Nuance Communications, Inc. - MRRS Decision
Headnote
MRRS - Registration and prospectus relief forissuance of securities by foreign issuer to Canadian employeesand related trades under stock ownership plans - issuer bidrelief for foreign issuer in connection with acquisition ofshares under stock ownership plans - Issuer with de minimisCanadian presence.
Applicable Ontario Statutes
Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 52, 74(1), 104(2)(c).
Applicable Ontario Rules
Rule 45-503 - Trades to Employees, Executivesand Consultants.
Applicable Instrument
Multilateral Instrument 45-102 - Resale of Securities- s. 2.14.
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO AND BRITISH COLUMBIA
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
NUANCE COMMUNICATIONS, INC.
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Ontario and British Columbia (the "Jurisdictions")has received an application from Nuance Communications, Inc.("Nuance" or the "Company") for a decisionpursuant to the securities legislation of the Jurisdictions(the "Legislation") that
(i) the requirements contained in the Legislationto be registered to trade in a security (the "RegistrationRequirement"), and the requirement to file and obtain areceipt for a preliminary prospectus and prospectus (the "ProspectusRequirement") (the Registration Requirement and the ProspectusRequirement are, collectively, the "Registration and ProspectusRequirements") will not apply to certain trades in securitiesof Nuance made in connection with the Nuance Communications,Inc. 2000 Employee Stock Purchase Plan (the "ESPP")and the Nuance Communications, Inc. 2000 Stock Plan (the "2000SOP") (the "SOP" together with the ESPP, the"Plans");
(ii) the Registration Requirement will not applyto first trades of shares ("Shares") acquired underthe Plans executed on an exchange or market outside of Canada;and
(iii) the requirements contained in the Legislationrelating to the delivery of an offer and issuer bid circularand any notices of change or variation thereto, minimum depositperiods and withdrawal rights, taking up and paying for securitiestendered to an issuer bid, disclosure, restrictions upon purchasesof securities, bid financing, identical consideration and collateralbenefits together with the requirement to file a reporting formwithin 10 days of an exempt issuer bid and pay a related fee(the "Issuer Bid Requirements") will not apply tocertain acquisitions by the Company of Shares pursuant to thePlans in each of the Jurisdictions;
AND WHEREAS pursuant to the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application;
AND WHEREAS Nuance has represented tothe Decision Makers as follows:
1. Nuance is presently a corporation in goodstanding incorporated under the laws of the State of Delaware.Nuance's head office is located in Menlo Park, California.
2. Nuance and affiliates of Nuance ("NuanceAffiliates") (Nuance and Nuance Affiliates are collectively,the "Nuance Companies") develop, market and supportsoftware that enables enterprises and telecommunications carriersto automate the delivery of information and services over thetelephone.
3. The Company is registered with the SecuritiesExchange Commission (the "SEC") in the U.S. underthe U.S. Securities Exchange Act of 1934 (the "ExchangeAct") and is not exempt from the reporting requirementsof the Exchange Act pursuant to Rule 12g 3-2.
4. Nuance is not a reporting issuer in any ofthe Jurisdictions and has no present intention of becoming areporting issuer in any of the Jurisdictions.
5. The authorized share capital of Nuance consistsof: 250,000,000 shares of common stock ("Shares")and 0 shares of preferred stock ("Preferred Shares").As of March 31, 2002, there were 33,383,453 Shares, and 0 PreferredShares issued and outstanding.
6. The Shares are quoted on The Nasdaq StockMarket (the "Nasdaq").
7. Nuance intends to use the services of oneor more agents/brokers in connection with the Plans (each an"Agent"). Charles Schwab & Co., Inc. ("Schwab")has initially been appointed by Nuance to act as Agent for thePlans. Schwab is a corporation registered under applicable U.S.securities or banking legislation to conduct retail trades insecurities and is not registered in either Jurisdiction to conductsuch trades. Nuance may at any time appoint additional or replacementAgents under the Plans. Any Agent appointed in replacement of,or in addition to, Schwab, if not a registrant in the Jurisdictions,would be registered under applicable U.S. legislation.
8. The role of the Agent may include: (a) disseminatinginformation and materials to Participants (as defined below)in connection with the Plans; (b) assisting with the administrationof and general record keeping for the Plans; (c) holding Shareson behalf of Participants, Former Participants (as defined below)and Permitted Transferees (as defined below) in limited purposebrokerage accounts; (d) facilitating Option (as defined below)exercises (including cashless exercises and stock swap exercises)under the Plans; (e) facilitating the payment of withholdingtaxes, if any, by cash or the tendering or withholding of Shares;(f) facilitating the reacquisition of Awards (as defined below)under the terms of the Plans; and (g) facilitating the resaleof Shares issued in connection with the Plans.
