------------- 10 SHARED DISPOSITIVE POWER 51,737,426 (see Item 5) - ----------- -------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 51,737,426 (see Item 5) - ----------- -------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) [ ] - ----------- -------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 22.3% (see Item 5) - ----------- -------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) PN - ----------- -------------------------------------------------------------------- SCHEDULE 13D/A - ---------------------------- CUSIP No. 80603P107 - ---------------------------- - ----------- -------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION Warburg Pincus & Co. - ----------- -------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [ ] (b) [X] - ----------- -------------------------------------------------------------------- 3 SEC USE ONLY ----------- ------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) N/A ----------- ------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------- -------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION New York - ---------------------------- --------- ----------------------------------------- 7 SOLE VOTING POWER 0 --------- ----------------------------------------- 8 SHARED VOTING POWER NUMBER OF SHARES BENEFICIALLY OWNED 51,737,426 (see Items 4 and 5) BY EACH REPORTING --------- ----------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER 0 --------- ----------------------------------------- 10 SHARED DISPOSITIVE POWER 51,737,426 (see Item 5) - ----------- -------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 51,737,426 (see Item 5) - ----------- -------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) [ ] - ----------- -------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 22.3% (see Item 5) - ----------- -------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) PN - ----------- -------------------------------------------------------------------- SCHEDULE 13D/A - ---------------------------- CUSIP No. 80603P107 - ---------------------------- - ----------- -------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION Warburg Pincus LLC (f/k/a E.M. Warburg Pincus & Co., LLC) - ----------- -------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [ ] (b) [X] - ----------- -------------------------------------------------------------------- 3 SEC USE ONLY ----------- ------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) N/A ----------- ------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------- -------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION New York - ---------------------------- --------- ----------------------------------------- 7 SOLE VOTING POWER 0 --------- ----------------------------------------- 8 SHARED VOTING POWER NUMBER OF SHARES BENEFICIALLY OWNED 51,737,426 (see Items 4 and 5) BY EACH REPORTING --------- ----------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER 0 --------- ----------------------------------------- 10 SHARED DISPOSITIVE POWER 51,737,426 (see Item 5) - ----------- -------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 51,737,426 (see Item 5) - ----------- -------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) [ ] - ----------- -------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 22.3% (see Item 5) - ----------- -------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) OO - ----------- -------------------------------------------------------------------- SCHEDULE 13D/A - ---------------------------- CUSIP No. 80603P107 - ---------------------------- - ----------- -------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION Warburg Pincus Partners, LLC - ----------- -------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [ ] (b) [X] - ----------- -------------------------------------------------------------------- 3 SEC USE ONLY ----------- ------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) N/A ----------- ------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------- -------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION New York - ---------------------------- --------- ----------------------------------------- 7 SOLE VOTING POWER 0 --------- ----------------------------------------- 8 SHARED VOTING POWER NUMBER OF SHARES BENEFICIALLY OWNED 51,737,426 (see Items 4 and 5) BY EACH REPORTING --------- ----------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER 0 --------- ----------------------------------------- 10 SHARED DISPOSITIVE POWER 51,737,426 (see Item 5) - ----------- -------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 51,737,426 (see Item 5) - ----------- -------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) [ ] - ----------- -------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 22.3% (see Item 5) - ----------- -------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) OO - ----------- -------------------------------------------------------------------- SCHEDULE 13D/A - ---------------------------- CUSIP No. 80603P107 - ---------------------------- - ----------- -------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION Charles R. Kaye - ----------- -------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [ ] (b) [X] - ----------- -------------------------------------------------------------------- 3 SEC USE ONLY ----------- ------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) N/A ----------- ------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------- -------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States of America - ---------------------------- --------- ----------------------------------------- 7 SOLE VOTING POWER 0 --------- ----------------------------------------- 8 SHARED VOTING POWER NUMBER OF SHARES BENEFICIALLY OWNED 51,737,426 (see Items 4 and 5) BY EACH REPORTING --------- ----------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER 0 --------- ----------------------------------------- 10 SHARED DISPOSITIVE POWER 51,737,426 (see Item 5) - ----------- -------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 51,737,426 (see Item 5) - ----------- -------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) [ ] - ----------- -------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 22.3% (see Item 5) - ----------- -------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) IN - ----------- -------------------------------------------------------------------- SCHEDULE 13D/A - ---------------------------- CUSIP No. 80603P107 - ---------------------------- - ----------- -------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION Joseph P. Landy - ----------- -------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [ ] (b) [X] - ----------- -------------------------------------------------------------------- 3 SEC USE ONLY ----------- ------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) N/A ----------- ------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ----------- -------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States of America - ---------------------------- --------- ----------------------------------------- 7 SOLE VOTING POWER 0 --------- ----------------------------------------- 8 SHARED VOTING POWER NUMBER OF SHARES BENEFICIALLY OWNED 51,737,426 (see Items 4 and 5) BY EACH REPORTING --------- ----------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER 0 --------- ----------------------------------------- 10 SHARED DISPOSITIVE POWER 51,737,426 (see Item 5) - ----------- -------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 51,737,426 (see Item 5) - ----------- -------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) [ ] - ----------- -------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 22.3% (see Item 5) - ----------- -------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) IN - ----------- -------------------------------------------------------------------- This Amendment No. 5 to Schedule 13D ("Amendment No. 5") amends the Schedule 13D originally filed on April 19, 2004 ("Original 13D") as amended by Amendment No. 1 to Schedule 13D filed on May 10, 2005, as further amended by Amendment No. 2 to Schedule 13D filed on September 19, 2005, as further amended by Amendment No. 3 to Schedule 13D filed on August 29, 2006, and as further amended by Amendment No. 4 to Schedule 13D filed on April 8, 2008 (as so amended, the "Amended 13D"), each filed on behalf of Warburg Pincus Private Equity VIII, L.P., a Delaware limited partnership ("WP VIII"), Warburg Pincus & Co., a New York general partnership ("WP"), Warburg Pincus LLC, a New York limited liability company ("WP LLC"), Warburg Pincus Partners, LLC, a New York limited liability company ("WPP LLC"), and Messrs. Charles R. Kaye and Joseph P. Landy, each a Managing General Partner of WP and Co-President and Managing Member of WP LLC (WP VIII, WP, WP LLC, WPP LLC and Messrs. Charles R. Kaye and Joseph P. Landy are collectively referred to as the "Warburg Pincus Reporting Persons"). This Amendment No. 5 relates to the common stock, par value $0.001 per share, of Nuance Communications, Inc., a Delaware corporation formerly known as ScanSoft, Inc. (the "Company"). The holdings of the Warburg Pincus Reporting Persons reported in this Amendment No. 5 include the holdings of Warburg Pincus Netherlands Private Equity VIII, C.V. I ("WPNPE I") and WP-WPVIII Investors, L.P. ("WP-WPVIII" and together with WP VIII and WPNPE I, the "Investors"), which shares the Warburg Pincus Reporting Persons may be deemed to beneficially own. Item 3. Source and Amount of Funds or Other Consideration. Item 3 of the Amended 13D is hereby amended and restated in its entirety as follows: The total amount of funds used by each Investor to purchase the securities of the Company as described herein was furnished from the working capital of such Investor. The total amount of funds paid by the Investors to purchase the securities of the Company as described herein is $270,524,907.54. Capitalized terms used herein which are not defined herein have the meanings given to them in the Original 13D and any amendments thereto. Item 4. Purpose of Transaction. Item 4 of the Amended 13D is hereby amended by adding the following to the end thereof: On May 20, 2008, the Investors closed the transactions contemplated by the 2008 Purchase Agreement (as previously reported in Amendment No. 4 to Schedule 13D) and acquired from the Company (a) an aggregate of 5,760,369 shares of Common Stock at a price per share equal to $17.36, and for an aggregate purchase price of $100,000,005.84; and (b) warrants to purchase an aggregate of 3,700,000 shares of Common Stock with a per share exercise price of $20.00, and for an aggregate purchase price of $462,500.00. The 2008 Warrants entered into between the Company and each of the Investors are attached hereto as Exhibits 99.1, 99.2 and 99.3. In connection with the closing of the transactions contemplated by the 2008 Purchase Agreement, the Company and each of the Investors amended and restated that certain Amended and Restated Stockholders Agreement, dated as of May 5, 2005, by entering into that certain Second Amended and Restated Stockholders Agreement, dated as of May 20, 2008, a copy of which is attached hereto as Exhibit 99.4. Item 5. Interest in Securities of the Issuer Items 5(a), (b) and (c) of the Amended 13D are hereby amended and restated in their entirety as follows: (a) Due to their respective relationships with the Investors and each other, as of May 20, 2008, each of the Warburg Pincus Reporting Persons may be deemed to beneficially own, in the aggregate, 37,408,650 shares of Common Stock by virtue of the Investors' beneficial ownership of such shares as of such date. As of May 20, 2008, the Warburg Pincus Reporting Persons may also be deemed to beneficially own additional shares of Common Stock by virtue of the Investors' beneficial ownership of the Series B Preferred Stock, the Adjustable Warrant, the March 15 Warrants, the Securities Purchase Warrants, the Stock Purchase Warrants and the 2008 Warrants (collectively, the "Convertible Securities"). Assuming the full exercise and conversion of the Convertible Securities, the Warburg Pincus Reporting Persons are deemed to beneficially own 51,737,426 shares of Common Stock, representing approximately 22.3% of the outstanding class of Common Stock, based on a total of 231,592,377 shares of Common Stock outstanding, which is comprised of: (i) 211,503,232 shares of Common Stock outstanding as of April 30, 2008, as represented in the Company's Form 10-Q for the quarter ended March 31, 2008 (the "Form 10-Q"), (ii) the 3,562,238 shares of Common Stock issuable upon the conversion of the 3,562,238 shares of Series B Preferred Stock acquired by the Investors, (iii) the 525,732 shares of Common Stock presently issuable upon the exercise of the Adjustable Warrant, as represented by the Company in the Form 10-Q, (iv) the 2,500,000 shares of Common Stock issuable upon the exercise of the March 15 Warrants, (v) the 863,236 shares of Common Stock presently issuable upon the exercise of the Securities Purchase Warrants, (vi) the 3,177,570 shares of Common Stock presently issuable upon the exercise of the Stock Purchase Warrants, (vii) the 3,700,000 shares of Common Stock acquirable upon the exercise of the 2008 Warrants and (viii) the 5,760,369 shares of Common Stock issued to the Investors pursuant to the 2008 Purchase Agreement. (b) Each of the Investors share the power to vote or to direct the vote and to dispose or to direct the disposition of the 51,737,426 shares of Common Stock it may be deemed to beneficially own as of May 20, 2008. Each of WP, WP LLC and WPP LLC shares with the Investors the power to vote or to direct the vote and to dispose or to direct the disposition of the 51,737,426 shares of Common Stock it may be deemed to beneficially own as of May 20, 2008. Charles R. Kaye and Joseph P. Landy are Managing General Partners of WP and Managing Members and Co-Presidents of WP LLC and may be deemed to control the other Warburg Pincus Reporting Persons. Messrs. Kaye and Landy disclaim beneficial ownership of all shares held by the Investors. (c) Except as described in this Amendment No. 5 and as previously reported on Amendment No. 4 to Schedule 13D, during the last sixty days there were no transactions in the Common Stock effected by the Warburg Pincus Reporting Persons, nor, to the best of their knowledge, any of their directors, executive officers, general partners or members. Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to the Securities of the Issuer. Item 6 of the Amended 13D is hereby amended by adding the following at the end of the discussion: As described in Item 4 hereto, on May 20, 2008 the Investors and the Company entered into the Second Amended and Restated Stockholders Agreement and the Company issued the 2008 Warrants to the Investors in connection with the closing of the transactions contemplated by the 2008 Purchase Agreement. The information set forth in Item 4 with respect to the Second Amended and Restated Stockholders Agreement and the 2008 Warrants is incorporated into this Item 6 by reference. Item 7. Material to Be Filed as Exhibits Exhibit 99.1. Warrant, dated May 20, 2008, between the Company and WP VIII Exhibit 99.2. Warrant, dated May 20, 2008, between the Company and WPNPE I Exhibit 99.3. Warrant, dated May 20, 2008, between the Company and WP-WPVIII Exhibit 99.4 Second Amended and Restated Stockholders Agreement, dated as of May 20, 2008, by and among the Company and the Investors SIGNATURES After reasonable inquiry and to the best of our knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct. Dated: May 20, 2008 WARBURG PINCUS PRIVATE EQUITY VIII, L.P. By: Warburg Pincus Partners, LLC, its General Partner By: Warburg Pincus & Co., its Managing Member By: /s/ Scott A. Arenare -------------------------------------- Name: Scott A. Arenare Title: Partner Dated: May 20, 2008 WARBURG PINCUS & CO. By: /s/ Scott A. Arenare -------------------------------------- Name: Scott A. Arenare Title: Partner Dated: May 20, 2008 WARBURG PINCUS LLC By: /s/ Scott A. Arenare -------------------------------------- Name: Scott A. Arenare Title: Member Dated: May 20, 2008 WARBURG PINCUS PARTNERS, LLC By: Warburg Pincus & Co., its Managing Member By: /s/ Scott A. Arenare -------------------------------------- Name: Scott A. Arenare Title: Partner Dated: May 20, 2008 By: /s/ Scott A. Arenare -------------------------------------- Name: Charles R. Kaye By: Scott A. Arenare Attorney-in-Fact* Dated: May 20, 2008 By: /s/ Scott A. Arenare -------------------------------------- Name: Joseph P. Landy By: Scott A. Arenare Attorney-in-Fact* * Power of Attorney given by Mr. Kaye was previously filed with the SEC on March 2, 2006 as an exhibit to a Schedule 13D filed by Building Products, LLC with respect to Builders FirstSource, Inc. ** Power of Attorney given by Mr. Landy was previously filed with the SEC on March 2, 2006 as an exhibit to a Schedule 13D filed by Building Products, LLC with respect to Builders FirstSource, Inc. EX-99.1 2 w052108c.txt W-30 EXHIBIT 99.1 W-30 THIS WARRANT AND THE WARRANT SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS SO REGISTERED OR AN EXEMPTION THEREFROM IS AVAILABLE WARRANT TO PURCHASE COMMON STOCK OF NUANCE COMMUNICATIONS, INC. Date of Issuance: May 20, 2008 In consideration for the payment by Warburg Pincus Private Equity VIII, L.P. to Nuance Communications, Inc., a Delaware corporation (the "Company"), of $448,208.75 in cash, by certified check, or by wire transfer (the "Purchase Price"), the Company agrees to the provisions set forth herein. The Company certifies that Warburg Pincus Private Equity VIII, L.P. and its permitted assigns (the "Holder"), is entitled, subject to the terms set forth below, to purchase from the Company, up to 3,585,670 fully-paid and nonassessable shares of Common Stock (the "Warrant Shares") at a purchase price per share equal to the Warrant Price (defined below). The number of shares of Common Stock purchasable upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as provided herein. The initial Warrant Price (the "Warrant Price") per share of Common Stock shall equal $20.00. This Warrant is one in a series of warrants issued on May 20, 2008 (the "Issuance Date") with substantially similar terms and conditions that (x) as of the Issuance Date and subject to the provisions of this Warrant and such other warrants (as applicable), allow for the purchase of up to an aggregate of 3,700,000 shares of Common Stock and (y) as of the Issuance Date, are represented by warrant certificate numbers W-30, W-31, and W-32. Such warrants and any warrants issued upon assignment or replacement thereof are referred to herein as the "Warrants," and the holders thereof and their permitted assigns are referred to herein as the "Holders." For the purpose of this Warrant, the term "Common Stock" shall mean (i) the Common Stock, par value $0.001 per share, of the Company as of the Issuance Date, or (ii) any other class or classes of stock resulting from successive changes or reclassifications of such class of stock, and the term "Business Day" shall mean any day other than a Saturday or Sunday or a day on which commercial banks in New York, New York are required or authorized to be closed. Section 1. Term of Warrant, Exercise of Warrant. (a) Subject to the terms of this Warrant, the Holder shall have the right, at its option, which may be exercised in whole or in part, at any time, and from time to time, commencing at the time immediately following the time the Purchase Price has been paid and until the earlier of (x) 5:00 p.m. Eastern Time on the four year anniversary of the Issuance Date and (y) the closing of a Change of Control (as defined below) (the "Warrant Expiration Date") to purchase from the Company the Warrant Shares. "Change of Control" shall mean the sale, conveyance or disposal of all or substantially all of the Company's property or business or the Company's merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which the stockholders of the Company immediately prior to the transaction or transactions own less than a majority of the voting power of the surviving corporation following the transaction or transactions. (b) The purchase rights evidenced by this Warrant shall be exercised by the Holder surrendering this Warrant, with the form of subscription at the end hereof duly executed by the Holder, to the Company at its office in Burlington, Massachusetts (or, in the event the Company's principal office is no longer in Burlington, Massachusetts its then principal office in the United States (the "Principal Office")), accompanied by payment, of an amount (the "Exercise Payment") equal to the Warrant Price multiplied by the number of Warrant Shares being purchased pursuant to such exercise, payable as follows: (i) by payment to the Company in cash, by certified check, or by wire transfer of the Exercise Payment, (ii) by surrender to the Company for cancellation of securities of the Company having a Market Price (as hereinafter defined) on the date of exercise equal to the Exercise Payment; or (iii) by a combination of the methods described in clauses (i) and (ii) above. In lieu of exercising the Warrant as set forth in the foregoing sentence, the Holder may elect to perform a net exercise and receive a payment equal to the difference between (i) the Market Price on the date of exercise multiplied by the number of Warrant Shares as to which the payment is then being elected and (ii) the aggregate Warrant Price with respect to such Warrant Shares, payable by the Company to the Holder only in shares of Common Stock valued at the Market Price on the date of exercise. For purposes hereof, the term "Market Price" shall mean, with respect to any day, the average closing price of a share of Common Stock or other security for the 5 consecutive trading days preceding such day on the principal national securities exchange on which the shares of Common Stock or securities are listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the average of the reported high and low prices during such 5 trading day period on Nasdaq or, if the shares are not listed on Nasdaq, in the over-the-counter market or, if the shares of Common Stock or securities are not publicly traded, the Market Price for such day shall be the fair market value thereof determined in good faith jointly by the Company and the Holders of a majority in interest of the shares of Common Stock then purchasable pursuant to outstanding Warrants (a "Holder Majority"); provided, however, that if such parties are unable to reach agreement within a reasonable period of time, the Market Price shall be determined in good faith by an independent investment banking firm selected jointly by the Company and a Holder Majority or, if that selection cannot be made within 15 days, by an independent investment banking firm selected by the American Arbitration Association in accordance with its rules. All costs and expenses of such independent investment banking firm shall be borne 50% by the Company and 50% by the Holders, pro rata based on the number of Warrant Shares then held by each. (c) Upon any exercise of this Warrant, the Company shall issue and cause to be delivered with all reasonable dispatch, but in any event within 10 Business Days, to or upon the written order of the Holder and, subject to Section 3, in such name or names as the Holder may designate (provided that such names other than the Holder may include only affiliates of the Holder), a certificate or certificates for the number of full Warrant Shares issuable upon such 2 exercise together with such other property, including cash (if necessary pursuant to Section 5.3 hereof), which may be deliverable upon such exercise. If fewer than all of the Warrant Shares represented by this Warrant are purchased, a new Warrant of the same tenor as this Warrant, evidencing the Warrant Shares not purchased will be issued and delivered by the Company at the Company's expense, to the Holder together with the issue of the certificates representing the Warrant Shares then being purchased. All Warrant certificates surrendered upon exercise of Warrants shall be canceled by the Company. Section 2. Warrant Register, Registration of Transfers. Section 2.1. Warrant Register. The Company shall keep at its Principal Office, a register (the "Warrant Register") in which the Company shall record the name and address of the Holder from time to time and all transfers and exchanges of this Warrant. The Company shall give the Holder prior written notice of any change of the address at which such register is kept. Section 2.2. Registration of Transfers, Exchanges or Assignment of Warrants. The Holder shall be entitled to assign its interest in this Warrant in whole or in part to any affiliate of Holder upon surrender thereof accompanied by a written instrument or instruments of transfer in the form of assignment at the end hereof duly executed by the Holder. Except as set forth in the preceding sentence, this Warrant may not be assigned by the Holder. This Warrant may also be exchanged or combined with warrants of like tenor at the option of the Holder for another Warrant or Warrants of like tenor and representing in the aggregate the right to purchase a like number of Warrant Shares upon presentation thereof to the Company as its Principal Office together with a written notice signed by the Holder specifying the denominations in which the new Warrant is or the new Warrants are to be issued. Upon surrender for transfer or exchange of this Warrant to the Company at its Principal Office for transfer or exchange, in accordance with this Section 2, the Company shall, without charge (subject to Section 3), execute and deliver a new Warrant or Warrants of like tenor and of a like aggregate amount of Warrant Shares in the name of the assignee named in such instrument of assignment and, if the Holder's entire interest is not being assigned, in the name of the Holder with respect to that portion not transferred, and this Warrant shall promptly be canceled. Notwithstanding the foregoing, the Holder acknowledges that this Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the "Act"), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant and Warrant Shares in the absence of (i) registration or qualification of this Warrant and such Warrant Shares under any applicable U.S. federal or state securities law then in effect, or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Section 3. Payment of Taxes. The Company shall pay all documentary stamp taxes, if any, attributable to the initial issuance of any Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue or delivery of any 3 Warrant or certificate for Warrant Shares in a name other than that of the Holder as such name is then shown on the books of the Company. Section 4. Certain Covenants. Section 4.1. Reservation of Warrant Shares. There have been reserved and the Company shall at all times keep reserved, out of its authorized but unissued Common Stock, free from any preemptive rights, rights of first refusal or other restrictions (other than pursuant to the Act and applicable state securities laws) a number of shares of Common Stock sufficient to provide for the exercise of the rights of purchase represented by this Warrant. Section 4.2. No Impairment. The Company shall not by any action including, without limitation, amending its Restated Certificate of Incorporation, any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but shall at all times in good faith assist in the carrying out of all such terms and in the taking of all such action, as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company shall take all such action as may be necessary or appropriate in order that the Company may validly issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant at the then Warrant Price therefor. Section 4.3. Notice of Certain Corporate Action. In case the Company shall propose (a) to offer to the holders of its Common Stock rights to subscribe for or to purchase any shares of Common Stock or shares of stock of any class or any other securities, rights or options, or (b) to effect any reclassification of its Common Stock (other than a reclassification involving only the subdivision, or combination, of outstanding shares of Common Stock), or (c) to effect any capital reorganization, or (d) to effect any Change of Control, or (e) to effect the liquidation, dissolution or winding up of the Company or (f) to offer to the holders of its Common Stock the right to have their shares of Common Stock repurchased or redeemed or otherwise acquired by the Company, or (g) to take any other action which would require the adjustment of the Warrant Price and/or the number of Warrant Shares issuable upon exercise of this Warrant, then in each such case (but without limiting the provisions of Section 5), the Company shall give to the Holder, a notice of such proposed action, which shall specify the date on which a record is to be taken for purposes of such dividend, distribution of offer of rights, or the date on which such reclassification, reorganization, Change of Control, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of Common Stock, if any such date is to be fixed and shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action on the Common Stock. Such notice shall be so given at least ten (10) Business Days prior to the record date for determining holders of the Common Stock for purposes of participating in or voting on such action, or at least ten (10) Business Days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Common Stock, whichever shall be the earlier. Such notice shall specify, in the case of any subscription or repurchase rights, the date on which the holders of Common Stock shall be entitled thereto, or the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon any reorganization, reclassification, Change of Control or other action, as the case may be. Such 4 notice shall also state whether the action in question or the record date is subject to the effectiveness of a registration statement under the Act or to a favorable vote of security holders, if either is required, and the adjustment in Warrant Price and/or number of Warrant Shares issuable upon exercise of this Warrant as a result of such reorganization, reclassification, Change of Control or other action, to the extent then determinable. No such notice shall be given if the Company reasonably determines that the giving of such notice would require disclosure of material information which the Company has a bona fide purpose for preserving as confidential or the disclosure of which would not be in the best interests of the Company. Section 4.4. Purchase Entirely for Own Account. The Holder acknowledges that this Warrant is given to the Holder in reliance upon the Holder's representation to the Company, which by its acceptance of this Warrant the Holder hereby confirms, that the Warrant, the Warrant Shares, and the Common Stock issuable upon conversion of the Warrant Shares (collectively, the "Securities") being acquired by the Holder are being acquired for investment for the Holder's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Warrant, the Holder further represents that the Holder does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Holder represents that it has full power and authority to enter into this Warrant. The Holder has not been formed for the specific purpose of acquiring any of the Securities. Section 4.5. Disclosure of Information. The Holder has had an opportunity to discuss the Company's business, management, financial affairs and the terms and conditions of the offering of the Securities with the Company's management and has had an opportunity to review the Company's facilities, and has had an opportunity to read all of the Company's filings with the Securities and Exchange Commission. Section 4.6. Restricted Securities. The Holder understands that the Securities have not been, and will not be, registered under the Act, by reason of a specific exemption from the registration provisions of the Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Holder's representations as expressed herein. The Holder understands that the Securities are "restricted securities" under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Holder must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Holder 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 the Holder's control, and which the Company is under no obligation and may not be able to satisfy. Section 4.7. Accredited Investor. The Holder is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Act. 5 Section 5. Adjustment of Warrant Price. Section 5.1. Subdivision or Combination of Stock. In case the Company shall at any time (i) issue a dividend payable in Common Stock or any rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or (ii) subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares, then (x) in the case of a dividend or subdivision, the Warrant Price in effect immediately prior to such dividend or subdivision shall be proportionately decreased and the number of shares of Common Stock purchasable upon the exercise of the Warrant immediately prior to such adjustment shall be proportionately increased, and (y) in the case of a combination, the Warrant Price in effect immediately prior to such combination shall be proportionately increased and the number of shares of Common Stock purchasable upon the exercise of the Warrant immediately prior to such adjustment shall be proportionately decreased. Section 5.2. Reorganization, Reclassification, Consolidation, Merger or Sale. If any capital reorganization or reclassification of the capital stock of the Company or any consolidation or merger of the Company with another corporation, other than a Change of Control, shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization, reclassification, consolidation, exercise, merger or sale, lawful and adequate provision shall be made whereby the Holder shall thereafter have the right to receive upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore receivable upon the exercise of this Warrant, that number of shares of stock, securities or assets (including cash) as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of Warrant Shares for which this Warrant could have been exercised immediately prior to such reorganization, reclassification, consolidation, merger or sale, and in any such case appropriate provision shall be made with respect to the rights and interests of such Holder to the end that the provisions hereof shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets (including cash) thereafter deliverable upon the exercise of this Warrant. The Company will not effect any such consolidation, merger or sale, unless prior to the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume, by written instrument executed and mailed or delivered to the Holder at the last address of such Holder appearing on the books of the Company, the obligation to deliver to such Holder such shares of stock, securities or assets (including cash) as, in accordance with the foregoing provisions, the Holder may be entitled to receive. Section 5.3. Fractional Shares. The Company shall not issue fractions of shares of Common Stock upon exercise of this Warrant or scrip in lieu thereof. If any fraction of a share of Common Stock would, except for the provisions of this Section 5.3, be issuable upon exercise of this Warrant, the Company shall in lieu thereof pay to the person entitled thereto an amount in cash equal to the current value of such fraction, calculated to the nearest one-hundredth (1/100) of a share, to be computed on the basis of the Market Price for a share of Common Stock as of the date of exercise. Section 5.4. Notice of Adjustment. Upon any adjustment of the Warrant Price, and from time to time upon the request of the Holder the Company shall furnish to the Holder the 6 Warrant Price resulting from such adjustment or otherwise in effect and the number of Warrant Shares then available for purchase under this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Section 5.5. Certain Events. If any event occurs as to which, in the good faith judgment of the Board of Directors of the Company the other provisions of this Section 5 are not strictly applicable or if strictly applicable would not fairly protect the exercise rights of the Holder in accordance with the essential intent and principles of such provisions, then the Board of Directors of the Company in the good faith, reasonable exercise of its business judgment shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles so as to protect such exercise rights as aforesaid. Section 6. No Rights as a Stockholder; Notice to Holder. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to consent or to receive notice as a stockholder in respect of any meeting of stockholders for the election of directors of the Company or any other matter, or any rights whatsoever as a stockholder of the Company. Section 7. Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with, in the case of a Holder which is not a qualified institutional buyer within the meaning of Rule 144A under the Act, surety) in an amount reasonably satisfactory to it, or (in the case of mutilation) upon surrender and cancellation thereof, the Company will issue, in lieu thereof, a new Warrant of like tenor. Section 8. Notices. All notices and other written communications provided for hereunder shall be given in writing and delivered in person or sent by overnight delivery service (with charges prepaid) or by facsimile transmission, if the original of such facsimile transmission is sent by overnight delivery service (with charges prepaid) by the next succeeding Business Day and (i) if to the Holder addressed to it at the address or fax number specified for such Holder in the Warrant Register or at such other address or fax number as the Holder shall have specified to the Company in writing in accordance with this Section 8, and (ii) if to the Company, addressed to it at 1 Wayside Road, Burlington, Massachusetts 01803, Attention General Counsel Fax No: (781) 565-5001 or at such other address or fax number as the Company shall have specified to the Holder in writing in accordance with this Section 8. Notice given in accordance with this Section 8 shall be effective upon the earlier of the date of delivery or the second Business Day at the place of delivery after dispatch. Section 9. Applicable Law. This Warrant shall be governed by and construed in accordance with the laws of the State of New York without giving effect to principles of conflict of laws. Section 10. Warrant Share Legend. Each certificate representing Warrant Shares, until such Warrant Shares have been distributed pursuant to a registration statement effective under the Act or sold to the public through a broker, dealer or market maker in 7 compliance with Rule 144 under the Act (or any similar rule then in force) shall bear one or all of the following legends: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933." Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended. Section 11. Captions. The captions of the Sections and subsections of this Warrant have been inserted for convenience only and shall have no substantive effect. Section 12. Amendment or Waiver. Any term of the Warrants may be amended or waived only by an instrument in writing signed by the Company and a Holder Majority, and any such amendment or waiver (and any other action taken or decision made by a Holder Majority) shall be binding upon all Holders. 8 IN WITNESS WHEREOF, the undersigned have executed this Warrant as of the 20th day of May, 2008. NUANCE COMMUNICATIONS, INC. By: /s/ James R. Arnold, Jr. ---------------------------------------- Name: James R. Arnold, Jr. Title: Chief Financial Officer WARBURG PINCUS PRIVATE EQUITY VIII, L.P. By: Warburg Pincus Partners LLC, its General Partner By: Warburg Pincus & Co., its Managing Member By: /s/ Patrick Severson ---------------------------------------- Name: Patrick Severson Title: Partner [Signature Page to Warrant] [To be signed only upon exercise of Warrant] TO Nuance Communications, Inc.: The undersigned, the holder of the within Warrant (the "Holder"), hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, ______ shares of Common Stock of Nuance Communications, Inc. and herewith [makes payment of $______ therefor in full payment of the Exercise Payment][tenders securities having a Market Price of $_____ in full payment of the Exercise Payment] or [elects to receive a payment equal to the difference between (i) the Market Price (as defined in the Warrant) multiplied by ________ (the number of Warrant Shares as to which the payment is being elected) and (ii) ___________, which is the exercise price with respect to such Warrant Shares, in full payment of the Exercise Payment, payable by the Company to the Holder only in shares of Common Stock valued at the Market Price in accordance with the terms of the Warrant], and requests that the certificates for such shares be issued in the name of, and be delivered to ______, whose address is ________. Dated: ________________________ ------------------------------------------- (Signature must conform in all respects to name of Holder as specified on the face of the Warrant) ------------------------------------------- Address [To be signed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _____________ the right represented by the within Warrant to purchase shares _____of the Common Stock of Nuance Communications, Inc. to which the within Warrant relates, and appoints _______ attorney to transfer said right on the books of Nuance Communications, Inc. with full power of substitution in the premises. Dated: ________________________ ------------------------------------------- (Signature must conform in all respects to name of Holder as specified on the face of the Warrant) ------------------------------------------- Address In the presence of: - --------------------------------- EX-99.2 3 w052108d.txt W-31 EXHIBIT 99.2 W-31 THIS WARRANT AND THE WARRANT SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS SO REGISTERED OR AN EXEMPTION THEREFROM IS AVAILABLE WARRANT TO PURCHASE COMMON STOCK OF NUANCE COMMUNICATIONS, INC. Date of Issuance: May 20, 2008 In consideration for the payment by Warburg Pincus Netherlands Private Equity VIII, C.V. I to Nuance Communications, Inc., a Delaware corporation (the "Company"), of $12,991.63 in cash, by certified check, or by wire transfer (the "Purchase Price"), the Company agrees to the provisions set forth herein. The Company certifies that Warburg Pincus Netherlands Private Equity VIII, C.V. I and its permitted assigns (the "Holder"), is entitled, subject to the terms set forth below, to purchase from the Company, up to 103,933 fully-paid and nonassessable shares of Common Stock (the "Warrant Shares") at a purchase price per share equal to the Warrant Price (defined below). The number of shares of Common Stock purchasable upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as provided herein. The initial Warrant Price (the "Warrant Price") per share of Common Stock shall equal $20.00. This Warrant is one in a series of warrants issued on May 20, 2008 (the "Issuance Date") with substantially similar terms and conditions that (x) as of the Issuance Date and subject to the provisions of this Warrant and such other warrants (as applicable), allow for the purchase of up to an aggregate of 3,700,000 shares of Common Stock and (y) as of the Issuance Date, are represented by warrant certificate numbers W-30, W-31, and W-32. Such warrants and any warrants issued upon assignment or replacement thereof are referred to herein as the "Warrants," and the holders thereof and their permitted assigns are referred to herein as the "Holders." For the purpose of this Warrant, the term "Common Stock" shall mean (i) the Common Stock, par value $0.001 per share, of the Company as of the Issuance Date, or (ii) any other class or classes of stock resulting from successive changes or reclassifications of such class of stock, and the term "Business Day" shall mean any day other than a Saturday or Sunday or a day on which commercial banks in New York, New York are required or authorized to be closed. Section 1. Term of Warrant, Exercise of Warrant. (a) Subject to the terms of this Warrant, the Holder shall have the right, at its option, which may be exercised in whole or in part, at any time, and from time to time, commencing at the time immediately following the time the Purchase Price has been paid and until the earlier of (x) 5:00 p.m. Eastern Time on the four year anniversary of the Issuance Date and (y) the closing of a Change of Control (as defined below) (the "Warrant Expiration Date") to purchase from the Company the Warrant Shares. "Change of Control" shall mean the sale, conveyance or disposal of all or substantially all of the Company's property or business or the Company's merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which the stockholders of the Company immediately prior to the transaction or transactions own less than a majority of the voting power of the surviving corporation following the transaction or transactions. (b) The purchase rights evidenced by this Warrant shall be exercised by the Holder surrendering this Warrant, with the form of subscription at the end hereof duly executed by the Holder, to the Company at its office in Burlington, Massachusetts (or, in the event the Company's principal office is no longer in Burlington, Massachusetts its then principal office in the United States (the "Principal Office")), accompanied by payment, of an amount (the "Exercise Payment") equal to the Warrant Price multiplied by the number of Warrant Shares being purchased pursuant to such exercise, payable as follows: (i) by payment to the Company in cash, by certified check, or by wire transfer of the Exercise Payment, (ii) by surrender to the Company for cancellation of securities of the Company having a Market Price (as hereinafter defined) on the date of exercise equal to the Exercise Payment; or (iii) by a combination of the methods described in clauses (i) and (ii) above. In lieu of exercising the Warrant as set forth in the foregoing sentence, the Holder may elect to perform a net exercise and receive a payment equal to the difference between (i) the Market Price on the date of exercise multiplied by the number of Warrant Shares as to which the payment is then being elected and (ii) the aggregate Warrant Price with respect to such Warrant Shares, payable by the Company to the Holder only in shares of Common Stock valued at the Market Price on the date of exercise. For purposes hereof, the term "Market Price" shall mean, with respect to any day, the average closing price of a share of Common Stock or other security for the 5 consecutive trading days preceding such day on the principal national securities exchange on which the shares of Common Stock or securities are listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the average of the reported high and low prices during such 5 trading day period on Nasdaq or, if the shares are not listed on Nasdaq, in the over-the-counter market or, if the shares of Common Stock or securities are not publicly traded, the Market Price for such day shall be the fair market value thereof determined in good faith jointly by the Company and the Holders of a majority in interest of the shares of Common Stock then purchasable pursuant to outstanding Warrants (a "Holder Majority"); provided, however, that if such parties are unable to reach agreement within a reasonable period of time, the Market Price shall be determined in good faith by an independent investment banking firm selected jointly by the Company and a Holder Majority or, if that selection cannot be made within 15 days, by an independent investment banking firm selected by the American Arbitration Association in accordance with its rules. All costs and expenses of such independent investment banking firm shall be borne 50% by the Company and 50% by the Holders, pro rata based on the number of Warrant Shares then held by each. (c) Upon any exercise of this Warrant, the Company shall issue and cause to be delivered with all reasonable dispatch, but in any event within 10 Business Days, to or upon the written order of the Holder and, subject to Section 3, in such name or names as the Holder may designate (provided that such names other than the Holder may include only affiliates of the 2 Holder), a certificate or certificates for the number of full Warrant Shares issuable upon such exercise together with such other property, including cash (if necessary pursuant to Section 5.3 hereof), which may be deliverable upon such exercise. If fewer than all of the Warrant Shares represented by this Warrant are purchased, a new Warrant of the same tenor as this Warrant, evidencing the Warrant Shares not purchased will be issued and delivered by the Company at the Company's expense, to the Holder together with the issue of the certificates representing the Warrant Shares then being purchased. All Warrant certificates surrendered upon exercise of Warrants shall be canceled by the Company. Section 2. Warrant Register, Registration of Transfers. Section 2.1. Warrant Register. The Company shall keep at its Principal Office, a register (the "Warrant Register") in which the