Exhibit 10.1

EXECUTION VERSION

NUANCE COMMUNICATIONS, INC.

U.S.$350,000,000 1.25% Senior Convertible Notes Due 2025*

Purchase Agreement

March 13, 2017

Morgan Stanley & Co. LLC

Barclays Capital Inc.

As Representatives of the several

Initial Purchasers named in

Schedule I hereto

c/o

      Morgan Stanley & Co. LLC

      1585 Broadway

      New York, NY 10036

      Barclays Capital Inc.

      745 Seventh Avenue

      New York, NY 10019

Ladies and Gentlemen:

Nuance Communications, Inc., a corporation organized under the laws of Delaware
(the “Company”), proposes to issue and sell to the several parties named in
Schedule I hereto (the “Initial Purchasers”), for whom you (the
“Representatives”) are acting as Representatives, U.S.$350,000,000 principal
amount of its 1.25% Senior Convertible Notes due 2025 (the “Firm Securities”).
The Company also proposes to grant to the Initial Purchasers an option to
purchase up to U.S.$60,000,000 additional principal amount of such Notes to
cover over-allotments, if any (the “Option Securities” and, together with the
Firm Securities, the “Securities”). The Securities are convertible into cash
and, if applicable, shares of Common Stock, par value U.S.$0.001 per share (the
“Common Stock”), of the Company at the conversion price set forth herein. The
Securities are to be issued under an indenture (the “Indenture”), to be dated as
of the Closing Date, between the Company and U.S. Bank National Association, as
trustee (the “Trustee”). To the extent there are no additional parties listed on
Schedule I other than you, the term Representatives as used herein shall mean
you as the Initial Purchasers, and the terms Representatives and Initial
Purchasers shall mean either the singular or plural as the context requires. The
use of the neuter in this Agreement shall include the feminine and masculine
wherever appropriate. Certain terms used herein are defined in Section 25
hereof.

 

 

*  Plus an option to purchase up to U.S.$60,000,000 additional principal amount
from the Company to cover over-allotments.

 

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The sale of the Securities to the Initial Purchasers will be made without
registration of the Securities or the Common Stock issuable upon conversion
thereof under the Act in reliance upon exemptions from the registration
requirements of the Act.

In connection with the sale of the Securities, the Company has prepared a
preliminary offering memorandum, dated March 13, 2017 (as amended or
supplemented at the date thereof, including any and all exhibits thereto and any
information incorporated by reference therein, the “Preliminary Memorandum”),
and a final offering memorandum, dated March 13, 2017 (as amended or
supplemented at the Execution Time, including any and all exhibits thereto and
any information incorporated by reference therein, the “Final Memorandum”). Each
of the Preliminary Memorandum and the Final Memorandum sets forth certain
information concerning the Company, the Securities and the Common Stock issuable
upon conversion thereof, if any. The Company hereby confirms that it has
authorized the use of the Disclosure Package, the Preliminary Memorandum and the
Final Memorandum, and any amendment or supplement thereto, in connection with
the offer and sale of the Securities by the Initial Purchasers. Unless stated to
the contrary, any references herein to the terms “amend”, “amendment” or
“supplement” with respect to the Final Memorandum shall be deemed to refer to
and include any information filed under the Exchange Act subsequent to the
Execution Time that is incorporated by reference therein.

1.    Representations and Warranties. The Company represents and warrants to,
and agrees with, each Initial Purchaser as set forth below in this Section 1.

(a)    The Preliminary Memorandum, at the date thereof, did not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. At the Execution Time and on the Closing Date,
the Final Memorandum did not and will not (and any amendment or supplement
thereto, at the date thereof and at the Closing Date, will not) contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the Company makes no
representation or warranty as to the information contained in or omitted from
the Preliminary Memorandum or the Final Memorandum, or any amendment or
supplement thereto, in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of the Initial Purchasers
through the Representatives specifically for inclusion therein, it being
understood and agreed that the only such information furnished by or on behalf
of any Initial Purchaser consists of the information described as such in
Section 8(b) hereof.

(b)    The Disclosure Package, as of the Execution Time, does not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The preceding sentence does not apply to
statements in or omissions from the Disclosure Package based upon and in
conformity with written information furnished to the

 

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Company by any Initial Purchaser through the Representatives specifically for
use therein, it being understood and agreed that the only such information
furnished by or on behalf of any Initial Purchaser consists of the information
described as such in Section 8(b) hereof.

(c)    Since the date of the most recent financial statements included in the
Disclosure Package and the Final Memorandum (exclusive of any supplement
thereto), there has been no material adverse change in the condition (financial
or otherwise), prospects, earnings, business or properties of the Company and
its subsidiaries, taken as a whole, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated in the
Disclosure Package and the Final Memorandum (exclusive of any supplement
thereto).

(d)    None of the Company, its Affiliates, or any person acting on its or their
behalf has directly or indirectly, made offers or sales of any security, or
solicited offers to buy, any security under circumstances that would require the
registration of the Securities or the Common Stock issuable upon conversion
thereof under the Act.

(e)    None of the Company, its Affiliates, or any person acting on its or their
behalf has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with any offer or sale of the
Securities.

(f)    The Securities satisfy the eligibility requirements of Rule 144A(d)(3)
under the Act.

(g)    No registration under the Act of the Securities or the Common Stock
issuable upon conversion thereof is required for the offer and sale of the
Securities to or by the Initial Purchasers in the manner contemplated herein, in
the Disclosure Package and the Final Memorandum.

(h)    The Company is not, and after giving effect to the offering and sale of
the Securities and the application of the proceeds thereof as described in the
Disclosure Package and the Final Memorandum will not be, an “investment company”
as defined in the Investment Company Act.

(i)    The Company is subject to and in full compliance with the reporting
requirements of Section 13 or Section 15(d) of the Exchange Act.

(j)    The Company has not paid or agreed to pay to any person any compensation
for soliciting another to purchase any securities of the Company (except as
contemplated in this Agreement).

(k)    The Company has not taken, directly or indirectly, any action designed to
or that has constituted or that might reasonably be expected to cause or result,
under the Exchange Act or otherwise, in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Securities.

 

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(l)    Each of the Company and its “significant subsidiaries” (as such term is
defined in Rule 1-02 of Regulation S-X) (each a “Significant Subsidiary”) has
been duly incorporated or formed and is validly existing as a corporation or
limited liability company, as applicable, in good standing under the laws of the
jurisdiction in which it is chartered or organized, except where the failure of
such subsidiary to be in good standing would not reasonably be expected to have
a Material Adverse Effect, with full corporate or limited liability company
power and authority to own or lease, as the case may be, and to operate its
properties and conduct its business as described in the Disclosure Package and
the Final Memorandum, and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction that
requires such qualification, except where the failure to be in good standing or
duly qualified would not reasonably be expected to have a Material Adverse
Effect (as defined herein).

(m)    All the outstanding shares of capital stock (or other ownership
interests) of each Significant Subsidiary of the Company have been duly
authorized and validly issued and are fully paid and nonassessable, and, except
as otherwise set forth in the Disclosure Package and the Final Memorandum and
except for director nominee shares immaterial in amount or as would not
otherwise reasonably be expected to have a Material Adverse Effect, all
outstanding shares of capital stock of the subsidiaries of the Company are owned
by the Company either directly or through wholly owned subsidiaries free and
clear of any security interest, claim, lien or encumbrance.

(n)    The Company’s authorized equity capitalization is as set forth in the
Disclosure Package and the Final Memorandum; the capital stock of the Company
conforms to the description thereof contained in the Disclosure Package and the
Final Memorandum; the outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable; the maximum
number of shares of Common Stock initially issuable upon conversion of the
Securities (assuming the Company settled such conversion, including the maximum
number of additional shares of Common Stock that may be issued upon conversion
of the Securities in connection with a “non-stock change of control” (as defined
in the Indenture) solely in shares of Common Stock) (the “Maximum Number of
Shares”) have been duly authorized and, when issued upon conversion of the
Securities, will be validly issued, fully paid and nonassessable; the Board of
Directors of the Company has duly and validly adopted resolutions reserving the
Maximum Number of Shares for issuance upon conversion of the Securities; the
holders of outstanding shares of capital stock of the Company are not entitled
to preemptive or other rights to subscribe for the Securities or the shares of
Common Stock issuable upon conversion thereof; and, except as set forth in the
Disclosure Package and the Final Memorandum, no options, warrants or other
rights to purchase, agreements or other obligations to issue, or rights to
convert any obligations into or exchange any securities for, shares of capital
stock of or ownership interests in the Company are outstanding.

(o)    The statements in the Preliminary Memorandum and the Final Memorandum
under the headings “Certain U.S. Federal Income Tax Considerations”,
“Description of the Notes”, “Description of Capital Stock”, “Plan of
Distribution” and “Legal Matters” (which section is incorporated by reference)
fairly summarize the matters therein described in all material respects.

 

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(p)    This Agreement has been duly authorized, executed and delivered by the
Company; the Indenture has been duly authorized and, assuming due authorization,
execution and delivery thereof by the Trustee, when executed and delivered by
the Company, will constitute a legal, valid, binding instrument enforceable
against the Company in accordance with its terms (subject, as to the enforcement
of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting creditors’ rights generally from time to time in effect and
to general principles of equity); the Securities have been duly authorized by
the Company, and, when executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the Initial
Purchasers, will have been duly executed and delivered by the Company and will
constitute the legal, valid and binding obligations of the Company entitled to
the benefits of the Indenture (subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors’ rights generally from time to time in effect and to general
principles of equity) and will be convertible in accordance with their terms.

(q)    Neither the Company nor any of its subsidiaries nor any agent thereof
acting on their behalf has taken, and none of them will take, any action that
might cause this Agreement or the issuance or sale of the Securities to violate
Regulation T, Regulation U or Regulation X of the Board of Governors of the
Federal Reserve System.

(r)    No consent, approval, authorization, filing with or order of any court or
governmental agency or body is required in connection with the transactions
contemplated herein or in the Indenture, except such as may be required under
the blue sky laws of any jurisdiction in which the Securities are offered and
sold.