9. The purpose of the SOP is to attract andretain the best available personnel, to provide additional incentiveto Participants and to promote the success of Nuance's business.The purpose of the ESPP is to provide Participants with an opportunityto purchase Shares of the Company through accumulated payrolldeductions.
10. Subject to annual adjustments as describedin the Plans, the initial maximum number of Shares that maybe issued pursuant to the Plans are: 1,000,000 Shares underthe ESPP and 7,747,670 Shares under the SOP.
11. The SOP permit grants of: (a) options onShares ("Options") and (b) stock purchases rightsfor restricted stock ("Stock Purchase Rights") (Optionsand Stock Purchase Rights are collectively, "Awards")to employees, including employee officers and directors of theNuance Companies ("SOP Participants").
12. Under the ESPP, employees of the NuanceCompanies ("ESPP Participants") are offered an opportunityto purchase Shares by means of applying accumulated payrolldeductions to the purchase of Shares at a discount price determinedin accordance with the terms of the ESPP.
13. Employees of the Nuance Companies eligibleto participate in the Plans will not be induced to purchaseShares or to exercise Awards by expectation of employment orcontinued employment.
14. Officers of the Nuance Companies who participatein the SOP will not be induced to purchase Shares or to exerciseAwards by expectation of appointment or employment or continuedappointment or employment as an officer.
15. As of June 17, 2002, there were 69 personsresident in Canada eligible to receive Shares or Awards underor participate in the Plans: 11 persons resident in Ontario;1 person resident in British Columbia and 57 persons residentin Quebec.
16. All necessary securities filings have beenmade in the U.S. in order to offer the Plans to Participantsresident in the U.S.
17. A prospectus prepared according to U.S.securities laws describing the terms and conditions of eachof the Plans will be delivered to each SOP Participant who receivesan Award or Shares under the SOP and to each ESPP Participantwho is eligible to participate in the ESPP. The annual reports,proxy materials and other materials Nuance provides to its U.S.shareholders will be provided or made available upon requestto SOP Participants and ESPP Participants (together "Participants")resident in the Jurisdictions who acquire and retain Sharesunder the Plans at substantially the same time and in substantiallythe same manner as such documents would be provided to U.S.shareholders.
18. The Plans are administered by a committeeappointed by the board of directors of Nuance (the "Committee").
19. Generally, in order to exercise an Optionunder the SOP, an optionee must submit a written notice of exerciseto Nuance or to the Agent identifying the Option, the numberof Shares being purchased and the method of payment.
20. The SOP provides that on exercise of Options,the payment of the exercise price in order to acquire the underlyingShares may be made: (a) in cash; (b) by the surrender of Sharesowned by the Option holder to the Company for cancellation ("Stock-SwapExercises") or to the Agent for resale; (c) the retentionof a number of Shares by the Company from the total number ofShares into which the Option is exercised; (d) by a combinationof the foregoing; or (e) such other consideration and methodof payment permitted by the Committee at an exercise price determinedin accordance with the terms of the SOP.
21. Options will vest and will be exercisableas specified in the Option agreement as determined by the Committee.The Option exercise price for each Share purchased under anyOption will be specified in the Option agreement and will notbe less than the fair market value (as such term is definedin the SOP).
22. The term of each Option will be fixed bythe Committee, provided however that the term shall be no morethan ten (10) years from the date of the grant. The date ofexercise will be chosen by the Option holder.
23. Under the SOP, the Committee may at anytime offer to buy out for a payment in cash or Shares, an optionpreviously granted on terms and conditions determined by theCommittee ("Option Buyouts").
24. Under the SOP, Options or Stock PurchaseRights may be forfeited or surrendered by SOP Participants tothe extent such Awards expire or become unexercisable withouthaving been exercised in full or where the SOP Participant'srelationship with Nuance is terminated or where Awards are cancelledon a merger or sale of assets or on the dissolution or liquidationof Nuance or where Awards are surrendered pursuant to an OptionExchange Program (as that term is defined in the SOP) ("AwardCancellations").
25. Under the SOP, on the termination of theSOP Participant's service with Nuance, Shares awarded underRestricted Stock Purchase Agreements (as defined in the SOP)which evidences the terms and restrictions applying to Sharespurchased under a Stock Purchase Right may be subject to a Sharereacquisition or Share repurchase option in favor of Nuancein accordance with the terms of the SOP ("Repurchase Option").