Company shall record the name and address of the Holder from time to time and all transfers and exchanges of this Warrant. The Company shall give the Holder prior written notice of any change of the address at which such register is kept. Section 2.2. Registration of Transfers, Exchanges or Assignment of Warrants. The Holder shall be entitled to assign its interest in this Warrant in whole or in part to any affiliate of Holder upon surrender thereof accompanied by a written instrument or instruments of transfer in the form of assignment at the end hereof duly executed by the Holder. Except as set forth in the preceding sentence, this Warrant may not be assigned by the Holder. This Warrant may also be exchanged or combined with warrants of like tenor at the option of the Holder for another Warrant or Warrants of like tenor and representing in the aggregate the right to purchase a like number of Warrant Shares upon presentation thereof to the Company as its Principal Office together with a written notice signed by the Holder specifying the denominations in which the new Warrant is or the new Warrants are to be issued. Upon surrender for transfer or exchange of this Warrant to the Company at its Principal Office for transfer or exchange, in accordance with this Section 2, the Company shall, without charge (subject to Section 3), execute and deliver a new Warrant or Warrants of like tenor and of a like aggregate amount of Warrant Shares in the name of the assignee named in such instrument of assignment and, if the Holder's entire interest is not being assigned, in the name of the Holder with respect to that portion not transferred, and this Warrant shall promptly be canceled. Notwithstanding the foregoing, the Holder acknowledges that this Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the "Act"), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant and Warrant Shares in the absence of (i) registration or qualification of this Warrant and such Warrant Shares under any applicable U.S. federal or state securities law then in effect, or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Section 3. Payment of Taxes. The Company shall pay all documentary stamp taxes, if any, attributable to the initial issuance of any Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax or taxes 3 which may be payable in respect of any transfer involved in the issue or delivery of any Warrant or certificate for Warrant Shares in a name other than that of the Holder as such name is then shown on the books of the Company. Section 4. Certain Covenants. Section 4.1. Reservation of Warrant Shares. There have been reserved and the Company shall at all times keep reserved, out of its authorized but unissued Common Stock, free from any preemptive rights, rights of first refusal or other restrictions (other than pursuant to the Act and applicable state securities laws) a number of shares of Common Stock sufficient to provide for the exercise of the rights of purchase represented by this Warrant. Section 4.2. No Impairment. The Company shall not by any action including, without limitation, amending its Restated Certificate of Incorporation, any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but shall at all times in good faith assist in the carrying out of all such terms and in the taking of all such action, as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company shall take all such action as may be necessary or appropriate in order that the Company may validly issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant at the then Warrant Price therefor. Section 4.3. Notice of Certain Corporate Action. In case the Company shall propose (a) to offer to the holders of its Common Stock rights to subscribe for or to purchase any shares of Common Stock or shares of stock of any class or any other securities, rights or options, or (b) to effect any reclassification of its Common Stock (other than a reclassification involving only the subdivision, or combination, of outstanding shares of Common Stock), or (c) to effect any capital reorganization, or (d) to effect any Change of Control, or (e) to effect the liquidation, dissolution or winding up of the Company or (f) to offer to the holders of its Common Stock the right to have their shares of Common Stock repurchased or redeemed or otherwise acquired by the Company, or (g) to take any other action which would require the adjustment of the Warrant Price and/or the number of Warrant Shares issuable upon exercise of this Warrant, then in each such case (but without limiting the provisions of Section 5), the Company shall give to the Holder, a notice of such proposed action, which shall specify the date on which a record is to be taken for purposes of such dividend, distribution of offer of rights, or the date on which such reclassification, reorganization, Change of Control, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of Common Stock, if any such date is to be fixed and shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action on the Common Stock. Such notice shall be so given at least ten (10) Business Days prior to the record date for determining holders of the Common Stock for purposes of participating in or voting on such action, or at least ten (10) Business Days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Common Stock, whichever shall be the earlier. Such notice shall specify, in the case of any subscription or repurchase rights, the date on which the holders of Common Stock shall be entitled thereto, or the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon any 4 reorganization, reclassification, Change of Control or other action, as the case may be. Such notice shall also state whether the action in question or the record date is subject to the effectiveness of a registration statement under the Act or to a favorable vote of security holders, if either is required, and the adjustment in Warrant Price and/or number of Warrant Shares issuable upon exercise of this Warrant as a result of such reorganization, reclassification, Change of Control or other action, to the extent then determinable. No such notice shall be given if the Company reasonably determines that the giving of such notice would require disclosure of material information which the Company has a bona fide purpose for preserving as confidential or the disclosure of which would not be in the best interests of the Company. Section 4.4. Purchase Entirely for Own Account. The Holder acknowledges that this Warrant is given to the Holder in reliance upon the Holder's representation to the Company, which by its acceptance of this Warrant the Holder hereby confirms, that the Warrant, the Warrant Shares, and the Common Stock issuable upon conversion of the Warrant Shares (collectively, the "Securities") being acquired by the Holder are being acquired for investment for the Holder's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Warrant, the Holder further represents that the Holder does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Holder represents that it has full power and authority to enter into this Warrant. The Holder has not been formed for the specific purpose of acquiring any of the Securities. Section 4.5. Disclosure of Information. The Holder has had an opportunity to discuss the Company's business, management, financial affairs and the terms and conditions of the offering of the Securities with the Company's management and has had an opportunity to review the Company's facilities, and has had an opportunity to read all of the Company's filings with the Securities and Exchange Commission. Section 4.6. Restricted Securities. The Holder understands that the Securities have not been, and will not be, registered under the Act, by reason of a specific exemption from the registration provisions of the Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Holder's representations as expressed herein. The Holder understands that the Securities are "restricted securities" under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Holder must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Holder 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 the Holder's control, and which the Company is under no obligation and may not be able to satisfy. Section 4.7. Accredited Investor. The Holder is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Act. 5 Section 5. Adjustment of Warrant Price. Section 5.1. Subdivision or Combination of Stock. In case the Company shall at any time (i) issue a dividend payable in Common Stock or any rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or (ii) subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares, then (x) in the case of a dividend or subdivision, the Warrant Price in effect immediately prior to such dividend or subdivision shall be proportionately decreased and the number of shares of Common Stock purchasable upon the exercise of the Warrant immediately prior to such adjustment shall be proportionately increased, and (y) in the case of a combination, the Warrant Price in effect immediately prior to such combination shall be proportionately increased and the number of shares of Common Stock purchasable upon the exercise of the Warrant immediately prior to such adjustment shall be proportionately decreased. Section 5.2. Reorganization, Reclassification, Consolidation, Merger or Sale. If any capital reorganization or reclassification of the capital stock of the Company or any consolidation or merger of the Company with another corporation, other than a Change of Control, shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization, reclassification, consolidation, exercise, merger or sale, lawful and adequate provision shall be made whereby the Holder shall thereafter have the right to receive upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore receivable upon the exercise of this Warrant, that number of shares of stock, securities or assets (including cash) as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of Warrant Shares for which this Warrant could have been exercised immediately prior to such reorganization, reclassification, consolidation, merger or sale, and in any such case appropriate provision shall be made with respect to the rights and interests of such Holder to the end that the provisions hereof shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets (including cash) thereafter deliverable upon the exercise of this Warrant. The Company will not effect any such consolidation, merger or sale, unless prior to the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume, by written instrument executed and mailed or delivered to the Holder at the last address of such Holder appearing on the books of the Company, the obligation to deliver to such Holder such shares of stock, securities or assets (including cash) as, in accordance with the foregoing provisions, the Holder may be entitled to receive. Section 5.3. Fractional Shares. The Company shall not issue fractions of shares of Common Stock upon exercise of this Warrant or scrip in lieu thereof. If any fraction of a share of Common Stock would, except for the provisions of this Section 5.3, be issuable upon exercise of this Warrant, the Company shall in lieu thereof pay to the person entitled thereto an amount in cash equal to the current value of such fraction, calculated to the nearest one-hundredth (1/100) of a share, to be computed on the basis of the Market Price for a share of Common Stock as of the date of exercise. 6 Section 5.4. Notice of Adjustment. Upon any adjustment of the Warrant Price, and from time to time upon the request of the Holder the Company shall furnish to the Holder the Warrant Price resulting from such adjustment or otherwise in effect and the number of Warrant Shares then available for purchase under this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Section 5.5. Certain Events. If any event occurs as to which, in the good faith judgment of the Board of Directors of the Company the other provisions of this Section 5 are not strictly applicable or if strictly applicable would not fairly protect the exercise rights of the Holder in accordance with the essential intent and principles of such provisions, then the Board of Directors of the Company in the good faith, reasonable exercise of its business judgment shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles so as to protect such exercise rights as aforesaid. Section 6. No Rights as a Stockholder; Notice to Holder. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to consent or to receive notice as a stockholder in respect of any meeting of stockholders for the election of directors of the Company or any other matter, or any rights whatsoever as a stockholder of the Company. Section 7. Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with, in the case of a Holder which is not a qualified institutional buyer within the meaning of Rule 144A under the Act, surety) in an amount reasonably satisfactory to it, or (in the case of mutilation) upon surrender and cancellation thereof, the Company will issue, in lieu thereof, a new Warrant of like tenor. Section 8. Notices. All notices and other written communications provided for hereunder shall be given in writing and delivered in person or sent by overnight delivery service (with charges prepaid) or by facsimile transmission, if the original of such facsimile transmission is sent by overnight delivery service (with charges prepaid) by the next succeeding Business Day and (i) if to the Holder addressed to it at the address or fax number specified for such Holder in the Warrant Register or at such other address or fax number as the Holder shall have specified to the Company in writing in accordance with this Section 8, and (ii) if to the Company, addressed to it at 1 Wayside Road, Burlington, Massachusetts 01803, Attention General Counsel Fax No: (781) 565-5001 or at such other address or fax number as the Company shall have specified to the Holder in writing in accordance with this Section 8. Notice given in accordance with this Section 8 shall be effective upon the earlier of the date of delivery or the second Business Day at the place of delivery after dispatch. Section 9. Applicable Law. This Warrant shall be governed by and construed in accordance with the laws of the State of New York without giving effect to principles of conflict of laws. Section 10. Warrant Share Legend. Each certificate representing Warrant Shares, until such Warrant Shares have been distributed pursuant to a registration statement 7 effective under the Act or sold to the public through a broker, dealer or market maker in compliance with Rule 144 under the Act (or any similar rule then in force) shall bear one or all of the following legends: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933." Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended. Section 11. Captions. The captions of the Sections and subsections of this Warrant have been inserted for convenience only and shall have no substantive effect. Section 12. Amendment or Waiver. Any term of the Warrants may be amended or waived only by an instrument in writing signed by the Company and a Holder Majority, and any such amendment or waiver (and any other action taken or decision made by a Holder Majority) shall be binding upon all Holders. 