(s)    None of the execution and delivery of the Indenture or this Agreement,
the issuance and sale of the Securities or the issuance of the Maximum Number of
Shares upon conversion thereof, or the consummation of any other of the
transactions herein or therein contemplated, or the fulfillment of the terms
hereof or thereof will conflict with, result in a breach or violation of (or
result in any Debt Repayment Triggering Event, solely in the case of clause
(ii) below), or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of its subsidiaries pursuant to, (i) the charter
or by-laws or comparable constituting documents of the Company or any of its
subsidiaries; (ii) the terms of any indenture, contract, lease, mortgage, deed
of trust, note agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument to which the Company or any of its
subsidiaries is a party or bound or to which its or their property is subject;
or (iii) any statute, law, rule, regulation, judgment, order or decree of any
court, regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or any of its subsidiaries
or any of its or their properties, other than in (ii) or (iii), as disclosed in
the Disclosure Package or those violations or defaults that would not reasonably
be expected to have a Material Adverse Effect or a material adverse effect on
the transactions contemplated by this Agreement. As used herein, a “Debt
Repayment Triggering Event” means any event or condition which gives, or with
the giving of notice or lapse of time would give, the holder of any note,
debenture or other evidence of indebtedness (or any person acting on such
holder’s behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or any of its subsidiaries.

 

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(t)    The consolidated historical financial statements and schedules of the
Company and its consolidated subsidiaries included or incorporated by reference
in the Disclosure Package and the Final Memorandum present fairly the financial
condition, results of operations and cash flows of the Company as of the dates
and for the periods indicated, comply as to form with the applicable accounting
requirements of Regulation S-X and have been prepared in conformity with
generally accepted accounting principles in the United States applied on a
consistent basis throughout the periods involved; the selected financial data
set forth under the caption “Summary Consolidated Financial Information” in the
Preliminary Memorandum and the Final Memorandum fairly present, on the basis
stated in the Preliminary Memorandum and the Final Memorandum, the information
included or incorporated by reference therein.

(u)    No action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company or any of its
subsidiaries or its or their property is pending or, to the best knowledge of
the Company, threatened that (i) could reasonably be expected to have a material
adverse effect on the performance of this Agreement or the Indenture, or the
consummation of any of the transactions contemplated hereby or thereby or
(ii) could reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or properties
of the Company and its subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business (a “Material Adverse
Effect”), except as set forth in or contemplated in the Disclosure Package and
the Final Memorandum (exclusive of any amendment or supplement thereto).

(v)    Each of the Company and each of its subsidiaries owns or leases all such
properties as are necessary to the conduct of its operations as presently
conducted.

(w)    Neither the Company nor any of its subsidiaries is in violation or
default of (i) any provision of its charter or bylaws or comparable constituting
documents; (ii) the terms of any indenture, contract, lease, mortgage, deed of
trust, note agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which it is a party or bound or to which its property
is subject; or (iii) any statute, law, rule, regulation, judgment, order or
decree applicable to the Company or such subsidiary of any court, regulatory
body, administrative agency, governmental body, arbitrator or other authority
having jurisdiction over the Company or such subsidiary or any of its
properties, as applicable, other than in (ii) or (iii), those violations or
defaults that would not reasonably be expected to have a Material Adverse
Effect.

(x)    BDO USA, LLP, who have certified certain financial statements of the
Company and its consolidated subsidiaries and delivered their report with
respect to the audited consolidated financial statements and schedules included
or incorporated by reference in the Disclosure Package and the Final Memorandum,
are independent public accountants with respect to the Company within the
meaning of generally accepted accounting principles in the United States and
within the meaning of the Act.

(y)    There are no stamp or other issuance or transfer taxes or duties or other
similar fees or charges required to be paid in connection with the execution and
delivery of this Agreement or the issuance or sale of the Securities or upon the
issuance of the Maximum Number of Shares upon the conversion thereof.

 

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(z)    The Company has filed all applicable tax returns that are required to be
filed or has requested extensions thereof (except in any case in which the
failure so to file would not have a Material Adverse Effect, except as set forth
in or contemplated in the Disclosure Package and the Final Memorandum (exclusive
of any amendment or supplement thereto)) and has paid all taxes required to be
paid by it and any other assessment, fine or penalty levied against it, to the
extent that any of the foregoing is due and payable, except for any such
assessment, fine or penalty that is currently being contested in good faith or
as would not have a Material Adverse Effect, except as set forth in or
contemplated in the Disclosure Package and the Final Memorandum (exclusive of
any amendment or supplement thereto).

(aa)    No labor problem or dispute with the employees of the Company or any of
its subsidiaries exists or is threatened or imminent, and the Company is not
aware of any existing or imminent labor disturbance by the employees of any of
its or its subsidiaries’ principal suppliers, contractors or customers, except
as would not have a Material Adverse Effect, and except as set forth in or
contemplated in the Disclosure Package and the Final Memorandum (exclusive of
any amendment or supplement thereto).

(bb)    The Company and each of its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and, in its
judgment, in such amounts as are prudent and customary in the businesses in
which they are engaged; all policies of insurance and fidelity or surety bonds
insuring the Company or any of its subsidiaries or their respective businesses,
assets, employees, officers and directors are in full force and effect; the
Company and its subsidiaries are in compliance with the terms of such policies
and instruments; there are no claims by the Company or any of its subsidiaries
under any such policy or instrument as to which any insurance company is denying
liability or defending under a reservation of rights clause; neither the Company
nor any of its subsidiaries has been refused any insurance coverage sought or
applied for; and neither the Company nor any of its subsidiaries has any reason
to believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not
have a Material Adverse Effect, except as set forth in or contemplated in the
Disclosure Package and the Final Memorandum (exclusive of any amendment or
supplement thereto).

(cc)    No subsidiary of the Company is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution on such subsidiary’s capital stock, from repaying to the Company
any loans or advances to such subsidiary from the Company or from transferring
any of such subsidiary’s property or assets to the Company or any other
subsidiary of the Company, except as described in or contemplated in the
Disclosure Package and the Final Memorandum (exclusive of any amendment or
supplement thereto).

(dd)    The Company and its subsidiaries possess all licenses, certificates,
permits and other authorizations issued by all applicable authorities necessary
to conduct their respective

 

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businesses, except as would not have a Material Adverse Effect, and neither the
Company nor any of its subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse Effect,
except as set forth in or contemplated in the Disclosure Package and the Final
Memorandum (exclusive of any amendment or supplement thereto).

(ee)    The Company and its subsidiaries own or possess, or can acquire on
reasonable terms, all patents, patent rights, licenses, inventions, copyrights,
know how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), trademarks,
service marks and trade names currently employed by them in connection with the
business now operated by them except for those, the failure to own or possess,
would not reasonably be expected to result in a Material Adverse Effect, and
neither the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to any
of the foregoing which, singly or in the aggregate, would reasonably be expected
to have a Material Adverse Effect.

(ff)    The Company and each of its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles in the United States and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company and its subsidiaries’
internal controls over financial reporting are effective and the Company and its
subsidiaries are not aware of any material weakness in their internal controls
over financial reporting.

(gg)    The Company and its subsidiaries maintain “disclosure controls and
procedures” (as such term is defined in Rule 13a-15(e) under the Exchange Act);
such disclosure controls and procedures are effective.

(hh)    The Company and its subsidiaries are (i) in compliance with any and all
applicable laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants (“Environmental Laws”); (ii) have received and are in compliance
with all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses; and (iii) have not
received notice of any actual or potential liability under any Environmental
Law, except where such non-compliance with Environmental Laws, failure to
receive or be in compliance with required permits, licenses or other approvals,
or liability would not, individually or in the aggregate, have a Material
Adverse Effect, except as set forth in or contemplated in the Disclosure Package
and the Final Memorandum (exclusive of any amendment or supplement thereto).
Except as set forth in the Disclosure Package and the Final Memorandum, neither
the Company nor any of its subsidiaries has been named as a “potentially
responsible party” under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended.

 

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(ii)    None of the following events has occurred or exists: (i) a failure to
fulfill the obligations, if any, under the minimum funding standards of
Section 302 of the United States Employee Retirement Income Security Act of
1974, as amended (“ERISA”), and the regulations and published interpretations
thereunder with respect to a Plan, determined without regard to any waiver of
such obligations or extension of any amortization period; (ii) an audit or
investigation by the Internal Revenue Service, the U.S. Department of Labor, the
Pension Benefit Guaranty Corporation or any other federal or state governmental
agency or any foreign regulatory agency with respect to the employment or
compensation of employees by any of the Company or any of its subsidiaries that
would not, individually or in the aggregate, have a Material Adverse Effect,
except as set forth in or contemplated in the Disclosure Package and the Final
Memorandum; (iii) any breach of any contractual obligation, or any violation of
law or applicable qualification standards, with respect to the employment or
compensation of employees by the Company or any of its subsidiaries that would
not, individually or in the aggregate, have a Material Adverse Effect, except as
set forth in or contemplated in the Disclosure Package and the Final Memorandum.
None of the following events has occurred or is reasonably likely to occur:
(i) a material increase in the aggregate amount of contributions required to be
made to all Plans in the current fiscal year of the Company and its subsidiaries
compared to the amount of such contributions made in the most recently completed
fiscal year of the Company and its subsidiaries; (ii) a material increase in the
“accumulated post-retirement benefit obligations” (within the meaning of
Statement of Financial Accounting Standards 106) of the Company and its
subsidiaries compared to the amount of such obligations in the most recently
completed fiscal year of the Company and its subsidiaries; (iii) any event or
condition giving rise to a liability under Title IV of ERISA that would not,
individually or in the aggregate, have a Material Adverse Effect, except as set
forth in or contemplated in the Disclosure Package and the Final Memorandum; or
(iv) the filing of a claim by one or more employees or former employees of the
Company or any of its subsidiaries related to their employment that would not,
individually or in the aggregate, have a Material Adverse Effect, except as set
forth in or contemplated in the Disclosure Package and the Final Memorandum. For
purposes of this paragraph, the term “Plan” means a plan (within the meaning of
Section 3(3) of ERISA) subject to Title IV of ERISA with respect to which the
Company or any of its subsidiaries may have any liability.

(jj)    Neither the Company nor any of its subsidiaries or affiliates, nor any
director, officer, or employee, nor, to the Company’s knowledge, any agent or
representative of the Company or of any of its subsidiaries or affiliates, has
taken or will take any action in furtherance of an offer, payment, promise to
pay, or authorization or approval of the payment or giving of money, property,
gifts or anything else of value, directly or indirectly, to any “government
official” (including any officer or employee of a government or government-owned
or controlled entity or of a public international organization, or any person
acting in an official capacity for or on behalf of any of the foregoing, or any
political party or party official or candidate for political office, or any
other person) to influence official action or secure an improper advantage; and
the Company and its subsidiaries and affiliates have conducted their businesses
in compliance with applicable anti-corruption laws and have instituted and
maintain and will continue to maintain policies and procedures designed to
promote and achieve compliance with such laws and with the representation and
warranty contained herein.

