Document:

exv10w1

 

Exhibit 10.1

EIGHTH LOAN MODIFICATION AGREEMENT

     This Eighth Loan Modification Agreement (this “Loan Modification Agreement”) is entered into
as of this 29th day of December, 2005, by and between SILICON VALLEY BANK, a
California-chartered bank, with its principal place of business at 3003 Tasman Drive, Santa Clara,
California 95054 and with a loan production office located at One Newton Executive Park, Suite 200,
2221 Washington Street, Newton, Massachusetts 02462 (“Bank”) and NUANCE COMMUNICATIONS INC,
formerly known as SCANSOFT, INC., a Delaware corporation with offices at 9 Centennial Drive,
Peabody, Massachusetts 01960 (“Borrower”).

	 	1.	 	DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and
obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a
loan arrangement dated as of October 31, 2002, evidenced by, among other documents, (i) a
certain Loan and Security Agreement dated as of October 31, 2002 between Borrower and Bank, as
amended by a certain First Loan Modification Agreement dated May 7, 2003, effective as of
March 31, 2003, as further amended by a certain Second Loan Modification Agreement dated as of
June 18, 2003, as further amended by a certain Third Loan Modification Agreement dated as of
August 11, 2003, as further amended by a certain Fourth Loan Modification Agreement dated as
of September 30, 2003, as further amended by a certain Fifth Loan Modification Agreement dated
as of March 31, 2004, as further amended by a certain Sixth Loan Modification Agreement dated
as of March 29, 2005, and as further amended by a certain Seventh Loan Modification Agreement
dated as of September 29, 2005 (as may be further amended from time to time, the “Loan
Agreement”), and (ii) a certain Negative Pledge Agreement dated as of October 31, 2002 (the
“Negative Pledge Agreement”). Capitalized terms used but not otherwise defined herein shall
have the same meaning as in the Loan Agreement.
	 
	 	 	 	Hereinafter, all indebtedness and obligations owing by Borrower to Bank shall be referred to
as the “Obligations”.
	 
	 	2.	 	DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the Collateral
as described in the Loan Agreement and a certain Pledge Agreement dated October 31, 2002
(together with any other collateral security granted to Bank, the “Security Documents”).
	 
	 	 	 	Hereinafter, the Security Documents, together with all other documents evidencing or
securing the Obligations shall be referred to as the “Existing Loan Documents”.
	 
	 	3.	 	DESCRIPTION OF CHANGE IN TERMS.

Modifications to Loan Agreement.

	 	1.	 	The Loan Agreement shall be amended by deleting Section 5 of
the Schedule to the Loan Agreement, entitled “Financial Covenants”, in its
entirety and inserting in lieu thereof the following:

“5. FINANCIAL COVENANTS. (Section 5.1)

(a) Minimum Unrestricted Cash. On the Closing Date and at all times
thereafter, the Borrower shall maintain unrestricted cash in accounts
with the Bank in an amount equal to or great than the aggregate
amount of all Obligations (including, without limitation, contingent
Obligations such as reimbursement obligations for any issued Letters
of Credit) of the Borrower to Bank.”

	 	2.	 	Notwithstanding Section 6(i) and Section 6(iv) of the Schedule
to the Loan Agreement, Borrower shall deliver its monthly consolidated balance
sheet and income statements, together with a Compliance Certificate to the Bank
on or before November 15, 2005.

 

 

	 	4.	 	FEES. Borrower shall pay to Bank a modification fee equal to Ten Thousand Dollars
($10,000.00) which fee shall be due on the date hereof and shall be deemed fully earned as of
the date hereof. Borrower shall also reimburse Bank for all legal fees and expenses incurred
in connection with this amendment to the Existing Loan Documents.
	 
	 	5.	 	RATIFICATION OF NEGATIVE PLEDGE AGREEMENT. Borrower hereby ratifies, confirms and
reaffirms, all and singular, the terms and conditions of the Negative Pledge Agreement and
acknowledges, confirms and agrees that the Negative Pledge Agreement remains in full force and
effect.
	 
	 	6.	 	CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
	 
	 	7.	 	RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and reaffirms
all terms and conditions of all security or other collateral granted to the Bank, and confirms
that the indebtedness secured thereby includes, without limitation, the Obligations.
	 
	 	8.	 	NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that Borrower has
no offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations,
or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims,
or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are
hereby expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.
	 
	 	9.	 	CONTINUING VALIDITY. Borrower understands and agrees that in modifying the existing
Obligations, Bank is relying upon Borrower’s representations, warranties, and agreements, as
set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan
Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full
force and effect. Bank’s agreement to modifications to the existing Obligations pursuant to
this Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Obligations. Nothing in this Loan Modification Agreement shall
constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to
retain as liable parties all makers of Existing Loan Documents, unless the party is expressly
released by Bank in writing. No maker will be released by virtue of this Loan Modification
Agreement.
	 