8 IN WITNESS WHEREOF, the undersigned have executed this Warrant as of the 20th day of May, 2008. NUANCE COMMUNICATIONS, INC. By: /s/ James R. Arnold, Jr. -------------------------------------- Name: James R. Arnold, Jr. Title: Chief Financial Officer 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/ Patrick Severson ---------------------------------------- Name: Patrick Severson Title: Partner [Signature Page to Warrant] [To be signed only upon exercise of Warrant] TO Nuance Communications, Inc.: The undersigned, the holder of the within Warrant (the "Holder"), hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, ______ shares of Common Stock of Nuance Communications, Inc. and herewith [makes payment of $______ therefor in full payment of the Exercise Payment][tenders securities having a Market Price of $_____ in full payment of the Exercise Payment] or [elects to receive a payment equal to the difference between (i) the Market Price (as defined in the Warrant) multiplied by ________ (the number of Warrant Shares as to which the payment is being elected) and (ii) ___________, which is the exercise price with respect to such Warrant Shares, in full payment of the Exercise Payment, payable by the Company to the Holder only in shares of Common Stock valued at the Market Price in accordance with the terms of the Warrant], and requests that the certificates for such shares be issued in the name of, and be delivered to ______, whose address is ________. Dated: ________________________ ------------------------------------------- (Signature must conform in all respects to name of Holder as specified on the face of the Warrant) ------------------------------------------- Address [To be signed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _____________ the right represented by the within Warrant to purchase shares _____of the Common Stock of Nuance Communications, Inc. to which the within Warrant relates, and appoints _______ attorney to transfer said right on the books of Nuance Communications, Inc. with full power of substitution in the premises. Dated: ________________________ ------------------------------------------- (Signature must conform in all respects to name of Holder as specified on the face of the Warrant) ------------------------------------------- Address In the presence of: - --------------------------------- EX-99.3 4 w052108e.txt W-32 EXHIBIT 99.3 W-32 THIS WARRANT AND THE WARRANT SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS SO REGISTERED OR AN EXEMPTION THEREFROM IS AVAILABLE WARRANT TO PURCHASE COMMON STOCK OF NUANCE COMMUNICATIONS, INC. Date of Issuance: May 20, 2008 In consideration for the payment by WP-WPVIII Investors, L.P. to Nuance Communications, Inc., a Delaware corporation (the "Company"), of $1,299.62 in cash, by certified check, or by wire transfer (the "Purchase Price"), the Company agrees to the provisions set forth herein. The Company certifies that WP-WPVIII Investors, L.P. and its permitted assigns (the "Holder"), is entitled, subject to the terms set forth below, to purchase from the Company, up to 10,397 fully-paid and nonassessable shares of Common Stock (the "Warrant Shares") at a purchase price per share equal to the Warrant Price (defined below). The number of shares of Common Stock purchasable upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as provided herein. The initial Warrant Price (the "Warrant Price") per share of Common Stock shall equal $20.00. This Warrant is one in a series of warrants issued on May 20, 2008 (the "Issuance Date") with substantially similar terms and conditions that (x) as of the Issuance Date and subject to the provisions of this Warrant and such other warrants (as applicable), allow for the purchase of up to an aggregate of 3,700,000 shares of Common Stock and (y) as of the Issuance Date, are represented by warrant certificate numbers W-30, W-31, and W-32. Such warrants and any warrants issued upon assignment or replacement thereof are referred to herein as the "Warrants," and the holders thereof and their permitted assigns are referred to herein as the "Holders." For the purpose of this Warrant, the term "Common Stock" shall mean (i) the Common Stock, par value $0.001 per share, of the Company as of the Issuance Date, or (ii) any other class or classes of stock resulting from successive changes or reclassifications of such class of stock, and the term "Business Day" shall mean any day other than a Saturday or Sunday or a day on which commercial banks in New York, New York are required or authorized to be closed. Section 1. Term of Warrant, Exercise of Warrant. (a) Subject to the terms of this Warrant, the Holder shall have the right, at its option, which may be exercised in whole or in part, at any time, and from time to time, commencing at the time immediately following the time the Purchase Price has been paid and until the earlier of (x) 5:00 p.m. Eastern Time on the four year anniversary of the Issuance Date and (y) the closing of a Change of Control (as defined below) (the "Warrant Expiration Date") to purchase from the Company the Warrant Shares. "Change of Control" shall mean the sale, conveyance or disposal of all or substantially all of the Company's property or business or the Company's merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which the stockholders of the Company immediately prior to the transaction or transactions own less than a majority of the voting power of the surviving corporation following the transaction or transactions. (b) The purchase rights evidenced by this Warrant shall be exercised by the Holder surrendering this Warrant, with the form of subscription at the end hereof duly executed by the Holder, to the Company at its office in Burlington, Massachusetts (or, in the event the Company's principal office is no longer in Burlington, Massachusetts its then principal office in the United States (the "Principal Office")), accompanied by payment, of an amount (the "Exercise Payment") equal to the Warrant Price multiplied by the number of Warrant Shares being purchased pursuant to such exercise, payable as follows: (i) by payment to the Company in cash, by certified check, or by wire transfer of the Exercise Payment, (ii) by surrender to the Company for cancellation of securities of the Company having a Market Price (as hereinafter defined) on the date of exercise equal to the Exercise Payment; or (iii) by a combination of the methods described in clauses (i) and (ii) above. In lieu of exercising the Warrant as set forth in the foregoing sentence, the Holder may elect to perform a net exercise and receive a payment equal to the difference between (i) the Market Price on the date of exercise multiplied by the number of Warrant Shares as to which the payment is then being elected and (ii) the aggregate Warrant Price with respect to such Warrant Shares, payable by the Company to the Holder only in shares of Common Stock valued at the Market Price on the date of exercise. For purposes hereof, the term "Market Price" shall mean, with respect to any day, the average closing price of a share of Common Stock or other security for the 5 consecutive trading days preceding such day on the principal national securities exchange on which the shares of Common Stock or securities are listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the average of the reported high and low prices during such 5 trading day period on Nasdaq or, if the shares are not listed on Nasdaq, in the over-the-counter market or, if the shares of Common Stock or securities are not publicly traded, the Market Price for such day shall be the fair market value thereof determined in good faith jointly by the Company and the Holders of a majority in interest of the shares of Common Stock then purchasable pursuant to outstanding Warrants (a "Holder Majority"); provided, however, that if such parties are unable to reach agreement within a reasonable period of time, the Market Price shall be determined in good faith by an independent investment banking firm selected jointly by the Company and a Holder Majority or, if that selection cannot be made within 15 days, by an independent investment banking firm selected by the American Arbitration Association in accordance with its rules. All costs and expenses of such independent investment banking firm shall be borne 50% by the Company and 50% by the Holders, pro rata based on the number of Warrant Shares then held by each. (c) Upon any exercise of this Warrant, the Company shall issue and cause to be delivered with all reasonable dispatch, but in any event within 10 Business Days, to or upon the written order of the Holder and, subject to Section 3, in such name or names as the Holder may designate (provided that such names other than the Holder may include only affiliates of the Holder), a certificate or certificates for the number of full Warrant Shares issuable upon such 2 exercise together with such other property, including cash (if necessary pursuant to Section 5.3 hereof), which may be deliverable upon such exercise. If fewer than all of the Warrant Shares represented by this Warrant are purchased, a new Warrant of the same tenor as this Warrant, evidencing the Warrant Shares not purchased will be issued and delivered by the Company at the Company's expense, to the Holder together with the issue of the certificates representing the Warrant Shares then being purchased. All Warrant certificates surrendered upon exercise of Warrants shall be canceled by the Company. Section 2. Warrant Register, Registration of Transfers. Section 2.1. Warrant Register. The Company shall keep at its Principal Office, a register (the "Warrant Register") in which the Company shall record the name and address of the Holder from time to time and all transfers and exchanges of this Warrant. The Company shall give the Holder prior written notice of any change of the address at which such register is kept. Section 2.2. Registration of Transfers, Exchanges or Assignment of Warrants. The Holder shall be entitled to assign its interest in this Warrant in whole or in part to any affiliate of Holder upon surrender thereof accompanied by a written instrument or instruments of transfer in the form of assignment at the end hereof duly executed by the Holder. Except as set forth in the preceding sentence, this Warrant may not be assigned by the Holder. This Warrant may also be exchanged or combined with warrants of like tenor at the option of the Holder for another Warrant or Warrants of like tenor and representing in the aggregate the right to purchase a like number of Warrant Shares upon presentation thereof to the Company as its Principal Office together with a written notice signed by the Holder specifying the denominations in which the new Warrant is or the new Warrants are to be issued. Upon surrender for transfer or exchange of this Warrant to the Company at its Principal Office for transfer or exchange, in accordance with this Section 2, the Company shall, without charge (subject to Section 3), execute and deliver a new Warrant or Warrants of like tenor and of a like aggregate amount of Warrant Shares in the name of the assignee named in such instrument of assignment and, if the Holder's entire interest is not being assigned, in the name of the Holder with respect to that portion not transferred, and this Warrant shall promptly be canceled. Notwithstanding the foregoing, the Holder acknowledges that this Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as amended (the "Act"), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant and Warrant Shares in the absence of (i) registration or qualification of this Warrant and such Warrant Shares under any applicable U.S. federal or state securities law then in effect, or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Section 3. Payment of Taxes. The Company shall pay all documentary stamp taxes, if any, attributable to the initial issuance of any Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue or delivery of any Warrant 3 or certificate for Warrant Shares in a name other than that of the Holder as such name is then shown on the books of the Company. Section 4. Certain Covenants. Section 4.1. Reservation of Warrant Shares. There have been reserved and the Company shall at all times keep reserved, out of its authorized but unissued Common Stock, free from any preemptive rights, rights of first refusal or other restrictions (other than pursuant to the Act and applicable state securities laws) a number of shares of Common Stock sufficient to provide for the exercise of the rights of purchase represented by this Warrant. Section 4.2. No Impairment. The Company shall not by any action including, without limitation, amending its Restated Certificate of Incorporation, any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but shall at all times in good faith assist in the carrying out of all such terms and in the taking of all such action, as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company shall take all such action as may be necessary or appropriate in order that the Company may validly issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant at the then Warrant Price therefor. Section 4.3. Notice of Certain Corporate Action. In case the Company shall propose (a) to offer to the holders of its Common Stock rights to subscribe for or to purchase any shares of Common Stock or shares of stock of any class or any other securities, rights or options, or (b) to effect any reclassification of its Common Stock (other than a reclassification involving only the subdivision, or combination, of outstanding shares of Common Stock), or (c) to effect any capital reorganization, or (d) to effect any Change of Control, or (e) to effect the liquidation, dissolution or winding up of the Company or (f) to offer to the holders of its Common Stock the right to have their shares of Common Stock repurchased or redeemed or otherwise acquired by the Company, or (g) to take any other action which would require the adjustment of the Warrant Price and/or the number of Warrant Shares issuable upon exercise of this Warrant, then in each such case (but without limiting the provisions of Section 5), the Company shall give to the Holder, a notice of such proposed action, which shall specify the date on which a record is to be taken for purposes of such dividend, distribution of offer of rights, or the date on which such reclassification, reorganization, Change of Control, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of Common Stock, if any such date is to be fixed and shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action on the Common Stock. Such notice shall be so given at least ten (10) Business Days prior to the record date for determining holders of the Common Stock for purposes of participating in or voting on such action, or at least ten (10) Business Days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Common Stock, whichever shall be the earlier. Such notice shall specify, in the case of any subscription or repurchase rights, the date on which the holders of Common Stock shall be entitled thereto, or the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon any reorganization, reclassification, Change of Control or other action, as the case may be. Such 4 notice shall also state whether the action in question or the record date is subject to the effectiveness of a registration statement under the Act or to a favorable vote of security holders, if either is required, and the adjustment in Warrant Price and/or number of Warrant Shares issuable upon exercise of this Warrant as a result of such reorganization, reclassification, Change of Control or other action, to the extent then determinable. No such notice shall be given if the Company reasonably determines that the giving of such notice would require disclosure of material information which the Company has a bona fide purpose for preserving as confidential or the disclosure of which would not be in the best interests of the Company. Section 4.4. Purchase Entirely for Own Account. The Holder acknowledges that this Warrant is given to the Holder in reliance upon the Holder's representation to the Company, which by its acceptance of this Warrant the Holder hereby confirms, that the Warrant, the Warrant Shares, and the Common Stock issuable upon conversion of the Warrant Shares (collectively, the "Securities") being acquired by the Holder are being acquired for investment for the Holder's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Warrant, the Holder further represents that the Holder does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Holder represents that it has full power and authority to enter into this Warrant. The Holder has not been formed for the specific purpose of acquiring any of the Securities. Section 4.5. Disclosure of Information. The Holder has had an opportunity to discuss the Company's business, management, financial affairs and the terms and conditions of the offering of the Securities with the Company's management and has had an opportunity to review the Company's facilities, and has had an opportunity to read all of the Company's filings with the Securities and Exchange Commission. Section 4.6. Restricted Securities. The Holder understands that the Securities have not been, and will not be, registered under the Act, by reason of a specific exemption from the registration provisions of the Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Holder's representations as expressed herein. The Holder understands that the Securities are "restricted securities" under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Holder must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Holder 