 

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(kk)    The operations of the Company and its subsidiaries are and have been
conducted at all times in material compliance with all applicable financial
recordkeeping and reporting requirements, including those of the Bank Secrecy
Act, as amended by Title III of the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 (USA PATRIOT Act), and the applicable anti-money laundering statutes of
jurisdictions where the Company and its subsidiaries conduct business, the rules
and regulations thereunder and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental agency
(collectively, the “Anti-Money Laundering Laws”), and no action, suit or
proceeding by or before any court or governmental agency, authority or body or
any arbitrator involving the Company or any of its subsidiaries with respect to
the Anti-Money Laundering Laws is pending or, to the best knowledge of the
Company, threatened.

(ll)    (i) Neither the Company nor any of its subsidiaries, nor any director,
officer, or employee thereof, nor, to the Company’s knowledge, any agent,
affiliate or representative of the Company or any of its subsidiaries, is an
individual or entity (“Person”) that is, or is owned or controlled by a Person
that is:

(A) the subject of any sanctions administered or enforced by the U.S. Department
of Treasury’s Office of Foreign Assets Control (“OFAC”), the United Nations
Security Council (“UNSC”), the European Union (“EU”), Her Majesty’s Treasury
(“HMT”), or other relevant sanctions authority (collectively, “Sanctions”), nor

(B) located, organized or resident in a country or territory that is the subject
of Sanctions (including, without limitation, Crimea, Cuba, Iran, North Korea,
Sudan and Syria).

(ii) The Company will not, directly or indirectly, use the proceeds of the
offering of the Securities, or lend, contribute or otherwise make available such
proceeds to any subsidiary, joint venture partner or other Person:

(A) to fund or facilitate any activities or business of or with any Person or in
any country or territory that, at the time of such funding or facilitation, is
the subject of Sanctions; or

(B) in any other manner that will result in a violation of Sanctions by any
Person (including any Person participating in the offering, whether as
underwriter, advisor, investor or otherwise).

(iii) For the past 5 years, the Company and its subsidiaries have not knowingly
engaged in, are not now knowingly engaged in, and will not engage in, any
dealings or transactions with any Person, or in any country or territory, that
at the time of the dealing or transaction is or was the subject of Sanctions.

 

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(mm)    There is and has been no failure on the part of the Company and any of
the Company’s directors or officers, in their capacities as such, to comply with
Section 402, related to loans, and Sections 302 and 906, related to
certifications, of the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated in connection therewith (the “Sarbanes-Oxley Act”), or, in any
material respect, with any other provision of the Sarbanes-Oxley Act.

(nn)    The interactive data in eXtensible Business Reporting Language included
or incorporated by reference in the Preliminary Memorandum, the Time of Sale
Memorandum or the Final Memorandum fairly presents the information called for in
all material respects and has been prepared in accordance with the Commission’s
rules and guidelines applicable thereto.

(oo)    Prior to the date hereof, the Company has furnished to the
Representatives letters, each substantially in the form of Exhibit A hereto,
duly executed by each executive officer and director of the Company set forth on
Annex A and addressed to the Representatives.

Any certificate signed by any officer of the Company and delivered to the
Representatives or counsel for the Initial Purchasers in connection with the
offering of the Securities shall be deemed a representation and warranty by the
Company, as to matters covered thereby, to each Initial Purchaser.

2.    Purchase and Sale. (a) Subject to the terms and conditions and in reliance
upon the representations and warranties herein set forth, the Company agrees to
sell to each Initial Purchaser, and each Initial Purchaser agrees, severally and
not jointly, to purchase from the Company, at a purchase price of 98.375% of the
principal amount thereof, plus accrued interest, if any, from March 17, 2017 to
the Closing Date, the principal amount of Firm Securities set forth opposite
such Initial Purchaser’s name in Schedule I hereto.

(b)    Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option to the several Initial Purchasers to purchase, severally and not jointly,
the Option Securities at the same purchase price as Initial Purchasers shall pay
for the Firm Securities, plus accrued interest, if any, from March 17, 2017 to
the settlement date for the Option Securities. The option may be exercised only
to cover over-allotments in the sale of the Firm Securities by the Initial
Purchasers. The option may be exercised in whole or in part at any time (but not
more than once) on or before the 13th day after the date of the Final Memorandum
upon written or telegraphic notice by the Representatives to the Company setting
forth the principal amount of Option Securities as to which the several Initial
Purchasers are exercising the option and the settlement date. Delivery of the
Option Securities, and payment therefor, shall be made as provided in Section 3
hereof. The principal amount of Option Securities to be purchased by each
Initial Purchaser shall be the same percentage of the total principal amount of
Option Securities to be purchased by the several Initial Purchasers as such
Initial Purchaser is purchasing of the Firm Securities, subject to such
adjustments as you in your absolute discretion shall make to eliminate any
fractional Securities.

3.    Delivery and Payment. (a) Delivery of and payment for the Firm Securities
and the Option Securities (if the option provided for in Section 2(b) hereof
shall have been exercised on or before the first Business Day immediately
preceding the Closing Date) shall be made at 10:00 A.M., New York City time, on
March 17, 2017, or at such time on such later date

 

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not more than three Business Days after the foregoing date as the
Representatives shall designate, which date and time may be postponed by
agreement between the Representatives and the Company or as provided in
Section 9 hereof (each such date and time of delivery and payment for the
Securities being herein called the “Closing Date”). Delivery of the Securities
shall be made to the Representatives for the respective accounts of the several
Initial Purchasers against payment by the several Initial Purchasers through the
Representatives of the purchase price thereof to or upon the order of the
Company by wire transfer payable in same-day funds to the account specified by
the Company. Delivery of the Securities shall be made through the facilities of
The Depository Trust Company unless the Representatives shall otherwise
instruct.

(b)    If the option provided for in Section 2(b) hereof is exercised after the
first Business Day immediately preceding the Closing Date, the Company will
deliver the Option Securities (at the expense of the Company) to the
Representatives on the date specified by the Representatives (which shall be
within three Business Days after exercise of said option) for the respective
accounts of the several Initial Purchasers, against payment by the several
Initial Purchasers through the Representatives of the purchase price thereof to
or upon the order of the Company by wire transfer payable in same-day funds to
the account specified by the Company. If settlement for the Option Securities
occurs after the Closing Date, the Company will deliver to the Representatives
on the settlement date for the Option Securities, and the obligation of the
Initial Purchasers to purchase the Option Securities shall be conditioned upon
receipt of, supplemental opinions, certificates and letters confirming as of
such date the opinions, certificates and letters delivered on the Closing Date
pursuant to Section 6 hereof.

4.    Offering by Initial Purchasers. (a) Each Initial Purchaser acknowledges
that the Securities and any shares of Common Stock issuable upon conversion
thereof have not been and will not be registered under the Act and may not be
offered or sold within the United States except pursuant to an exemption from,
or in a transaction not subject to, the registration requirements of the Act.

(b)    Each Initial Purchaser, severally and not jointly, represents and
warrants to and agrees with the Company that:

(i)    it has not offered or sold, and will not offer or sell, any Securities
within the United States as part of their distribution at any time except to
those it reasonably believes to be “qualified institutional buyers” (as defined
in Rule 144A under the Act);

(ii)    neither it nor any person acting on its behalf has made or will make
offers or sales of the Securities in the United States by means of any form of
general solicitation or general advertising (within the meaning of Regulation D)
in the United States;

(iii)    in connection with each sale pursuant to Section 4(b)(i), it has taken
or will take reasonable steps to ensure that the purchaser of such Securities is
aware that such sale may be made in reliance on Rule 144A;

 

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(iv)    it is an “accredited investor” (as defined in Rule 501(a) of Regulation
D);

5.    Agreements. The Company agrees with each Initial Purchaser that:

(a)    The Company will furnish to each Initial Purchaser and to counsel for the
Initial Purchasers, without charge, during the period referred to in Section
5(c) below, as many copies of the materials contained in the Disclosure Package
and the Final Memorandum and any amendments and supplements thereto as they may
reasonably request.

(b)    The Company will not amend or supplement the Disclosure Package or the
Final Memorandum, other than by filing documents under the Exchange Act that are
incorporated by reference therein, without the prior written consent of the
Representatives; provided, however, that prior to the completion of the
distribution of the Securities by the Initial Purchasers (as determined by the
Initial Purchasers), the Company will not file any document under the Exchange
Act that is incorporated by reference in the Disclosure Package or the Final
Memorandum unless, prior to such proposed filing, the Company has furnished the
Representatives with a copy of such document for their review and the
Representatives have not reasonably objected to the filing of such document. The
Company will promptly advise the Representatives when any document filed under
the Exchange Act that is incorporated by reference in the Disclosure Package or
the Final Memorandum shall have been filed with the Commission.

(c)    If at any time prior to the completion of the sale of the Securities by
the Initial Purchasers (as determined by the Representatives), any event occurs
as a result of which the Disclosure Package or the Final Memorandum, as then
amended or supplemented, would include any untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made or the circumstances
then prevailing, not misleading, or if it should be necessary to amend or
supplement the Disclosure Package or the Final Memorandum to comply with
applicable law, the Company will promptly (i) notify the Representatives of any
such event; (ii) subject to the requirements of Section 5(b), prepare an
amendment or supplement that will correct such statement or omission or effect
such compliance; and (iii) supply any supplemented or amended Disclosure Package
or Final Memorandum to the several Initial Purchasers and counsel for the
Initial Purchasers without charge in such quantities as they may reasonably
request.

(d)    Without the prior written consent of the Representatives, the Company has
not given and will not give to any prospective purchaser of the Securities any
written information concerning the offering of the Securities other than
materials contained in the Disclosure Package, the Final Memorandum or any other
offering materials prepared by or with the prior written consent of the
Representatives.

(e)    The Company will arrange, if necessary, for the qualification of the
Securities for sale by the Initial Purchasers under the laws of such
jurisdictions as the Representatives may designate and will maintain such
qualifications in effect so long as required for the sale of the Securities;
provided that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any
action that would subject it to

 

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service of process in suits, other than those arising out of the offering or
sale of the Securities, in any jurisdiction where it is not now so subject. The
Company will promptly advise the Representatives of the receipt by the Company
of any notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose.

(f)    The Company will not, and will not permit any of its controlled
Affiliates to, resell any Securities or shares of Common Stock issued upon
conversion thereof that have been acquired by any of them.

(g)    None of the Company, its Affiliates, or any person acting on its or their
behalf will, directly or indirectly, make offers or sales of any security, or
solicit offers to buy any security, under circumstances that would require the
registration of the Securities or Common Stock issuable upon conversion thereof
under the Act.