26. Nuance shall have the right to deduct applicabletaxes from any payment under the Plans by withholding, at thetime of delivery or vesting of cash or Shares under the Plans,an appropriate amount of cash or Shares ("Share WithholdingExercises") or a combination thereof for a payment of taxesrequired by law or to take such other action as may be necessaryin the opinion of Nuance or the Committee to satisfy all obligationsfor the withholding of such taxes.
27. Awards and rights under the Plans are nottransferable by a Participant other than by will or beneficiarydesignation or by the laws of intestacy unless otherwise providedfor by the Committee.
28. Following the termination of a Participant'srelationship with the Nuance Companies for reasons of disability,retirement, termination, change of control or any other reason("Former Participants"), and on the death of a Participantwhere Awards have been transferred by will or pursuant to abeneficiary designation or the laws of intestacy or otherwise("Permitted Transferees"), the Former Participantsand Permitted Transferees will continue to have rights in respectof the Plans ("Post-Termination Rights").
29. Post-Termination Rights may include, amongother things: (a) the right to exercise Awards for a perioddetermined in accordance with the SOP; (b) the right of a Participantwho receives payment in lieu of notice of termination of employmentto continue to participate in the ESPP during the period inwhich the Participant is subject to such payment in lieu ofnotice; (c) the right to receive payment of accumulated payrolldeductions in his or her account, without interest under theESPP; and (d) the right to sell Shares acquired under the Plansthrough the Agent.
30. Post-Termination Rights will only be effectivewhere such rights accrued while the Participant had a relationshipwith the Nuance Companies.
31. As there is no market for the Shares inCanada and none is expected to develop, it is expected thatthe resale by Participants, Former Participants and PermittedTransferees of the Shares acquired under the Plans will be effectedthrough the Nasdaq.
32. As of June 17, 2002, Canadian shareholdersdid not own, directly or indirectly, more than 10% of the issuedand outstanding Shares and did not represent in number morethan 10% of the shareholders of Nuance. If at any time duringthe currency of the Plans Canadian shareholders of Nuance hold,in aggregate, greater than 10% of the total number of issuedand outstanding Shares or if such shareholders constitute morethan 10% of all shareholders of Nuance, Nuance will apply tothe relevant Jurisdiction for an order with respect to furthertrades to and by Participants in that Jurisdiction in respectof the Shares acquired under the Plans.
33. Pursuant to the SOP, the acquisition ofAwards by the Company in the following circumstances may constitutean "issuer bid": Stock Swap Exercises, Share WithholdingExercises and the Repurchase Option.
34. The issuer bid exemptions in the Legislationmay not be available for such acquisitions by the Company sincesuch acquisitions may occur at a price that is not calculatedin accordance with the "market price," as that termis defined in the Legislation and may be made from PermittedTransferees.
35. The Legislation of all of the Jurisdictionsmay not contain exemptions from the Prospectus and RegistrationRequirements for all the intended trades in Awards and Sharesunder the Plans.
36. When the Agents sell Shares on behalf ofParticipants, Former Participants and Permitted Transferees,the Agents, Participants, Former Participants and PermittedTransferees may not be able to rely upon the exemptions fromthe Registration and Prospectus Requirements contained in theLegislation of the Jurisdictions.
AND WHEREAS pursuant to the System,this Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");
AND WHEREAS each of the Decision Makers issatisfied that the test contained in the Legislation that providesthe Decision Maker with the jurisdiction to make the Decisionhas been met;
THE DECISION of the Decision Makerspursuant to the Legislation is that:
(a) the Registration and Prospectus Requirementswill not apply to any trade or distribution of Awards or Sharesmade in connection with the Plans, including trades and distributionsinvolving Nuance, the Nuance Affiliates, the Agents, Participants,Former Participants, and Permitted Transferees, provided that,the first trade in Shares acquired through the Plans pursuantto this Decision will be deemed a distribution or primary distributionto the public under the Legislation unless the conditions insubsection 2.14(1) of Multilateral Instrument 45-102 Resaleof Securities are satisfied;
(b) the first trade by Participants, FormerParticipants, and Permitted Transferees, in Shares acquiredpursuant to the Plans including first trades effected throughthe Agents, will not be subject to the Registration Requirement,provided such first trade is executed through a stock exchangeor market outside of Canada or to a person or company outsideof Canada; and
(c) the Issuer Bid Requirements will not applyto the acquisition by Nuance of Awards or Shares from Participants,Former Participants or Permitted Transferees provided such acquisitionsare made in accordance with the terms of the Plans.
September 19, 2002.
"H. Lorne Morphy" "Harold P. Hands"