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 the Holder's control, and which the Company is under no obligation and may not be able to satisfy. Section 4.7. Accredited Investor. The Holder is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Act. 5 Section 5. Adjustment of Warrant Price. Section 5.1. Subdivision or Combination of Stock. In case the Company shall at any time (i) issue a dividend payable in Common Stock or any rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or (ii) subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares, then (x) in the case of a dividend or subdivision, the Warrant Price in effect immediately prior to such dividend or subdivision shall be proportionately decreased and the number of shares of Common Stock purchasable upon the exercise of the Warrant immediately prior to such adjustment shall be proportionately increased, and (y) in the case of a combination, the Warrant Price in effect immediately prior to such combination shall be proportionately increased and the number of shares of Common Stock purchasable upon the exercise of the Warrant immediately prior to such adjustment shall be proportionately decreased. Section 5.2. Reorganization, Reclassification, Consolidation, Merger or Sale. If any capital reorganization or reclassification of the capital stock of the Company or any consolidation or merger of the Company with another corporation, other than a Change of Control, shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization, reclassification, consolidation, exercise, merger or sale, lawful and adequate provision shall be made whereby the Holder shall thereafter have the right to receive upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore receivable upon the exercise of this Warrant, that number of shares of stock, securities or assets (including cash) as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of Warrant Shares for which this Warrant could have been exercised immediately prior to such reorganization, reclassification, consolidation, merger or sale, and in any such case appropriate provision shall be made with respect to the rights and interests of such Holder to the end that the provisions hereof shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets (including cash) thereafter deliverable upon the exercise of this Warrant. The Company will not effect any such consolidation, merger or sale, unless prior to the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume, by written instrument executed and mailed or delivered to the Holder at the last address of such Holder appearing on the books of the Company, the obligation to deliver to such Holder such shares of stock, securities or assets (including cash) as, in accordance with the foregoing provisions, the Holder may be entitled to receive. Section 5.3. Fractional Shares. The Company shall not issue fractions of shares of Common Stock upon exercise of this Warrant or scrip in lieu thereof. If any fraction of a share of Common Stock would, except for the provisions of this Section 5.3, be issuable upon exercise of this Warrant, the Company shall in lieu thereof pay to the person entitled thereto an amount in cash equal to the current value of such fraction, calculated to the nearest one-hundredth (1/100) of a share, to be computed on the basis of the Market Price for a share of Common Stock as of the date of exercise. Section 5.4. Notice of Adjustment. Upon any adjustment of the Warrant Price, and from time to time upon the request of the Holder the 6 Company shall furnish to the Holder the Warrant Price resulting from such adjustment or otherwise in effect and the number of Warrant Shares then available for purchase under this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Section 5.5. Certain Events. If any event occurs as to which, in the good faith judgment of the Board of Directors of the Company the other provisions of this Section 5 are not strictly applicable or if strictly applicable would not fairly protect the exercise rights of the Holder in accordance with the essential intent and principles of such provisions, then the Board of Directors of the Company in the good faith, reasonable exercise of its business judgment shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles so as to protect such exercise rights as aforesaid. Section 6. No Rights as a Stockholder; Notice to Holder. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to consent or to receive notice as a stockholder in respect of any meeting of stockholders for the election of directors of the Company or any other matter, or any rights whatsoever as a stockholder of the Company. Section 7. Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with, in the case of a Holder which is not a qualified institutional buyer within the meaning of Rule 144A under the Act, surety) in an amount reasonably satisfactory to it, or (in the case of mutilation) upon surrender and cancellation thereof, the Company will issue, in lieu thereof, a new Warrant of like tenor. Section 8. Notices. All notices and other written communications provided for hereunder shall be given in writing and delivered in person or sent by overnight delivery service (with charges prepaid) or by facsimile transmission, if the original of such facsimile transmission is sent by overnight delivery service (with charges prepaid) by the next succeeding Business Day and (i) if to the Holder addressed to it at the address or fax number specified for such Holder in the Warrant Register or at such other address or fax number as the Holder shall have specified to the Company in writing in accordance with this Section 8, and (ii) if to the Company, addressed to it at 1 Wayside Road, Burlington, Massachusetts 01803, Attention General Counsel Fax No: (781) 565-5001 or at such other address or fax number as the Company shall have specified to the Holder in writing in accordance with this Section 8. Notice given in accordance with this Section 8 shall be effective upon the earlier of the date of delivery or the second Business Day at the place of delivery after dispatch. Section 9. Applicable Law. This Warrant shall be governed by and construed in accordance with the laws of the State of New York without giving effect to principles of conflict of laws. Section 10. Warrant Share Legend. Each certificate representing Warrant Shares, until such Warrant Shares have been distributed pursuant to a registration statement effective under the Act or sold to the public through a broker, dealer or market maker in 7 compliance with Rule 144 under the Act (or any similar rule then in force) shall bear one or all of the following legends: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933." Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended. Section 11. Captions. The captions of the Sections and subsections of this Warrant have been inserted for convenience only and shall have no substantive effect. Section 12. Amendment or Waiver. Any term of the Warrants may be amended or waived only by an instrument in writing signed by the Company and a Holder Majority, and any such amendment or waiver (and any other action taken or decision made by a Holder Majority) shall be binding upon all Holders. 8 IN WITNESS WHEREOF, the undersigned have executed this Warrant as of the 20th day of May, 2008. NUANCE COMMUNICATIONS, INC. By: /s/ James R. Arnold, Jr. ---------------------------------------- Name: James R. Arnold, Jr. Title: Chief Financial Officer WP-WPVIII INVESTORS, L.P. By: Warburg Pincus Partners LLC, its General Partner By: Warburg Pincus & Co., its Managing Member By: /s/ Patrick Severson ---------------------------------------- Name: Patrick Severson Title: Partner [Signature Page to Warrant] [To be signed only upon exercise of Warrant] TO Nuance Communications, Inc.: The undersigned, the holder of the within Warrant (the "Holder"), hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, ______ shares of Common Stock of Nuance Communications, Inc. and herewith [makes payment of $______ therefor in full payment of the Exercise Payment][tenders securities having a Market Price of $_____ in full payment of the Exercise Payment] or [elects to receive a payment equal to the difference between (i) the Market Price (as defined in the Warrant) multiplied by ________ (the number of Warrant Shares as to which the payment is being elected) and (ii) ___________, which is the exercise price with respect to such Warrant Shares, in full payment of the Exercise Payment, payable by the Company to the Holder only in shares of Common Stock valued at the Market Price in accordance with the terms of the Warrant], and requests that the certificates for such shares be issued in the name of, and be delivered to ______, whose address is ________. Dated: ________________________ ------------------------------------------- (Signature must conform in all respects to name of Holder as specified on the face of the Warrant) ------------------------------------------- Address [To be signed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _____________ the right represented by the within Warrant to purchase shares _____of the Common Stock of Nuance Communications, Inc. to which the within Warrant relates, and appoints _______ attorney to transfer said right on the books of Nuance Communications, Inc. with full power of substitution in the premises. Dated: ________________________ ------------------------------------------- (Signature must conform in all respects to name of Holder as specified on the face of the Warrant) ------------------------------------------- Address In the presence of: - --------------------------------- EX-99.4 5 w052108f.txt SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT EXHIBIT 99.4 SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT This SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (the "Agreement") is made as of May 20, 2008 by and among Nuance Communications, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Company"), Warburg Pincus Private Equity VIII, L.P., Warburg Pincus Netherlands Private Equity VIII C.V. I, and WP-WPVIII Investors, L.P. (collectively, the "Purchasers") RECITALS A. Immediately prior to the closing of the transactions contemplated by the Purchase Agreement (as defined below), the Purchasers Beneficially Own an aggregate of 42,277,057 shares of Voting Stock of the Company, including warrants to purchase an aggregate of 7,066,538 shares of the Company Common Stock; B. The Purchasers are purchasing an additional 5,760,369 shares of Company Common Stock and warrants to purchase an aggregate of 3,700,000 shares of Company Common Stock (the "Warrants") pursuant to that certain Purchase Agreement, dated as of April 7, 2008 (the "Purchase Agreement"); C. The Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its stockholders to issue and sell the shares of Company Common Stock and the Warrants to the Purchaser; D. The Company and the Purchasers are parties to that certain Amended and Restated Stockholders Agreement, dated as of May 5, 2005 (the "Prior Agreement"); and E. The Company and the Purchasers desire to amend and restate the rights and obligations set forth in the Prior Agreement, in each case as set forth herein. NOW THEREFORE, in consideration of the covenants and promises set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: AGREEMENT 1. Certain Definitions. Unless the context otherwise requires, the following terms, for all purposes of this Agreement, shall have the meanings specified in this Section 1: "Additional Director Board Appointment Period" shall mean the period from the date hereof and ending on the later of (i) the date that the Purchasers shall cease to Beneficially Own at least 25,000,000 shares of Voting Stock (as adjusted from time to time for any stock dividends, combinations, recapitalizations and the like) or (ii) the date that the Purchasers' percentage Beneficial Ownership of the Voting Stock is less than the quotient of (x) two (2) divided by (y) the then authorized number of directors of the Company. "Affiliate" shall have the meaning set forth in Rule 12b-2 of the rules and regulations promulgated under the Exchange Act; provided, however, that for purposes of this Agreement, the Purchasers and their Affiliates, on the one hand, and the Company and its Affiliates, on the other, shall not be deemed to be "Affiliates" of one another. "Beneficially Own," "Beneficially Owned," or "Beneficial Ownership" shall have the meaning set forth in Rule 13d-3 of the rules and regulations promulgated under the Exchange Act. "Closing Date" shall have the meaning ascribed to such term in the Purchase Agreement. "Company Common Stock" shall mean shares of the Common Stock of the Company, $0.001 par value. "Company Competitor" shall mean any person or entity (or any Affiliates of such a person or entity) that (i) conducts material activities and operations consisting of providing speech technology primarily for use in telephony-network based services, mobile or embedded platforms, or desktop or server-based dictation software applications, (ii) develops and licenses software that incorporates document capture or image processing technology, (iii) has filed a statement on Schedule 13D pursuant to Rule 13d-l(a) with the SEC that indicates under Item 4 of such Schedule that the person has acquired or holds the securities with a purpose or effect of changing or influencing control of the Company, or in connection with or as a participant in any transaction having that purpose or effect, or (iv) to the Purchasers' knowledge after a written request, intends to file a statement on Schedule 13D with the SEC indicating under Item 4 of such Schedule that the person has acquired or holds the securities with a purpose or effect of changing or influencing control of the Company, or in connection with or as a participant in any transaction having that purpose or effect. "Controlled Fund" shall mean any fund of which Warburg Pincus Partners LLC is a general partner. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Exchange Offer" shall mean a bona fide exchange offer subject to the provisions of Rule 13e-3 promulgated under the Exchange Act. "Fair Market Value" means, as of any date of determination, (i) in the case of Company Common Stock, the average of the closing sale prices of Company Common Stock during the 5 trading days immediately preceding such date of determination on the principal U.S. or foreign securities exchange on which such Company Common Stock is listed or, if such Company Common Stock is not listed or primarily traded on any such exchange, the average of the closing sale prices or the closing bid quotations of such security during the 5 day period preceding such date of determination on Nasdaq or any comparable system then in use or, if no such quotations are available, the fair market value of such security as of such date of determination as determined in good faith by the Company and the holders of a majority in interest of the shares of Company Common Stock then held by the Purchasers and (ii) in the case of property other than cash or a security, the fair market value of such property on such date of determination as determined in good faith by the Company and the holders of a majority in interest of the shares of Company Common Stock then held by the Purchasers; provided, however, that if such parties are unable to reach agreement as to the fair market value of such security pursuant to clause (i) above or such property pursuant to clause (ii) above within a reasonable period of time, the fair market value shall be determined in good faith by an independent investment banking firm selected jointly by the Company and the holders of a majority in interest of the shares -2- of Company Common Stock then held by the Purchasers or, if that selection cannot be made within 15 days, by an independent investment banking firm selected by the American Arbitration Association in accordance with its rules. All costs and expenses of such independent investment banking firm shall be borne 50% by the Company and 50% by the Purchasers, pro rata based on the number of shares of Company Common Stock then held by each. "Form S-3" means such form under the Securities Act as in effect on the date hereof or any successor or similar registration form under the Securities Act subsequently adopted by the SEC that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. "Holder" means any person owning of record Registrable