(h)    Unless the Securities have been registered under the Act, any information
provided by the Company, its Affiliates or any person acting on its or their
behalf to publishers of publicly available databases about the terms of the
Securities shall include a statement that the Securities have not been
registered under the Act and are subject to restrictions under Rule 144A under
the Act.

(i)    None of the Company, its Affiliates, or any person acting on its or their
behalf will engage in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with any offer or sale of the
Securities in the United States.

(j)    For so long as any of the Securities or the Common Stock issuable upon
the conversion thereof are “restricted securities” within the meaning of Rule
144(a)(3) under the Act, the Company will, during any period in which it is not
subject to and in compliance with Section 13 or 15(d) of the Exchange Act,
provide to each holder of such restricted securities and to each prospective
purchaser (as designated by such holder) of such restricted securities, upon the
request of such holder or prospective purchaser, any information required to be
provided by Rule 144A(d)(4) under the Act. This covenant is intended to be for
the benefit of the holders, and the prospective purchasers designated by such
holders, from time to time of such restricted securities.

(k)    The Company will cooperate with the Representatives and use its
commercially reasonable efforts to permit the Securities to be eligible for
clearance and settlement through The Depository Trust Company.

(l)    The Company will reserve and keep available at all times, free of
pre-emptive rights, the Maximum Number of Shares.

(m)    The Company will use its commercially reasonable efforts to effect and
maintain the listing of the Maximum Number of Shares on The Nasdaq Global Select
Market (“Nasdaq”) on or prior to the Closing Date.

 

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(n)    Each of the Securities and the shares of Common Stock issuable upon
conversion thereof will bear, to the extent applicable, the legend contained in
“Transfer Restrictions” in the Preliminary Memorandum and the Final Offering
Memorandum for the time period and upon the other terms stated therein.

(o)    The Company will not for a period of 60 days following the Execution
Time, without the prior written consent of Morgan Stanley & Co. LLC, directly or
indirectly, offer, sell, contract to sell, pledge, otherwise dispose of, enter
into any transaction which is designed to, or might reasonably be expected to,
result in the disposition (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise) by the Company or any Affiliate
of the Company or any person in privity with the Company or any Affiliate of the
Company of, file (or participate in the filing of) a registration statement with
the Commission in respect of, or establish or increase a put equivalent position
or liquidate or decrease a call equivalent position within the meaning of
Section 16 of the Exchange Act in respect of, any shares of capital stock of the
Company or any securities convertible into, or exercisable or exchangeable for,
shares of capital stock of the Company (other than the Securities), or publicly
announce an intention to effect any such transaction; provided, however, that
the Company may (i) issue and sell Common Stock or securities convertible into
or exchangeable for Common Stock pursuant to any employee stock option plan,
stock ownership plan or dividend reinvestment plan of the Company described in
the Disclosure Package and the Final Memorandum and in effect at the Execution
Time, (ii) issue Common Stock issuable upon the conversion of the Securities or
other securities or the exercise of warrants outstanding at the Execution Time
and described in the Disclosure Package and the Final Memorandum and (iii) do
any of the foregoing in connection with the acquisition (whether through merger,
share purchase, share exchange or otherwise) of a company, division, business or
assets or strategic transactions, provided that every recipient of any such
securities described in this clause (iii) (and every party that will be entitled
to receive such securities upon closing of the applicable transaction or
otherwise has rights with respect to such securities) agrees in writing to be
subject to this paragraph for the remainder of the 60 day period, provided that
in the case of clause (iii), the number of shares of Common Stock issued or
issuable pursuant to such clause shall not, in the aggregate, exceed 5% of the
shares of Common Stock outstanding on the date hereof.

(p)    The Company will not take, directly or indirectly, any action designed to
or that has constituted, or that might reasonably be expected to cause or
result, under the Exchange Act or otherwise, in stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Securities.

(q)    Between the date hereof and the Closing Date, the Company will not do or
authorize any act or thing that would result in an adjustment of the conversion
price of the Securities.

(r)    The Company will, for a period of twelve months following the Execution
Time, furnish to the Representatives (i) all reports or other communications
(financial or other) generally made available to stockholders, and deliver such
reports and communications to the Representatives as soon as they are available,
unless such documents are furnished to or filed with the Commission or any
securities exchange on which any class of securities of the

 

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Company is listed and generally made available to the public and (ii) such
additional information concerning the business and financial condition of the
Company as the Representatives may from time to time reasonably request (such
statements to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports furnished to
stockholders).

(s)    The Company will comply with all applicable securities and other laws,
rules and regulations, including, without limitation, the Sarbanes-Oxley Act,
and use its best efforts to cause the Company’s directors and officers, in their
capacities as such, to comply with such laws, rules and regulations, including,
without limitation, the provisions of the Sarbanes-Oxley Act.

(t)    The Company will prepare a final term sheet, containing solely a
description of the Securities and the offering thereof, in the form approved by
you and attached as Schedule II hereto.

(u)    The Company agrees to pay the costs and expenses relating to the
following matters: (i) the preparation of the Indenture, the issuance of the
Securities, the fees of the Trustee and the issuance of the Common Stock upon
conversion of the Securities, including up to the Maximum Amount of Shares;
(ii) the preparation, printing or reproduction of the materials contained in the
Disclosure Package and the Final Memorandum and each amendment or supplement to
either of them; (iii) the printing (or reproduction) and delivery (including
postage, air freight charges and charges for counting and packaging) of such
copies of the materials contained in the Disclosure Package and the Final
Memorandum, and all amendments or supplements to either of them, as may, in each
case, be reasonably requested for use in connection with the offering and sale
of the Securities; (iv) the preparation, printing, authentication, issuance and
delivery of the Securities; (v) any stamp or transfer taxes in connection with
the original issuance and sale of the Securities; (vi) the printing (or
reproduction) and delivery of this Agreement, any blue sky memorandum and all
other agreements or documents printed (or reproduced) and delivered in
connection with the offering of the Securities; (vii) any registration or
qualification of the Securities for offer and sale under the securities or blue
sky laws of the several states and any other jurisdictions specified pursuant to
Section 5(e) (including filing fees and the reasonable fees and expenses of
counsel for the Initial Purchasers relating to such registration and
qualification); (viii) admitting the Securities for clearance and settlement
through The Depository Trust Company; (ix) the transportation and other expenses
incurred by or on behalf of Company representatives in connection with
presentations to prospective purchasers of the Securities; (x) the fees and
expenses of the Company’s accountants and the fees and expenses of counsel
(including local and special counsel) for the Company; and (xi) all other costs
and expenses incident to the performance by the Company of its obligations
hereunder.

6.    Conditions to the Obligations of the Initial Purchasers. The obligations
of the Initial Purchasers to purchase and pay for the Firm Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties of the Company contained herein at the Execution
Time, the Closing Date (as though made on such Closing Date) and any settlement
date pursuant to Section 3 hereof, to the accuracy of the statements of the
Company made in any certificates pursuant to the provisions hereof, to the

 

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performance by the Company of its obligations hereunder and to the following
additional conditions precedent:

(a)    The Company shall have requested and caused Wilson Sonsini Goodrich &
Rosati, counsel for the Company, to furnish to the Representatives its opinion,
dated the Closing Date and addressed to the Initial Purchasers, to the effect of
the substantive paragraphs set forth on Annex B hereto.

(b)    The Representatives shall have received from Davis Polk & Wardwell LLP,
counsel for the Initial Purchasers, such opinion or opinions, dated the Closing
Date and addressed to the Initial Purchasers, with respect to the issuance and
sale of the Securities, the Indenture, the Disclosure Package, the Final
Memorandum (as amended or supplemented at the Closing Date) and other related
matters as the Representatives may reasonably require, and the Company shall
have furnished to such counsel such documents as they request for the purpose of
enabling them to pass upon such matters.

(c)    The Company shall have furnished to the Representatives a certificate of
the Company, signed by (x) the Chairman of the Board or the Chief Executive
Officer and (y) the principal financial or accounting officer of the Company,
dated the Closing Date, to the effect that the signers of such certificate have
carefully examined the Disclosure Package and the Final Memorandum and any
amendments or supplements thereto, and this Agreement and that:

(i)    the representations and warranties of the Company in this Agreement are
true and correct on and as of the Closing Date with the same effect as if made
on the Closing Date, and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied hereunder
at or prior to the Closing Date; and

(ii)    since the date of the most recent financial statements included or
incorporated by reference in the Disclosure Package and the Final Memorandum
(exclusive of any amendment or supplement thereto), there has been no material
adverse change in the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of business,
except as set forth in or contemplated in the Disclosure Package and the Final
Memorandum (exclusive of any amendment or supplement thereto).

(d)    [Reserved].

(e)    At the Execution Time and at the Closing Date, the Company shall have
requested and caused each of BDO USA, LLP to furnish to the Representatives
letters, dated respectively as of the Execution Time and as of the Closing Date,
in each case in form and substance satisfactory to the Representatives.

(f)    On the date hereof, the Representatives shall have received a written
certificate executed by the Chief Financial Officer of the Company, the form of
which is attached as Schedule III hereto.

 

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(g)    Subsequent to the Execution Time or, if earlier, the dates as of which
information is given in the Disclosure Package (exclusive of any amendment or
supplement thereto) and the Final Memorandum (exclusive of any amendment or
supplement thereto), there shall not have been (i) any change or decrease
specified in the letter or letters referred to in paragraph (e) of this
Section 6; or (ii) any change, or any development involving a prospective
change, in or affecting the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and its subsidiaries taken as a
whole, whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Disclosure Package and
the Final Memorandum (exclusive of any amendment or supplement thereto), the
effect of which, in any case referred to in clause (i) or (ii) above, is, in the
sole judgment of the Representatives, so material and adverse as to make it
impractical or inadvisable to proceed with the offering or delivery of the
Securities as contemplated in the Disclosure Package and the Final Memorandum
(exclusive of any amendment or supplement thereto).

(h)    Subsequent to the Execution Time and prior to the Closing Date, there
shall not have occurred any downgrading, nor shall any notice have been given of
any intended or potential downgrading or of any review for a possible change
that does not indicate the direction of the possible change, in the rating
accorded any of the debt securities of the Company or any of its subsidiaries by
any “nationally recognized statistical rating organization,” as such term is
defined in Section 3(a)(62) of the Exchange Act.

(i)    The Securities shall be eligible for clearance and settlement through The
Depository Trust Company.

(j)    Prior to the Execution Time, the Company shall have furnished to the
Representatives a letter substantially in the form of Exhibit A hereto from the
executive officers and directors of the Company set forth on Annex A and
addressed to the Initial Purchasers.

(k)    The Company shall have caused the Maximum Number of Shares to be approved
for listing, subject to issuance, on Nasdaq.