	 	10.	 	JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
properties, unconditionally, the non-exclusive jurisdiction of any state or federal court of
competent jurisdiction in the Commonwealth of Massachusetts in any action, suit, or proceeding
of any kind against it which arises out of or by reason of this Loan Modification Agreement;
provided, however, that if for any reason Bank cannot avail itself of the courts of the
Commonwealth of Massachusetts, then venue shall lie in Santa Clara County, California.
	 
	 	11.	 	COUNTERSIGNATURE/EFFECTIVENESS. This Loan Modification Agreement shall become
effective only when it shall have been executed by Borrower and Bank.

 

 

     This Loan Modification Agreement is executed as a sealed instrument under the laws of the
Commonwealth of Massachusetts as of the date first written above.

	 	 	 	 	 
	 	 	BORROWER:
	 
	 	 	 	 
	 	 	NUANCE COMMUNICATIONS INC. F/K/A SCANSOFT, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ James R. Arnold, Jr.
	 

	 	 	 	 
	 

	 	Name:
	 	James R. Arnold, Jr.
	 

	 	Title:
	 	Chief Financial Officer, Nuance
	 
	 	 	 	 
	 

	 	BANK:
	 
	 	 	 	 
	 	 	SILICON VALLEY BANK
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Mark Gallagher
	 

	 	 	 	 
	 

	 	Name:
	 	Mark Gallagher
	 

	 	Title:
	 	SVP

 

 

     The undersigned ratifies, confirms and reaffirms, all and singular, the terms and conditions
of a certain Unconditional Guaranty dated October 31, 2002 (the “Guaranty”) and a certain Security
Agreement dated October 31, 2002 (the “Security Agreement”) and acknowledges, confirms and agrees
that the Guaranty and the Security Agreement shall remain in full force and effect and shall in no
way be limited by the execution of this Loan Modification Agreement, or any other documents,
instruments and/or agreements executed and/or delivered in connection herewith.

	 	 	 	 	 
	CAERE CORPORATION	 	 
	 
	By:

	 	/s/ James R. Arnold, Jr.	 	 
	 

	 	 	 	 
	Name:

	 	James R. Arnold, Jr.	 	 
	Title:

	 	Chief Financial Officer, Nuance
	 	 

     The undersigned each hereby ratifies, confirms and reaffirms, all and singular, the terms and
conditions of certain Unconditional Guarantees each dated September 30, 2003 (collectively, the
“Guaranty”) and acknowledges, confirms and agrees that the Guaranty shall remain in full force and
effect and shall in no way be limited by the execution of this Loan Modification Agreement, or any
other documents, instruments and/or agreements executed and/or delivered in connection herewith.

	 	 	 	 	 
	SPEECHWORKS SECURITIES CORP.	 	 
	 
	 	 	 	 
	By:

	 	/s/ James R. Arnold, Jr.
 

	 	 
	Name:

	 	James R. Arnold, Jr.	 	 
	Title:

	 	Chief Financial Officer, Nuance	 	 
	 
	 	 	 	 
	SPEECHWORKS INTERNATIONAL HOLDINGS, INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ James R. Arnold, Jr.
 

	 	  
	Name:

	 	James R. Arnold, Jr.	 	 
	Title:

	 	Chief Financial Officer, Nuance	 	 
	 
	 	 	 	 
	SPEECHWORKS ACQUISITION CORP.	 	 
	 
	 	 	 	 
	By:

	 	/s/ James R. Arnold, Jr.
 

	 	 
	Name:

	 	James R. Arnold, Jr.	 	 
	Title:

	 	Chief Financial Officer, Nuance	 	 
	 
	 	 	 	 
	SPEECHWORKS INTERNATIONAL, INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ James R. Arnold, Jr.
 

	 	 
	Name:

	 	James R. Arnold, Jr.	 	 
	Title:

	 	Chief Financial Officer, Nuanceexv10w2

 

	 	 	 	 	 
	NUANCE COMMUNICATIONS, INC.

	 	ONE WAYSIDE ROAD
 BURLINGTON, MA 01803
	 	781 565 5000
 NUANCE.COM

Exhibit 10.2

	 	 	 
	TO:

	 	All Non-Commission Employees
	FROM:

	 	Corporate Human Resources
	RE:

	 	2006 Incentive for Performance (IFP) Bonus Program
	DATE:

	 	February 6, 2005

We are pleased to confirm the details of the FY 2006 Incentive for Performance (IFP) Bonus Program,
which was introduced at the Company Meeting held in December. The Bonus Program has three payout
elements: the portion based upon company achievement, which comprises 50% of the Annual Bonus
Opportunity, and two portions based on departmental achievement, which comprises the remaining 50%
of the Annual Bonus Opportunity and is evenly split into two bonus periods as illustrated below.