Securities that have not been sold to the public or any transferee or assignee of record of such Registrable Securities to which the registration rights conferred by this Agreement have been transferred or assigned in accordance with Section 5.8 hereof. "Permitted Amount" shall mean the sum of (i) up to a maximum of 5% of the issued and outstanding Voting Stock of the Company as calculated immediately following the Closing Date and (ii) any amount of shares of Voting Stock acquired directly from the Company after the date of this Agreement pursuant to an agreement with the Company. "Register," "registered" and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document. "Registrable Securities" means (a) shares of Company Common Stock (i) held by the Purchasers on the day immediately following the Closing Date or (ii) acquired pursuant to open market purchases following the Closing Date, and any Company Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, any Company Common Stock, warrant, right or other security held by the Purchasers. Notwithstanding the foregoing, Registrable Securities shall not include any securities of the Company sold by any person to the public either pursuant to a registration statement under the Securities Act or Rule 144. "Registration Expenses" shall mean all expenses incurred by the Company in complying with Sections 5.1 and 5.2 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, Blue Sky fees and expenses and the expense of any special audits incidental to or required by any such registration (but excluding the compensation of regular employees of the Company, which shall be paid in any event by the Company, and all underwriting discounts and commissions). -3- "Representatives" shall mean the directors, officers, employees and independent contractors, agents or advisors (including, without limitation, attorneys, accountants, and investment bankers) of the specified party or any of its Subsidiaries. "Rule 144" means Rule 144 as promulgated by the SEC under the Securities Act, as such rule may be amended from time to time, or any similar successor rule that may be promulgated by the SEC. "SEC" or "Commission" means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "Securities Act" means the Securities Act of 1933, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time. "Selling Expenses" means all underwriting discounts, selling commissions and stock transfer rates applicable to the sale of Registrable Securities and, except as set forth in the definition of "Registration Expenses" above, all fees and reimbursement of counsel for the Holders. "Shelf Registration Period" shall mean the period beginning immediately following the Closing Date and ending at 12:00 a.m. New York City time on the 365th day after the effectiveness of any registration statement filed pursuant to the terms of Section 5.3, as such period may be extended. "Standstill Period" shall mean the three (3) year period beginning on the Closing Date and ending at 12:00 a.m. New York City time on the third anniversary of the Closing Date. "Subsidiaries" shall mean each corporation, limited liability company, partnership, association, joint venture or other business entity of which any party or any of its Affiliates owns, directly or indirectly, more than 50% of the stock or other equity interest entitled to vote on the election of the members of the board of directors or similar governing body. "Third Party Tender Offer" shall mean a bona fide public tender offer subject to the provisions of Regulation 14D when first commenced within the meaning of Rule 14d-2(a) of the rules and regulations under the Exchange Act, by a person or 13D Group (which is not made by and does not include any of the Company or any Affiliate of the Company) to purchase or exchange for cash or other consideration any Voting Stock and which consists of an offer to acquire more than 10% of the Voting Power of the Company. "13D Group" means any group of persons formed for the purpose of acquiring, holding, voting or disposing of Voting Stock which would be required under Section 13(d) of the Exchange Act, and the rules and regulations promulgated thereunder, to file a statement on Schedule 13D pursuant to Rule 13d-l(a) or Schedule 13G pursuant to Rule 13d-1(c) with the SEC as a "person" within the meaning of Section 13(d)(3) of the Exchange Act if such group Beneficially Owned Voting Stock representing more than 5% of any class of Voting Stock then outstanding. -4- "Voting Power" shall mean the number of votes entitled to then be cast by the Voting Stock of the Company at any election of directors of the Company, provided that, for the purpose of determining Voting Power, each share of Preferred Stock of the Company, if any (the "Preferred Stock"), shall be deemed to be entitled to the number of votes equal to the number of shares of Company Common Stock into which such share of Preferred Stock could then be converted. "Voting Stock" shall mean shares of the Company Common Stock and any other securities of the Company having the ordinary power to vote in the election of members of the Board of Directors of the Company and any securities convertible, exchangeable for or otherwise exercisable to acquire voting securities. 2. Appointment of the Purchasers' Nominee(s) to the Board. The Company hereby agrees that (a) until the date that the Purchasers cease to Beneficially Own at least 10,000,000 shares of Voting Stock (as adjusted from time to time for any stock dividends, combinations, splits, recapitalizations and the like), the Board shall take such action as may be necessary to appoint one (1) member of the Board who shall be designated by the holders of a majority in interest of the shares of Company Common Stock then held by the Purchasers, and (b) until the expiration of the Additional Director Board Appointment Period, the Board shall take such action as may be necessary to appoint a second member of the Board who shall be designated by Warburg Pincus Private Equity VIII, L.P. Each nominee so designated shall be reasonably acceptable to, and approved by a majority of the Board, which acceptance and approval shall not be unreasonably withheld (such nominees from time to time so designated, each a "Purchaser Nominee," and collectively, the "Purchaser Nominees." For as long as the Purchaser Nominee(s) have a right to be appointed to the Board pursuant to this Section 2, the Company shall nominate and take such action as may be necessary to cause the Purchaser Nominee(s) to be elected or appointed to the Board. If at any time during the period when the Purchaser Nominee(s) have a right to be appointed to the Board pursuant to this Section 2, there shall occur a vacancy in the Board seat previously occupied by a Purchaser Nominee by reason of resignation, removal, death or incapacity, then such vacancy shall be filled by another Purchaser Nominee designated in accordance with this Section 2. 3. Covenants of the Purchasers. 3.1 Standstill. During the Standstill Period, the Purchasers, Warburg Pincus & Co., and Warburg Pincus Partners LLC, shall not, without the prior written consent of the Company or its Board of Directors: (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. -5- (b) make, or in any way participate, directly or indirectly, in any "solicitation" of "proxies" to vote (as such terms are used in the rules of the SEC), or seek to advise or influence any person or entity with respect to the voting of any Voting Stock of the Company (other than in such Purchaser's Representatives' capacities as a member of the Company's Board of Directors in a manner consist with his or her fiduciary duties); (c) make any public announcement with respect to, or submit a proposal for or offer of (with or without conditions) (including to the Company's Board of Directors), any extraordinary transaction involving the Company or any of its securities or assets; (d) form, join or in any way participate in a 13D Group in connection with any of the foregoing; (e) otherwise act or seek to control or influence the management or Board of Directors or policies of the Company, whether alone or in concert with others (other than in such Purchaser's Representatives' capacities as a member of the Company's Board of Directors in a manner consistent with his or her fiduciary duties); (f) take any action that could reasonably be expected to require the Company to make a public announcement regarding the possibility of any of the events described in clauses (a) through (e) above; (g) request the Company or any of its Representatives, directly or indirectly, to amend or waive any provision of this Section 3.1 in a manner that would require public disclosure; or (h) direct or instruct any of their respective Subsidiaries, Representatives or Affiliates to take any such action. Notwithstanding the foregoing, if, at any time during the Standstill Period, (i) any person or 13D Group (other than any person or 13D Group which includes the Purchasers, their respective Subsidiaries or Representatives) acquires Beneficial Ownership of Voting Stock of the Company representing 40% or more of the then outstanding Voting Stock of the Company; (ii) any person or 13D Group (other than any person or 13D Group which includes the Purchasers, their respective Subsidiaries or Representatives) announces or commences a tender or exchange offer to acquire Voting Stock of the Company 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 -6- Common Stock as of immediately prior to such transaction would be owned by persons other than the then current holders of shares of Common Stock and any person or 13D Group which includes the Purchasers, their respective Subsidiaries or Representatives; then, except as otherwise provided herein, the Standstill Period shall be suspended and tolled during the pendency of any such event with respect to the Purchasers, their respective Subsidiaries and Representatives and the provisions of subparagraphs (a) through (g) shall not be applicable to the Purchasers, their respective Subsidiaries and Representatives during the pendency of any such event. For the avoidance of doubt, the Standstill Period shall resume and be extended by an amount of time equal to the time during which such event was pending, and the provisions of subparagraphs (a) through (g) shall resume to be applicable to the Purchasers, their respective Subsidiaries and Representatives in the event that the provisions of (i) through (iii) cease to be applicable, such as, for example and without limitation, disposition of the Voting Stock of the Company to below 40% by the person or 13D Group, withdrawal of the tender or exchange offer by the person or 13D Group, or termination of merger, sale or other business combination transaction. 3.2 Transfer Restrictions. (a) The Purchasers shall not (and shall not permit any Affiliate to), directly or indirectly: (i) Sell, transfer, pledge, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, transfer the economic risk of ownership of, or otherwise dispose of (each, a "Transfer") any Voting Stock or Voting Power to any person or group that is conducting, is participating or has participated in a solicitation of proxies in opposition to the recommendation or proposal of the Board, or has proposed or otherwise solicited stockholders of the Company for approval of one or more stockholder proposals; (ii) Transfer five percent (5%) or more of the Voting Stock or Voting Power (in one or a series of transactions) in response to a Third Party Tender Offer or an Exchange Offer with respect to which the Board shall not have recommended that stockholders of the Company accept such offer, unless prior to such Transfer, the Purchasers have complied with the provisions of Section 3.3 below; or (iii) Transfer five percent (5%) or more of the Voting Stock or Voting Power (in one or a series of transactions that have not been approved by a majority of the Board) to a Company Competitor who has made a bona fide written offer to acquire such securities, unless prior to such Transfer, the Purchasers have complied with the provisions of Section 3.3 below. (b) Prior to the date that is one hundred eighty (180) days following the Closing Date, no Purchaser will, directly or indirectly, Transfer any shares of Voting Stock (it being understood that Transfers of, or other transactions with respect to direct or indirect ownership interests in a Purchaser the purpose of which is not to Transfer shares of Voting Stock -7- shall not be considered to be direct or indirect Transfers of shares of Voting Stock) except for the following: (i) Transfers to other Purchasers; (ii) Transfers in connection with a bona fide pledge to, or similar arrangement in connection with a bona fide borrowing from a financial institution; (iii) Transfers in a transaction approved by a majority of the Board, excluding the Purchaser Nominees; or (iv) Transfers in connection with a tender offer, merger, sale of all or substantially all the Company's assets or any similar transaction involving the Company approved and/or recommended by a majority of the Board, excluding the Purchaser Nominees. 3.3 The Company's Right of First Refusal. (a) Prior to the Purchasers effecting any Transfer of Voting Stock or Voting Power that is subject to the restrictions set forth in Section 3.2(a), the Company shall have a first refusal right to purchase such Voting Stock or Voting Power on the following terms and conditions: (i) The Purchasers shall give prior notice (the "Transfer Notice") to the Company in writing of such intention, specifying the name of the proposed purchaser or transferee, the amount of Voting Stock or Voting Power proposed to be the subject of such Transfer, the proposed price therefor and 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 -8- 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. (e) The Company may assign its right of first refusal under this Section 3.3 to any other person or persons; provided, however, that the Company shall be liable for the timely performance of any obligations in this Section 3.3 by such assignee. 3.4 Other Transfers. Except as provided in this Section 3, this Agreement does not, and is not intended to, restrict the Purchasers ability to Transfer any Voting Stock or Voting Power. 4. Prohibited Transfer. Any purchase which causes the Purchasers to be in violation of the terms of Section 3 above ("Prohibited Transfer") shall not be effected by the Company and shall be voidable at the option of the Company by their giving written notice to the transferor, his transferee and the Purchasers. Each certificate representing Voting Stock held by the Purchasers shall be endorsed by the Company with a legend reading as follows: "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." 5. Registration Rights. 5.1 Demand Registration. (a) Subject to the conditions of this Section 5.1, if the Company shall receive a written request from the Holders holding not less than a majority of the Registrable Securities then outstanding that that the Company file a registration statement with respect to all or part of the Registrable Securities under the Securities Act with an anticipated aggregate offering price of at least $10,000,000, then the Company shall, within ten (10) calendar days of the receipt thereof, give written notice of such request to all Holders, and, subject to the limitations of this Section 5.1, use its commercially reasonable efforts to effect, as expeditiously as reasonably possible, the registration under the Securities Act of all Registrable Securities that all Holders request to be registered pursuant to and in accordance with this Agreement (a "Demand Registration"). (b) Notwithstanding the foregoing, if the Company shall furnish to the Holders requesting a registration statement pursuant to this Section 5.1, a certificate signed by -9- 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 Section 5.1(a); provided, however, that the Company may not utilize this right more than twice in any twelve-month period. (c) The Company shall not be required to effect or take any action to effect a registration pursuant to this Section 5.1: (i) prior to the commencement of the Shelf Registration Period; (ii) after the Company has effected four 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. 