(l)    Prior to the Closing Date, the Company shall have furnished to the
Representatives such further information, certificates and documents as the
Representatives may reasonably request.

If any of the conditions specified in this Section 6 shall not have been
fulfilled when and as provided in this Agreement, or if any of the opinions and
certificates mentioned above or elsewhere in this Agreement shall not be
reasonably satisfactory in form and substance to the Representatives and counsel
for the Initial Purchasers, this Agreement and all obligations of the Initial
Purchasers hereunder may be cancelled at, or at any time prior to, the Closing
Date by the Representatives. Notice of such cancellation shall be given to the
Company in writing or by telephone or facsimile confirmed in writing.

The documents required to be delivered by this Section 6 will be delivered at
the office of counsel for the Initial Purchasers, at 450 Lexington Avenue, New
York, New York 10017, on the Closing Date.

 

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7.    Reimbursement of Expenses. If the sale of the Securities provided for
herein is not consummated because any condition to the obligations of the
Initial Purchasers set forth in Section 6 hereof is not satisfied, because of
any termination pursuant to Section 10 hereof or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof other than by reason of a default by any of
the Initial Purchasers, the Company will reimburse the Initial Purchasers
severally on demand for all expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by them in connection
with the proposed purchase and sale of the Securities.

8.    Indemnification and Contribution. (a) The Company agrees to indemnify and
hold harmless each Initial Purchaser, the directors, officers, employees,
Affiliates and agents of each Initial Purchaser and each person who controls any
Initial Purchaser within the meaning of either the Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
other U.S. federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary Memorandum, the
Final Memorandum, any Issuer Written Information or any other written
information used by or on behalf of the Company in connection with the offer or
sale of the Securities, or in any amendment or supplement thereto or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and agrees to reimburse each such indemnified party, as incurred,
for any legal or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made in the Preliminary Memorandum, the Final Memorandum, or in
any amendment thereof or supplement thereto, in reliance upon and in conformity
with written information furnished to the Company by or on behalf of any Initial
Purchaser through the Representatives specifically for inclusion therein it
being understood and agreed that the only such information furnished by or on
behalf of any Initial Purchaser consists of the information described as such in
Subsection (b) below. This indemnity agreement will be in addition to any
liability that the Company may otherwise have.

(b)    Each Initial Purchaser severally, and not jointly, agrees to indemnify
and hold harmless the Company, each of its directors, each of its officers, and
each person who controls the Company within the meaning of either the Act or the
Exchange Act, to the same extent as the foregoing indemnity to each Initial
Purchaser, but only with reference to information furnished to the Company by or
on behalf of such Initial Purchaser through the Representatives specifically for
inclusion in the Preliminary Memorandum, the Final Memorandum or in any
amendment or supplement thereto. This indemnity agreement will be in addition to
any liability that any Initial Purchaser may otherwise have. The Company
acknowledges that the statements set forth under the heading “Plan of
Distribution” in the fourth, twelfth and fourteenth paragraph in the Preliminary
Memorandum and the Final Memorandum constitute the only information furnished in
writing by or on behalf of the Initial Purchasers for inclusion in the
Preliminary Memorandum, the Final Memorandum or in any amendment or supplement
thereto.

 

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(c)    Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel (including
local counsel) of the indemnifying party’s choice at the indemnifying party’s
expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel,
other than local counsel if not appointed by the indemnifying party, retained by
the indemnified party or parties except as set forth below); provided, however,
that such counsel shall be satisfactory to the indemnified party.
Notwithstanding the indemnifying party’s election to appoint counsel (including
local counsel) to represent the indemnified party in an action, the indemnified
party shall have the right to employ separate counsel (including local counsel),
and the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest; (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties that are different
from or additional to those available to the indemnifying party; (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action; or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and (ii) does
not include a statement as to, or an admission of, fault, culpability or a
failure to act, by or on behalf of any indemnified party.

(d)    In the event that the indemnity provided in paragraph (a) or (b) of this
Section 8 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, the Company and the Initial Purchasers severally agree to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending any loss, claim, damage, liability or action) (collectively “Losses”)
to which the Company and one or more of the Initial Purchasers may be subject in
such proportion as is appropriate to reflect the relative benefits received by
the

 

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Company on the one hand and by the Initial Purchasers on the other from the
offering of the Securities; provided, however, that in no case shall any Initial
Purchaser be responsible for any amount in excess of the purchase discount or
commission applicable to the Securities purchased by such Initial Purchaser
hereunder. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company and the Initial Purchasers severally
shall contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Initial Purchasers on the other in connection with the statements or
omissions that resulted in such Losses, as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to
the total net proceeds from the offering (before deducting expenses) received by
it, and benefits received by the Initial Purchasers shall be deemed to be equal
to the total purchase discounts and commissions. Relative fault shall be
determined by reference to, among other things, whether any untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information provided by the Company on the one hand
or the Initial Purchasers on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company and the Initial Purchasers agree
that it would not be just and equitable if contribution were determined by pro
rata allocation or any other method of allocation that does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this paragraph (d), no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 8, each person who controls an Initial Purchaser within the
meaning of either the Act or the Exchange Act and each director, officer,
employee, Affiliate and agent of an Initial Purchaser shall have the same rights
to contribution as such Initial Purchaser, and each person who controls the
Company within the meaning of either the Act or the Exchange Act and each
officer and director of the Company shall have the same rights to contribution
as the Company, subject in each case to the applicable terms and conditions of
this paragraph (d).

9.    Default by an Initial Purchaser. If any one or more Initial Purchasers
shall fail to purchase and pay for any of the Securities agreed to be purchased
by such Initial Purchaser hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Initial Purchasers shall be obligated severally to take
up and pay for (in the respective proportions which the principal amount of
Securities set forth opposite their names in Schedule I hereto bears to the
aggregate principal amount of Securities set forth opposite the names of all the
remaining Initial Purchasers) the Securities which the defaulting Initial
Purchaser or Initial Purchasers agreed but failed to purchase; provided,
however, that in the event that the aggregate principal amount of Securities
which the defaulting Initial Purchaser or Initial Purchasers agreed but failed
to purchase shall exceed 10% of the aggregate principal amount of Securities set
forth in Schedule I hereto, the remaining Initial Purchasers shall have the
right to purchase all, but shall not be under any obligation to purchase any, of
the Securities, and if such nondefaulting Initial Purchasers do not purchase all
the Securities, this Agreement will terminate without liability to any
nondefaulting Initial Purchaser or the Company. In the event of a default by any
Initial Purchaser as set forth in this Section 9, the Closing Date shall be
postponed for such period, not exceeding five Business Days, as the
Representatives shall determine in order that the required changes in the Final

 

21

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Memorandum or in any other documents or arrangements may be effected. Nothing
contained in this Agreement shall relieve any defaulting Initial Purchaser of
its liability, if any, to the Company or any nondefaulting Initial Purchaser for
damages occasioned by its default hereunder.

10.    Termination. This Agreement shall be subject to termination in the
absolute discretion of the Representatives, by notice given to the Company prior
to delivery of, and payment for, the Securities, if at any time prior to such
delivery and payment (i) trading in the Company’s Common Stock shall have been
suspended by the Commission or the Nasdaq Global Select Market or trading in
securities generally on the Nasdaq Global Select Market or the New York Stock
Exchange shall have been suspended or limited or minimum prices shall have been
established on any such exchanges; (ii) there shall have occurred any material
disruption in commercial banking or securities settlement or clearance services
in the United States the effect of which is such as to make it, in the sole
judgment of the Representatives, impractical to proceed with the offering or
delivery of the Securities as contemplated in the Disclosure Package and the
Final Memorandum (exclusive of any amendment or supplement thereto); (iii) a
banking moratorium shall have been declared either by U.S. federal or New York
State authorities or by the authorities of Massachusetts; or (iv) there shall
have occurred any outbreak or escalation of hostilities, declaration by the
United States of a national emergency or war or other calamity or crisis the
effect of which on financial markets is such as to make it, in the sole judgment
of the Representatives, impractical to proceed with the offering or delivery of
the Securities as contemplated in the Disclosure Package and the Final
Memorandum (exclusive of any amendment or supplement thereto).

11.    Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company or
its officers and of the Initial Purchasers set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Initial Purchasers or the Company or any of the
indemnified persons referred to in Section 8 hereof, and will survive delivery
of and payment for the Securities. The provisions of Sections 7 and 8 hereof
shall survive the termination or cancellation of this Agreement.

12.    Notices. All communications hereunder will be in writing and effective
only on receipt, and, if sent to the Representatives, will be mailed, delivered
or telefaxed to Morgan Stanley & Co. LLC, 1585 Broadway, New York, NY 10036,
Attention: Convertible Debt Syndicate Desk, with a copy to the Legal Department,
and Barclays Capital Inc., 745 Seventh Avenue, New York, NY 10019, Attention:
Syndicate Registration, Facsimile: (646) 834-8133; or, if sent to the Company,
will be mailed, delivered or telefaxed to 408-317-0310 and confirmed to it at 1
Wayside Road, Burlington, Massachusetts 01803, attention of the Legal Department
with a copy to Wilson, Sonsini, Goodrich & Rosati, 1700 K Street, NW Fifth
Floor, Washington, DC 20006, telefax 212-999-5899, Attention: Robert Sanchez.

13.    Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the indemnified
persons referred to in Section 8 hereof and their respective successors, and,
except as expressly set forth in Section 5(j) hereof, no other person will have
any right or obligation hereunder.

 

22

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14.    Jurisdiction. The Company agrees that any suit, action or proceeding
against the Company brought by any Initial Purchaser, the directors, officers,
employees and agents of any Initial Purchaser, or by any person who controls any
Initial Purchaser, arising out of or based upon this Agreement or the
transactions contemplated hereby may be instituted in any State or U.S. federal
court in The City of New York and County of New York, and waives any objection
which it may now or hereafter have to the laying of venue of any such
proceeding, and irrevocably submits to the non-exclusive jurisdiction of such
courts in any suit, action or proceeding. The Company hereby appoints CT
Corporation, as its authorized agent (the “Authorized Agent”) upon whom process
may be served in any suit, action or proceeding arising out of or based upon
this Agreement or the transactions contemplated herein that may be instituted in
any State or U.S. federal court in The City of New York and County of New York,
by any Initial Purchaser, the directors, officers, employees, Affiliates and
agents of any Initial Purchaser, or by any person who controls any Initial
Purchaser, and expressly accepts the non-exclusive jurisdiction of any such
court in respect of any such suit, action or proceeding. The Company hereby
represents and warrants that the Authorized Agent has accepted such appointment
and has agreed to act as said agent for service of process, and the Company
agrees to take any and all action, including the filing of any and all documents
that may be necessary to continue such appointment in full force and effect as
aforesaid. Service of process upon the Authorized Agent shall be deemed, in
every respect, effective service of process upon the Company. Notwithstanding
the foregoing, any action arising out of or based upon this Agreement may be
instituted by any Initial Purchaser, the directors, officers, employees,
Affiliates and agents of any Initial Purchaser, or by any person who controls
any Initial Purchaser, in any court of competent jurisdiction in Delaware.