	 	 	 	 	 	 	 	 	 
	Program Components	 	1st Half 2006	 	2nd Half 2006
	 	 	Q1	 	Q2	 	Q3	 	Q4
	Department Opportunity	 	25% (payable the first
payroll in May 2006)	 	25% (payable the first
payroll in December 2006)
	Company Opportunity	 	50% (payable the first payroll in December 2006)

The payout of the departmental portion of the Bonus Program will be based upon achievement of
specific goals that will be established for each half-year period and communicated by the
department’s senior vice president. Payout of the company portion of the Bonus Program will be
based upon achievement of Nuance Communications, Inc. corporate targets set for the fiscal year as
follows:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Achievement Against Plan	 	Targets
	Revenue
	 	 	 	 	 	 	 	 	 	 	 	 
	EPS
	 	 	 	 	 	 	 	 	 	 	 	 
	Total Payout
	 	 	25	%	 	 	75	%	 	 	100	%

The terms and conditions of the FY2006 Bonus Program are outlined below.

	 	 	 
	Effective Date

	 	This plan is effective October 1,
2005 through September 30, 2006. It
is a discretionary plan that may be
modified or cancelled at any time by
the Chairman and CEO.
	 
	 	 
	Eligibility

	 	All non-commission employees are
eligible to participate. Newly
hired employees’ annual bonus
opportunities are pro-rated based on
the number of weeks worked at Nuance
during the bonus period. Employees
who voluntarily resign from Nuance,
for any reason, prior to a payout
date are not eligible to receive a
payout. Employees who are on a
leave of absence during the year
will have their bonus opportunities
pro-rated based on the amount of
time they are at work.
	 
	 	 
	Annual Bonus

Opportunity

	 	The annual bonus opportunity for the
Bonus Program is based on the
employee’s position in the company’s
job structure and salary at the end
of the payout periods, March 31,
2006 and September 30, 2006.
Employees’ individual bonus
opportunities will remain consistent
with those of 2005, unless otherwise
communicated in writing.
	 
	 	 
	 

	 	The target percent and corresponding
bonus amount do not change within
the plan year unless:

	 	•	 	An employee is promoted into
a position that carries a higher
percentage opportunity (e.g., from
individual contributor to manager). 
When this occurs, the opportunity
percentage and bonus amount are
pro-rated based on the effective
date of the change; or

 

 

	 	•	 	An employee’s status
changes. If, at some point during
the plan year, an employee’s status
changes from part-time to full-time
or vice versa, the opportunity
percentage and bonus amount are
pro-rated based on the effective
date of the change.

	 	 	 
	Fiscal Year Bonus Opportunity Split

	 	Your annual bonus opportunity will
be split into a first half
opportunity of 25%, equal to 50% of
your annual departmental
opportunity, and a second half
opportunity of 75% which comprises
the remainder of your departmental
opportunity along with the full
company opportunity.
	 
	 	 
	Payout Guidelines

	 	The first half bonus will be paid
after the 2nd quarter-end close,
anticipated to be in the first pay
period of May. The second half
bonus will be paid after the 4th
quarter-end/year-end close,
anticipated to be in the first pay
period of December (pay dates vary
based upon geographic location).
	 
	 	 
	 

	 	50% of your bonus opportunity is
based on the achievement of company
performance goals (revenue and EPS)
and the other 50% is based on the
achievement of your department’s
goals. The company needs to
achieve all of the company goals
established in order for you to
receive 50% of the annual bonus
opportunity. Your department needs
to achieve all of the assigned
departmental goals in order for you
to receive the other 50% of the
annual bonus opportunity. In
addition, the company targets
described above are based on the
company’s current operations and may
be adjusted to take into
consideration any significant
changes to the company’s operations.
	 
	 	 
	 

	 	Bonus payouts are capped at 100% of
your bonus opportunity. Incremental
payouts under this plan, if any,
will be awarded at the discretion of
the CEO.
	 
	 	 
	 

	 	Example:

	 	•	 	Sally is paid
$60,000 per year and is eligible for
a 10% bonus or $6,000.
	 
	 	•	 	For the first half
year period, Sally is eligible for
25% of the bonus opportunity or
$1,500 (equal to 1/2 of the
departmental opportunity).
	 
	 	•	 	 For the second
half year period, Sally is eligible
for 75% of the bonus opportunity or
$4,500 (equal to 1/2 of the
departmental opportunity plus the
full company opportunity).
	 
	 	•	 	Her department
attained all of their goals for the
first half year period but failed to
attain their second half year goals
(each weighted as 25% of annual
opportunity), so Sally is eligible
for only half of the 50% annual
bonus opportunity tied to her
department goals.
	 
	 	•	 	Nuance attained
both the revenue and EPS goals set
for the year, so she will receive
full payout on the 50% bonus
opportunity ($3,000) tied to the
company performance goals.
	 
	 	•	 	Based on this
scenario, Sally will be paid $1,500
on 5/15/06 for achievement of
departmental goals in the first half
and $3,000 on 12/15/06 for
achievement of the annual company
objectives. Her total annual payout
is therefore equal to $4,500, or 75%
of her annual opportunity.

	 	 	 
	Payout Methods

	 	The company reserves the right to
provide bonus payouts in either cash
and/or restricted stock. As a
general rule, restricted stock
awards would be utilized at Director
level positions and above.

As always, you should consider this compensation information to be company confidential and only
discuss it with your manager or your Human Resources representative.

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