5.2 Form S-3 Registration. If at any time following the commencement of the Shelf Registration Period, the Company shall receive from the Holders holding not less than a majority of the Registrable Securities then outstanding a written request that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holders, the Company will: (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 -10- 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. (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. Registrations effected pursuant to this Section 5.2 shall be counted as demands for registration effected pursuant to Section 5.1, and in no event shall the Company be required to effect more than two (2) S-3 Registrations. 5.3 Shelf Registration. During the Shelf Registration Period, if the Company shall receive from the Holders holding not less than a majority of the Registrable Securities then outstanding a written request that the Company effect a registration on Form S-3 with respect to all or part of the Registrable Securities owned by such Purchasers, the Company will as soon as reasonably practicable, effect such registration (a "Shelf Registration Statement") and all such qualifications and compliances as may be so requested and as would permit or facilitate the distribution of all or such portion of such Holders' Registrable Securities as are specified in such request exclusively to partners, limited partners, retired partners, retired limited partners, members, retired members and stockholders of such Holders; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 5.3, if Form S-3 is not available to the Company for such offering. The Company shall use its commercially reasonable efforts to keep the Shelf Registration Statement effective, current and available for use by the Purchasers during the Shelf Registration Period. While the Shelf Registration Statement remains in effect, the Company may at any time and from time to time deliver to the Holders written notice to the effect that distributions may not be effected under the Shelf Registration Statement for a period of time (a "Blackout Period") because of the existence of material facts not disclosed or incorporated by reference in such Shelf Registration Statement and in the then-current prospectus included therein; provided, however, that the duration of any Blackout Period shall not exceed ninety (90) days. Upon receipt of any such notice, the Holders shall refrain from distributing Registrable Securities under such Shelf Registration Statement until the Holders have received notice from the Company to the effect that such distributions may then be effected. The Company shall as promptly as reasonably possible update the Shelf Registration Statement and the prospectus included therein in order to permit Registrable Securities to be distributed, and the Shelf Registration Period shall automatically be extended by the aggregate number of days during which the Holders were instructed to refrain from distributing Registrable Securities during all Blackout Periods, without duplication. -11- 5.4 Expenses of Registration. Except as specifically provided herein, all Registration Expenses incurred in connection with any registration effected pursuant to Section 5.1, Section 5.2 or Section 5.3 herein shall be borne by the Company. All Selling Expenses incurred in connection with any registrations effected pursuant to Section 5.1 or Section 5.2 shall be borne by the holders of the securities so registered pro rata on the basis of the number of shares so registered. The Company shall not, however, be required to pay for expenses of any registration proceeding begun, the request of which has been subsequently withdrawn by the Holders initiating such registration unless a majority of the Holders of Registrable Securities agree to forfeit their right to one Demand Registration or S-3 Registration, as the case may be, pursuant to Section 5.1 or Section 5.2 (in which event such right shall be forfeited by all Holders of Registrable Securities). If such Holders are required to pay the Registration Expenses, such expenses shall be borne by the holders of securities (including Registrable Securities) initiating such registration in proportion to the number of shares for which registration was requested. 5.5 Underwriting. If the Company determines in its sole discretion that the registration statement under which the Company gives notice under Section 5.1 or Section 5.2 will be for an underwritten offering, the Company shall so advise the Holders of Registrable Securities. In such event, the right of any such Holder to be included in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. Notwithstanding any other provision contained in this Agreement, if the managing underwriter determines in good faith that marketing factors require a limitation of the number of shares to be underwritten (including Registrable Securities), the number of shares that may be included in the underwriting shall be allocated first to requesting Holders on a pro rata basis based on the total number of Registrable Securities then held by all such requesting Holders, then to any other shareholders on a pro rata basis based on the number of shares of Company Common Stock then held by such other shareholders. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the managing underwriter, delivered at least ten (10) business days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. For any Holder that is a partnership, limited partnership, limited liability company or corporation, the partners, limited partners, retired partners, retired limited partners, members, retired members and stockholders of such Holder, or the estates and family members of any such partners, limited partners, retired partners, retired limited partners, members, retired members and any trusts for the benefit of any of the foregoing persons shall be deemed to be collectively a single "Holder," and any pro rata reduction with respect to such "Holder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "Holder," as defined in this sentence. 5.6 Furnishing Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to Sections 5.1 and 5.2 above that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities. -12- 5.7 Indemnification. (a) The Company will indemnify and hold harmless each Holder, each of its officers, directors and partners, legal counsel, and accountants and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification or compliance has been effected pursuant to Section 5, and each underwriter, if any, and each person who controls within the meaning of Section 15 of the Securities Act any underwriter, against all expenses, claims, losses, damages, and liabilities (or actions, proceedings or settlements in respect thereof) arising out of or based on (i) any untrue statement or alleged untrue statement of a material fact contained in any prospectus, free-writing prospectus, offering circular, or other document, including any related registration statement, notification or the like, incident to any such registration, qualification or compliance, (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation by the Company of the Securities Act or any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse each such Holder, each of its officers, directors, partners, legal counsel, and accountants and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating and defending or settling any such claim, loss, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by such Holder or underwriter. It is agreed that the indemnity agreement contained in this Section 5.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company. (b) Each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers, legal counsel and accountants, and each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, each other such Holder and each of its officers and directors, and each person controlling such other Holder, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on (i) any untrue statement or alleged untrue statement of a material fact by such Holder contained in any such registration statement, prospectus, free-writing prospectus offering circular or other document, or (ii) any omission or alleged omission to state therein by such Holder a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such Holders, directors, officers, legal counsel, accountants, persons, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by such Holder; provided, however, that the obligations of such Holder hereunder shall not apply to amounts paid in settlement of any such claims, losses, damages or liabilities (or actions in -13- respect thereof) if such settlement is effected without the consent of such Holder; and provided that in no event shall any indemnity under this Section 5.7(b) exceed the net proceeds from the offering received by such Holder. (c) Each party entitled to indemnification under this Section 5.7 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of such claim or any litigation resulting therefrom; provided, however, that legal counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such party's expense; and, provided further, however, that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 5.7(c), to the extent such failure is not prejudicial. Consent by the Indemnifying Party to entry of any judgment or entry into any settlement shall not bind the Indemnified Party without the Indemnified Party's written consent, unless such settlement includes as an unconditional term thereof the giving by the claimant or plaintiff to the Indemnified Party of a release from all liability with respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as the Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom. (d) If the indemnification provided for in this Section 5.7 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to herein, then the Indemnifying Party, in lieu of . indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and to parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omissions. (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with an underwritten public offering of the Company's securities are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. 5.8 Transfer or Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 5 may not be transferred or assigned by a Holder without the prior written consent of the Company. -14- 5.9 Amendment of Registration Rights. Any provision of this Section 5 may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of at least a majority of the Registrable Securities then outstanding. Any amendment or waiver effected in accordance with this Section 5.9 shall be binding upon each Holder and the Company. 6. Management Rights. 6.1 For so long as any Purchaser owns 1,000,000 shares of Voting Stock, the Company covenants that: (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. 7. Miscellaneous. 7.1 Governing Law; Jurisdiction. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware without giving effect to the principles of conflicts of laws. Any legal action or other legal proceeding relating to this Agreement or the enforcement of any provision of this Agreement may be brought or otherwise commenced in any state or federal court located in the State of Delaware. Each party hereto agrees to the entry of an order to enforce any resolution, settlement, order or award made pursuant to this Section 7.1 by the state and federal courts located in the State of Delaware and in connection therewith hereby waives, and agrees not to assert by way of motion, as a defense, or otherwise, any claim that such resolution, settlement, order or award is inconsistent with or violative of the laws or public policy of the laws of the State of Delaware or any other jurisdiction. -15- 7.2 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successor and assigns of the parties hereto. 7.3 Entire Agreement; Amendment. This Agreement, the Purchase Agreement and the Warrants constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. Any previous agreements among the parties relative to the specific subject matter hereof, including but not limited to the Prior Agreement, are superseded by this Agreement. Neither this Agreement nor any provision hereof may be amended, changed, waived, discharged or terminated other than by a written instrument signed by the party against who enforcement of any such amendment, change, waiver, discharge or termination is sought. 7.4 Notices, etc. All notices and other communications required or permitted hereunder shall be effective upon receipt and shall be in writing and may be delivered in person, by telecopy, electronic mail, express delivery service or U.S. mail, in which event it may be mailed by first-class, certified or registered, postage prepaid, addressed, to the party to be notified, at the respective addresses set forth below, or at such other address which may hereinafter be designated in writing: (a) If to the Purchasers, to: Warburg Pincus Private Equity VIII, L.P. Warburg Pincus Netherlands Private Equity VIII, C.V. I WP-WPVIII Investors, L.P. 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: Steven J. Gartner, Esq. Fax No. 212-728-9222 (b) If to the Company, to: Nuance Communications, Inc. 1 Wayside Road Burlington, MA 01803 Attention: Chief Executive Officer General Counsel Phone: 781-565-5000 Fax: 781-565-5001 -16- with a copy to: Wilson Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto, CA 94304 Attention: Katharine A. Martin, Esq. Fax No. 650-493-6811 Wilson Sonsini Goodrich & Rosati 1700 K Street, NW Fifth Floor Washington, DC 20006 Attention: Robert D. Sanchez, Esq. Fax No.: 202-973-8899 7.5 Severability. If any provision of this Agreement shall be judicially determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 7.6 Titles and Subtitles. The titles of the Articles and Sections of this Agreement are for convenience of reference only and in no way define, limit, extend, or describe the scope of this Agreement or the intent of any of its provisions. 7.7 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 7.8 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party upon any breach or default of any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character of any breach or default under this Agreement, or any waiver of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in writing, and that all remedies, either under this Agreement, by law or otherwise, shall be cumulative and not alternative. 7.9 Consents. Any permission, consent, or approval of any kind or character under this Agreement shall be in writing and shall be effective only to the extent specifically set forth in such writing. 7.10 SPECIFIC PERFORMANCE. THE PARTIES HERETO AGREE THAT IRREPARABLE DAMAGE WOULD OCCUR IN THE EVENT THAT ANY OF THE -17- PROVISIONS OF THIS AGREEMENT WERE NOT PERFORMED IN ACCORDANCE WITH ITS SPECIFIC INTENT OR WERE OTHERWISE BREACHED. IT IS ACCORDINGLY AGREED THAT THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS, WITHOUT BOND, TO PREVENT OR CURE BREACHES OF THE PROVISIONS OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS HEREOF, THIS BEING IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED BY LAW OR EQUITY, AND ANY PARTY SUED FOR BREACH OF THIS AGREEMENT EXPRESSLY WAIVES ANY DEFENSE THAT A REMEDY IN DAMAGES WOULD BE ADEQUATE. 7.11 Construction of Agreement. No provision of this Agreement shall be construed against either party as the drafter thereof. 7.12 Section References. Unless otherwise stated, any reference contained herein to a Section or subsection refers to the provisions of this Agreement. 7.13 Variations of Pronouns. All pronouns and all variations thereof shall be deemed to refer to the masculine, feminine, or neuter, singular or plural, as the context in which they are used may require. [Remainder of Page Intentionally Left Blank] -18- IN WITNESS WHEREOF, the parties have caused this Second Amended and Restated Stockholders Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first written above. NUANCE COMMUNICATIONS, INC. By: /s/ James R. Arnold, Jr. ---------------------------------------- Name: James R. Arnold, Jr. Title: Chief Financial 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/ Patrick Severson ---------------------------------------- Name: Patrick Severson 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/ Patrick Severson ---------------------------------------- Name: Patrick Severson Title: Partner -19- WP-WPVIII Investors, L.P. By: Warburg Pincus Partners LLC, its General Partner By: Warburg Pincus & Co., its Managing Member By: /s/ Patrick Severson ---------------------------------------- Name: Patrick Severson Title: Partner -20- -----END PRIVACY-ENHANCED MESSAGE-----