15.    Integration. This Agreement supersedes all prior agreements and
understandings (whether written or oral) between the Company and the Initial
Purchasers, or any of them, with respect to the subject matter hereof.

16.    Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed within the State of New York.

17.    Waiver of Jury Trial. The Company hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.

18.    No Fiduciary Duty. The Company hereby acknowledges that (a) the purchase
and sale of the Securities pursuant to this Agreement is an arm’s-length
commercial transaction between the Company, on the one hand, and the Initial
Purchasers and any Affiliate through which it may be acting, on the other,
(b) the Initial Purchasers are acting as principal and not as an agent or
fiduciary of the Company and (c) the Company’s engagement of the Initial
Purchasers in connection with the offering and the process leading up to the
offering is as independent contractors and not in any other capacity.
Furthermore, the Company agrees that it is solely responsible for making its own
judgments in connection with the offering (irrespective of whether any of the
Initial Purchasers has advised or is currently advising the Company on related
or other matters). The Company agrees that it will not claim that the Initial
Purchasers have rendered advisory services of any nature or respect, or owe an
agency, fiduciary or similar duty to the Company in connection with such
transaction or the process leading thereto.

 

23

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19.    Currency. Each reference in this Agreement to U.S. dollars (the “relevant
currency”), including by use of the symbol “$”, is of the essence. To the
fullest extent permitted by law, the obligation of the Company in respect of any
amount due under this Agreement will, notwithstanding any payment in any other
currency (whether pursuant to a judgment or otherwise), be discharged only to
the extent of the amount in the relevant currency that the party entitled to
receive such payment may, in accordance with its normal procedures, purchase
with the sum paid in such other currency (after any premium and costs of
exchange) on the Business Day immediately following the day on which such party
receives such payment. If the amount in the relevant currency that may be so
purchased for any reason falls short of the amount originally due, the Company
will pay such additional amounts, in the relevant currency, as may be necessary
to compensate for the shortfall. Any obligation of the Company not discharged by
such payment will, to the fullest extent permitted by applicable law, be due as
a separate and independent obligation and, until discharged as provided herein,
will continue in full force and effect.

20.    Waiver of Immunity. To the extent that the Company has or hereafter may
acquire any immunity (sovereign or otherwise) from any legal action, suit or
proceeding, from jurisdiction of any court or from set-off or any legal process
(whether service or notice, attachment in aid or otherwise) with respect to
itself or any of its property, the Company hereby irrevocably waives and agrees
not to plead or claim such immunity in respect of its obligations under this
Agreement.

21.    Waiver of Tax Confidentiality. Notwithstanding anything herein to the
contrary, purchasers of the Securities (and each employee, representative or
other agent of a purchaser) may disclose to any and all persons, without
limitation of any kind, the U.S. tax treatment and U.S. tax structure of any
transaction contemplated herein and all materials of any kind (including
opinions or other tax analyses) that are provided to the purchasers of the
Securities relating to such U.S. tax treatment and U.S. tax structure, other
than any information for which nondisclosure is reasonably necessary in order to
comply with applicable securities laws.

22.    Counterparts. This Agreement may be signed in one or more counterparts,
each of which shall constitute an original and all of which together shall
constitute one and the same agreement.

23.    Headings. The section headings used herein are for convenience only and
shall not affect the construction hereof.

24.    Interpretation. For purposes of this agreement, any statement as to any
person acting on behalf of the Company or its Affiliates shall be deemed to not
include the Initial Purchasers or any person acting on their behalf.

25.    Definitions. The terms that follow, when used in this Agreement, shall
have the meanings indicated.

 

24

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“Act” shall mean the U.S. Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.

“Affiliate” shall have the meaning specified in Rule 501(b) of Regulation D.

“Business Day” shall mean any day other than a Saturday, a Sunday or a legal
holiday or a day on which banking institutions or trust companies are authorized
or obligated by law to close in The City of New York.

“Commission” shall mean the Securities and Exchange Commission.

“Disclosure Package” shall mean (i) the Preliminary Memorandum, as amended or
supplemented at the Execution Time, (ii) the final term sheet prepared pursuant
to Section 5(s) hereto and in the form attached as Schedule II hereto and
(iii) any Issuer Written Information.

“Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.

“Execution Time” shall mean the date and time that this Agreement is executed
and delivered by the parties hereto.

“Investment Company Act” shall mean the U.S. Investment Company Act of 1940, as
amended, and the rules and regulations of the Commission promulgated thereunder.

“Issuer Written Information” shall mean any writings in addition to the
Preliminary Memorandum that the parties expressly agree in writing to treat as
part of the Disclosure Package.

“Regulation D” shall mean Regulation D under the Act.

“Regulation S” shall mean Regulation S under the Act.

“Regulation S-X” shall mean Regulation S-X under the Act.

“Trust Indenture Act” shall mean the U.S. Trust Indenture Act of 1939, as
amended, and the rules and regulations of the Commission promulgated thereunder.

 

25

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If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement between the
Company and the several Initial Purchasers.

 

Very truly yours, Nuance Communications, Inc. By:  

/s/ Daniel D. Tempesta

  Name:   Daniel D. Tempesta   Title:   Executive Vice President and Chief
Financial Officer

 

26

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The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.

Morgan Stanley & Co. LLC By:  

/s/ David Oakes

  Name:   David Oakes   Title:   Managing Director

Acting on behalf of itself and the several Initial Purchasers named in Schedule
I hereto.

 

27

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The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.

Barclays Capital Inc. By:  

/s/ David Levin

  Name:   David Levin   Title:   Managing Director

Acting on behalf of itself and the

several Initial Purchasers named

in Schedule I hereto.

 

28

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SCHEDULE I

 

Initial Purchasers

   Principal Amount
of Firm
Securities to be
Purchased  

Morgan Stanley & Co. LLC

   U.S.$ 175,000,000  

Barclays Capital Inc.

   U.S.$ 105,000,000  

Deutsche Bank Securities Inc.

   U.S.$ 35,000,000  

RBC Capital Markets, LLC

   U.S.$ 35,000,000     

 

 

 

Total

   U.S.$ 350,000,000     

 

 

 

 

Sch-I-1

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SCHEDULE II

 

PRICING TERM SHEET    Strictly Confidential Dated March 13, 2017   

Nuance Communications, Inc.

$350,000,000

1.25% Senior Convertible Notes due 2025

The information in this pricing term sheet (this “Pricing Term Sheet”)
supplements Nuance Communications, Inc.’s preliminary offering memorandum, dated
March 13, 2017 (the “Preliminary Offering Memorandum”), and supersedes the
information in the Preliminary Offering Memorandum only to the extent
inconsistent with the information in the Preliminary Offering Memorandum. In all
other respects, this Pricing Term Sheet is qualified in its entirety by
reference to the Preliminary Offering Memorandum, including all other documents
incorporated by reference therein. Terms used herein but not defined herein
shall have the respective meanings as set forth in the Preliminary Offering
Memorandum. All references to dollar amounts are references to U.S. dollars.

 

Issuer:   Nuance Communications, Inc., a Delaware corporation. Ticker / Exchange
for Common Stock:   NUAN / The NASDAQ Global Select Market (“NASDAQ”). Title of
Securities:   1.25% Senior Convertible Notes due 2025 (the “Notes”). Aggregate
Principal Amount Offered:   $350,000,000 (or $410,000,000 if the initial
purchasers exercise their over-allotment option to purchase up to an additional
$60,000,000 principal amount of the Notes in full). Trade Date:   March 14,
2017. Expected Settlement Date:   March 17, 2017. Offering Price:   Each Note
will be issued at a price of 100% of its principal amount plus accrued interest,
if any, from March 17, 2017. Maturity Date:   April 1, 2025, unless earlier
converted or repurchased. Interest Rate:   1.25% per year. Interest will accrue
from March 17, 2017, and will be payable in cash in arrears on April 1 and
October 1 of each year, beginning October 1, 2017.   The Issuer will also pay
additional interest, if any, at its election as the sole remedy relating to the
failure to comply with reporting obligations as described in the Preliminary
Offering Memorandum under “Description of the Notes — Events of Default; Notice
and Waiver” and under the “Description of the Notes — No Registration Rights;
Additional Interest.” NASDAQ Last Reported Sale Price on March 13, 2017:  
$17.09 per share of the Issuer’s common stock. Conversion Premium:  
Approximately 30% above the NASDAQ Last Reported Sale Price on March 13, 2017.
Initial Conversion Price:   Approximately $22.22 per share of the Issuer’s
common stock.

 

Sch-II-1

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Initial Conversion Rate:    45.0106 shares of the Issuer’s common stock per
$1,000 principal amount of Notes. Use of Proceeds:    The Issuer estimates that
the net proceeds from the offering will be approximately $343.5 million, or
$402.5 million if the initial purchasers exercise their over-allotment option in
full. The Issuer intends to use $99.1 million of net proceeds from the offering
to fund the repurchase of shares of its common stock pursuant to transactions
negotiated with institutional investors concurrently with the pricing of the
offering. The Issuer intends to use the remaining net proceeds, together with
cash on hand, to repurchase, redeem, retire or otherwise repay all of its
outstanding 2.75% Senior Convertible Debentures due 2031, including the
repurchase of $17.8 million in aggregate principal amount of its outstanding
2.75% Senior Convertible Debentures due 2031 concurrently with this offering.
See “Use of Proceeds” in the Preliminary Offering Memorandum. Joint Book-Running
Managers:    Morgan Stanley & Co. LLC    Barclays Capital Inc. Co-Lead Managers:
   Deutsche Bank Securities Inc.    RBC Capital Markets, LLC CUSIP Number:   
67020Y AM2 ISIN:    US67020YAM21 Adjustment to Conversion Rate Upon a   
Non-Stock Change of Control:    The following table sets forth the number of
additional shares per $1,000 principal amount of Notes by which the conversion
rate shall be increased during the non-stock change of control conversion
observation period based on the effective date and stock price for the non-stock
change of control (as such terms are defined in the Preliminary Offering
Memorandum):

 

     Stock Price  

Effective Date

   $17.09      $20.00      $22.22      $25.00      $30.00      $40.00     
$55.00      $75.00      $100.00      $125.00      $160.00  

March 17, 2017

     13.5032        10.1055        8.2673        6.5616        4.5323       
2.4503        1.1735        0.5167        0.1936        0.0612        0.0000  

April 1, 2018

     13.5032        9.8265        7.9455        6.2196        4.2023       
2.1953        1.0165        0.4343        0.1561        0.0459        0.0000  

April 1, 2019

     13.5032        9.5875        7.6427        5.8824        3.8677       
1.9375        0.8638        0.3581        0.1232        0.0326        0.0000  

April 1, 2020

     13.5032        9.3500        7.3200        5.5128        3.4983       
1.6625        0.7105        0.2869        0.0950        0.0221        0.0000  

April 1, 2021

     13.5032        9.0485        6.9131        5.0528        3.0543       
1.3543        0.5531        0.2193        0.0701        0.0144        0.0000  

April 1, 2022

     13.5032        8.6340        6.3690        4.4560        2.5070       
1.0100        0.3951        0.1563        0.0476        0.0064        0.0000  

April 1, 2023

     13.5032        8.0010        5.5666        3.6132        1.8010       
0.6340        0.2447        0.1000        0.0290        0.0010        0.0000  

April 1, 2024

     13.5032        6.9230        4.2160        2.2952        0.8873       
0.2675        0.1135        0.0497        0.0138        0.0000        0.0000  

April 1, 2025

     13.5032        4.9895        0.0000        0.0000        0.0000       
0.0000        0.0000        0.0000        0.0000        0.0000        0.0000  

The exact stock prices and effective dates may not be set forth in the table
above, in which case

 

  •   if the stock price is between two stock price amounts on the table or the
effective date is between two dates on the table, the number of additional
shares will be determined by straight-line interpolation between the number of
additional shares set forth for the higher and lower stock price amounts and the
two dates, as applicable, based on a 365-day year;

 

  •   if the stock price is in excess of $160.00 per share (subject to
adjustment), no additional shares will be issued upon conversion;

 

  •   if the stock price is less than $17.09 per share (subject to adjustment),
no additional shares will be issued upon conversion.

 

Sch-II-2

--------------------------------------------------------------------------------

Notwithstanding the foregoing, in no event will the conversion rate exceed
58.5137 per $1,000 principal amount of the Notes, subject to adjustments in the
same manner as the conversion rate.

The Issuer’s obligation to deliver the additional shares could be considered a
penalty, in which case the enforceability of the obligation to deliver
additional shares would be subject to general principles of reasonableness of
economic remedies.

 

Sch-II-3

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Capitalization

The following table sets forth Nuance’s capitalization as of December 31, 2016

 

  •   on an actual basis; and

 

  •   and on a pro forma as adjusted basis to reflect (i) the completion of this
offering (assuming that the initial purchasers do not exercise their
over-allotment option), (ii) the use of proceeds, together with cash on hand, as
described in the “Use of Proceeds” section of the Preliminary Offering
Memorandum for the repurchase of $99.1 million of shares of common stock and the
repurchase of all of Nuance’s outstanding 2031 Debentures, and (iii) Nuance’s
redemption in January 2017 of $600.0 million in aggregate principal amount of
our 2020 Senior Notes.

This table should be read in conjunction with “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” contained in Nuance’s
Annual Report on Form 10-K for the fiscal year ended September 30, 2016 and in
our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31,
2016, and Nuance’s financial statements and related notes thereto, all of which
are incorporated by reference into the Preliminary Offering Memorandum.

 

    As of December 31, 2016       Actual     As Adjusted(1)       (in thousands)
 

Cash and cash equivalents and marketable securities

  $ 1,137,465     $ 370,227    

 

 

   

 

 

 

Current portion of long-term debt

  $ 977,458     $ 0    

 

 

   

 

 

 

Long-term debt (less current portion)

   

Deferred issuance costs related to our Revolving Credit Facility

    (1,423 )      (1,423 ) 

5.375% Senior Notes due 2020, net of unamortized premium of  $2.8 million
and deferred issuance costs of $6.9 million

    448,272       448,272  

5.625% Senior Notes due 2026, net of deferred issuance costs of $6.5 million

    493,471       493,471  

6.000% Senior Notes due 2024, net of deferred issuance costs of $2.3 million

    297,678       297,678  

1.00% Senior Convertible Debentures due 2035, net of unamortized discount of
$158.0 million and deferred issuance costs of $7.9 million

    510,589       510,589  

2.75% Senior Convertible Debentures due 2031, net of unamortized discount of
$14.9 million and deferred issuance costs of $0.9 million

    —         —    

1.50% Senior Convertible Debentures due 2035, net of unamortized discount of
$49.5 million and deferred issuance costs of $1.8 million

    212,643       212,643  

1.25% Senior Convertible Notes offered hereby(2)

    —         243,219    

 

 

   

 

 

 

Total stockholders’ equity

    1,925,704       1,892,705    

 

 

   

 

 

 

Total capitalization

  $ 3,886,934     $ 4,097,154    

 

 

   

 

 

 

 

(1) For purposes of the “As Adjusted” column, the Issuer has assumed that its
net proceeds from this offering will be approximately $343.5 million after
deducting the initial purchasers’ discounts and commissions and estimated
offering expenses payable by the Issuer and that such proceeds will be used by
the Issuer for the repurchase of (i) 5,797,365 shares of common stock for
$99.1 million in negotiated transactions with institutional investors in the
offering, subject to availability, (ii) $17.8 million in aggregate principal
amount of 2031 Debentures concurrently with this offering for $17.9 million, and
(iii) the remaining outstanding 2031 Debentures pursuant to the rights of the
holders of such Debentures to require the repurchase of such Debentures on
November 1, 2017, using approximately $226.5 million of net proceeds, together
with approximately $151.2 million of available cash on hand.

(2)

In accordance with ASC 470-20, convertible debt that may be wholly or partially
settled in cash is required to be separated into a liability and an equity
component, such that interest expense reflects the Issuer’s non-convertible debt
interest rate. Upon issuance, a debt discount will be recognized as a decrease

 

Sch-II-4

--------------------------------------------------------------------------------

  in debt and an increase in equity. The debt component will accrete up to the
principal amount over the expected term of the debt. ASC 470-20 does not affect
the actual amount that the Issuer is required to repay, and the amount shown in
the table above for the Notes is the aggregate principal amount of the Notes and
does not reflect any debt discount, fees and expenses that the Issuer will be
required to recognize.

This communication is intended for the sole use of the person to whom it is
provided by the sender. This material is confidential and is for your
information only and is not intended to be used by anyone other than you. This
information does not purport to be a complete description of the Notes or the
offering.

 

 

This communication shall not constitute an offer to sell or the solicitation of
an offer to buy the Notes, or any shares of the Issuer’s common stock issuable
upon conversion of the Notes, nor shall there be any sale of the Notes, or any
such shares of the Issuer’s common stock, in any state in which such
solicitation or sale would be unlawful prior to registration or qualification of
the Notes or such common stock under the laws of any such jurisdiction.

The Notes and any shares of common stock issuable upon conversion of the Notes
have not been, and will not be, registered under the Securities Act of 1933, as
amended (the “Securities Act”) or any state securities laws, and may only be
sold to qualified institutional buyers pursuant to Rule 144A of the Securities
Act or pursuant to another applicable exemption from registration. The Notes are
not transferable except in accordance with the restrictions described under
“Transfer Restrictions” in the Preliminary Offering Memorandum.

A copy of the Preliminary Offering Memorandum for the offering of the Notes may
be obtained by contacting Morgan Stanley & Co. LLC, Attention: Prospectus
Department, 180 Varick Street, 2nd Floor, New York, NY 10014 or Barclays Capital
Inc., c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY
11717, by telephone at 888-603-5847, or by emailing
Barclaysprospectus@broadridge.com.

ANY DISCLAIMER OR OTHER NOTICES THAT MAY APPEAR BELOW ARE NOT APPLICABLE TO THIS
COMMUNICATION AND SHOULD BE DISREGARDED. SUCH DISCLAIMERS OR OTHER NOTICES WERE
AUTOMATICALLY GENERATED AS A RESULT OF THIS COMMUNICATION BEING SENT VIA
BLOOMBERG OR ANOTHER EMAIL SYSTEM.

 

Sch-II-5

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EXHIBIT A

March [●], 2017            

Morgan Stanley & Co. LLC

Barclays Capital Inc.

As Representatives of the several Initial Purchasers

c/o

Morgan Stanley & Co. LLC

1585 Broadway

New York, NY 10036

Barclays Capital Inc.

745 Seventh Avenue

New York, NY 10019

Ladies and Gentlemen:

This letter is being delivered to you in connection with a proposed Purchase
Agreement (the “Purchase Agreement”), between Nuance Communications, Inc., a
Delaware corporation (the “Company”) and you as representatives of a group of
Initial Purchasers named therein, relating to an offering of Senior Convertible
Notes due 2025, which will be convertible into common stock, $0.001 par value
(the “Common Stock”), of the Company.

In order to induce you and the other Initial Purchasers to enter into the
Purchase Agreement, the undersigned will not, without the prior written consent
of Morgan Stanley & Co. LLC, directly or indirectly, offer, sell, contract to
sell, pledge or otherwise dispose of, enter into any transaction which is
designed to, or might reasonably be expected to, result in the disposition
(whether by actual disposition or effective economic disposition due to cash
settlement or otherwise) by the undersigned of, or exercise any right to demand
the filing by the Company of (or participate in the filing of) a registration
statement with the U.S. Securities and Exchange Commission in respect of, or
establish or increase a put equivalent position or liquidate or decrease a call
equivalent position within the meaning of Section 16 of the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the U.S. Securities
and Exchange Commission promulgated thereunder in respect of, any shares of
capital stock of the Company or any securities convertible into, or exercisable
or exchangeable for such capital stock, or publicly announce an intention to
effect any such transaction, for a period of 60 days after the date of the
Purchase Agreement (the “Lock-Up Period”).

 

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Notwithstanding anything herein to the contrary, the undersigned may (i) make
transfers as a bona fide gift or gifts or pledge, (ii) make transfers either
during the undersigned’s lifetime or on death by will or intestacy to the
undersigned’s immediate family or to a trust, the beneficiaries of which are the
undersigned or a member or members of the undersigned’s immediate family, (iii)
[reserved], (iv) transfer shares of capital stock of the Company acquired in the
open market on or after the date of the Purchase Agreement, (v) make transfers
pursuant to an acquisition of the Company by another person, group of affiliated
persons or entity by means of merger or consolidation or any transaction or
series of related transactions resulting in the exchange of the outstanding
shares of the Company for securities or consideration issued, or caused to be
issued, by the acquiring person, group of affiliated persons or entity,
(vi) sell shares of capital stock pursuant to a trading plan that complies with
Rule 10b5-1 under the Exchange Act (a “10b5-1 Trading Plan”) in existence as of
the date hereof, (vii) establish a 10b5-1 Trading Plan, (viii) dispose of shares
of restricted stock to the Company to satisfy tax withholding obligations or
upon termination of employment with the Company, or (ix) transfer shares of
capital stock of the Company for tax planning purposes; provided that, in the
case of clauses, (i), (ii) and (iii) that the recipient of such gift, pledge,
transfer or distribution thereof agrees to be bound by the restrictions set
forth herein; and provided that, in the case of clause (iv), (a) such sales are
not required to be reported in any public report or filing with the Securities
and Exchange Commission (excluding a Form 3 or 5 or Schedule 13G or 13D (or
amendments thereof) under the Securities Exchange Act of 1934) during the
Lock-Up Period and (b) the undersigned does not otherwise voluntarily effect any
public filing or report regarding such sales; and provided that, in the case of
clause (vii) the restrictions contained in this agreement shall apply in full
force to sales pursuant to a 10b5-1 Trading Plan that was established after the
date hereof; and provided that, in the case of clause (ix), such shares so
transferred do not exceed 5,000 shares.

Morgan Stanley & Co. LLC may release, in their sole discretion, any of the
securities subject to this lockup agreement at any time without notice.

If for any reason the Purchase Agreement shall be terminated prior to the
Closing Date (as defined in the Purchase Agreement), the agreement set forth
above shall likewise be terminated.

 

Very truly yours, By:  

 

  Name:   Title:

 

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ANNEX A

Executive Officers and Directors

 

1. Paul A. Ricci

2. Robert J. Frankenberg

3. William H. Janeway

4. Mark R. Laret

5. Katharine A. Martin

6. Philip J. Quigley

7. Robert Finocchio

8. A. Bruce Bowden

9. Robert C. Schassler

10. Kenneth M. Siegel

11. Daniel D. Tempesta

 

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ANNEX B

Form of Wilson Sonsini Goodrich Rosati Opinion Letter

 

  1. The Company has been duly incorporated and is an existing corporation in
good standing under the laws of the State of Delaware with corporate power and
authority to own its properties and conduct its business as described in the
Disclosure Package and the Final Offering Memorandum.

 

  2. The Company is qualified to do business in the Commonwealth of
Massachusetts.

 

  3. The Company has all requisite corporate power to execute and deliver the
Purchase Agreement and the Securities and to perform its obligations under the
terms of the Purchase Agreement and the Securities.

 

  4. The shares of Common Stock initially issuable upon conversion of the
Securities, including any shares issuable pursuant an increase in the conversion
rate as a result of a “non-stock change of control” (as defined in the
Indenture) (the “Conversion Shares”), assuming such shares have been duly
authorized and reserved for issuance upon such conversion and, when issued and
delivered in accordance with the provisions of the Securities and the Indenture,
will be duly and validly issued and fully paid and non-assessable. The shares of
Common Stock initially issuable upon conversion of the Securities conform in all
material respects to the description of the Common Stock contained in the
Disclosure Package and the Final Offering Memorandum. The stockholders of the
Company have no preemptive rights with respect to the issuance of the Conversion
Shares under the Certificate of Incorporation, Bylaws or DGCL. The Board of
Directors of the Company has duly and validly adopted resolutions reserving the
Conversion Shares for issuance upon conversion of the Securities.

 

  5. The Purchase Agreement has been duly authorized, executed and delivered by
the Company.

 

  6. The Securities being issued on the date hereof have been duly authorized by
the Company and, when executed by the Company and authenticated by the Trustee
in the manner provided for in the Indenture and issued and delivered to the
Initial Purchasers against payment of the purchase price therefor specified in
the Purchase Agreement in accordance with the terms of the Purchase Agreement,
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms and will be entitled to the
benefits of the Indenture.

 

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  7. The Indenture has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its respective terms.

 

  8. The issuance and sale of the Securities being delivered on the date hereof,
the issuance of the Conversion Shares, if any (assuming conversion on the date
hereof pursuant to the terms of the Securities) and the execution, delivery and
performance by the Company of its obligations under the Indenture, the
Securities, and the Purchase Agreement and the consummation of the transactions
therein contemplated, except as disclosed in the risk factor entitled “We may be
unable to repurchase the Notes for cash when required by the holders following a
fundamental change, or pay cash upon conversion of the Notes, and our future
debt may contain limitations on our ability to pay cash upon conversion or
repurchase of the Notes” contained in the Disclosure Package and the Final
Offering Memorandum which disclosure relates to whether the Company will be able
to satisfy, at the time of any conversion of Notes or repurchase upon a
Fundamental Change, the conditions for a Net Share Settlement pursuant to the
proviso to Section 6.09(b)(ii) of the Credit Agreement because whether such
conditions will be satisfied is unknown as of the date of this opinion, do not
conflict with or did not result in a breach or violation by the Company of any
of the terms or provisions of, or constitute a default under, any Reviewed
Agreement, nor will such action result in any violation by the Company of
(i) the Certificate of Incorporation or the Bylaws, (ii) any U.S. federal or New
York or Delaware (under the DGCL) state statute, or (iii) any rule, order or
regulation known to us of any U.S. federal or New York or Delaware (under the
DGCL) state court or governmental agency or body having jurisdiction over the
Company or any of its properties.

 

  9. No consent, approval, authorization, order, registration or qualification
of or with any U.S. federal or New York or Delaware (under the DGCL) state court
or governmental agency or body is required for the issue and sale of the
Securities and the issuance of the Conversion Shares or the consummation by the
Company of the transactions contemplated by the Purchase Agreement or the
Indenture, except (i) as may be expressly contemplated by the Purchase
Agreement, the Indenture or the Securities and (ii) such consents, approvals,
authorizations, registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and distribution of
the Securities by the Initial Purchasers and the issuance of the Conversion
Shares (as to which, in each case, such counsel need not express an opinion).

 

  10. The statements set forth in the Disclosure Package and the Final Offering
Memorandum under the captions “Description of the Notes” and “Description of
Capital Stock” insofar as such statements purport to constitute summaries of the
legal matters, documents or proceedings referred to therein, accurately
summarize in all material respects the matters referred to therein.

 

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  11. The Company is not required to register as an “investment company,” as
such term is defined in the Investment Company Act of 1940, as amended.

 

  12. No registration of the Securities under the Act and no qualification of an
indenture under the Trust Indenture Act with respect thereto, is required for
the offer, sale and delivery of the Securities by the Company to the Initial
Purchasers pursuant to the Purchase Agreement and the initial resale of the
Securities by the Initial Purchasers in the manner contemplated by the Purchase
Agreement and the Final Offering Memorandum (it being understood that no opinion
is expressed as to any subsequent resale of the Securities or the shares of
Common Stock issuable upon conversion of the Securities).

 

  13. The statements set forth in the Disclosure Package and the Final Offering
Memorandum under the caption “Certain U.S. Federal Income Tax Considerations,”
insofar as they purport to summarize matters of United States federal income tax
laws or legal conclusions with respect thereto, accurately summarize in all
material respects the matters referred to therein.

 

 

We participated in conferences with certain officers and other representatives
of the Company, representatives of the Initial Purchasers, counsel for the
Initial Purchasers and representatives of the independent certified public
accountants of the Company at which the contents of the Disclosure Package, the
Final Offering Memorandum and related matters were reviewed and discussed and,
although such counsel does not assume any responsibility for the accuracy,
completeness or fairness of the Disclosure Package or the Final Offering
Memorandum (except to the extent of such counsel’s statements in paragraphs 11
and 14 above), and has made no independent check or verification thereof, on the
basis of the foregoing no facts have come to such counsel’s attention that have
caused it to believe that:

(i)    the documents included in the Disclosure Package, all considered
together, as of 10:51 p.m. New York time on March 13, 2017 (the “Applicable
Time”), contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading (it being
understood that we are not called upon to and do not comment on the financial
statements and the notes thereto and financial statement schedules and other
financial data derived from such financial statements or schedules included
therein or omitted therefrom), or

 

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(ii)    the Final Offering Memorandum, as of its date or as of the date hereof,
contained or contains an untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading (it
being understood that we are not called upon to and do not comment on the
financial statements and the notes thereto and financial statement schedules and
other financial data derived from such financial statements or schedules
included therein or omitted therefrom).

 

 

We further advise that, based on the foregoing, to our knowledge, except as set
forth in the Disclosure Package and the Final Offering Memorandum, there are no
pending or threatened actions, suits or proceedings against the Company or its
subsidiaries that we believe would have a material adverse effect on the
business, results of operations, or financial condition of the Company and its
subsidiaries, taken as a whole, or would materially and adversely affect the
ability of the Company to perform its obligations under the Purchase Agreement,
the Indenture and the Securities.

 

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SCHEDULE III

NUANCE COMMUNICATIONS, INC.

CERTIFICATE OF THE CHIEF FINANCIAL OFFICER

March [●], 2017

Reference is hereby made to the Purchase Agreement, dated March 13, 2017 (the
“Purchase Agreement”), between Nuance Communications, Inc. (the “Company”) and
Morgan Stanley & Co. LLC and Barclays Capital Inc. as representatives of the
several initial purchasers named on Schedule I thereto (the “Initial
Purchasers”). Capitalized terms used but not defined in this certificate have
the meaning assigned to them in the Purchase Agreement.

I am responsible for the financial accounting matters of the Company and am
familiar with the accounting books and records and internal controls of the
Company. To assist the Initial Purchasers in conducting and documenting their
investigation of the affairs of the Company, I, Daniel D. Tempesta, in my
capacity as Chief Financial Officer of the Company, do hereby certify pursuant
to Section 6(f) of the Purchase Agreement that after reasonable inquiry and
investigation by myself or members of my staff who are responsible for the
Company’s financial and accounting matters:

 

  1. The items marked with “A” on the pages attached as Exhibit A (a) are
derived from the accounting books and records of the Company, (b) fairly
present, in all material respects, the Company’s calculation of the
aforementioned information for the periods presented and (c) are calculated
substantially in accordance with the description thereof contained in footnotes
contained therein.

 

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IN WITNESS WHEREOF, I, Daniel D. Tempesta, have signed this certificate as of
the date first written above.

 

NUANCE COMMUNICATIONS, INC. By:  

 

  Name:   Daniel Tempesta   Title:   Chief Financial Officer

 

[Signature Page to CFO Certificate]