Form DEF 14A Nuance Communications, For: Mar 01

January 14, 2022 8:31 AM EST

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Table of Contents

 

SCHEDULE 14A INFORMATION

(RULE 14a-101)

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  

Filed by a Party other than the Registrant  

Check the appropriate box:

 

   Preliminary Proxy Statement
   Definitive Proxy Statement
   Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2))
   Definitive Additional Materials
   Soliciting Material Pursuant to § 240.14a-12

NUANCE COMMUNICATIONS, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

   No fee required.
   Fee computed on table below per Exchange Act rules 14a-6(i)(1) and 0-11.
   (1)   

Title of each class of securities to which transaction applies:

     

   (2)   

Aggregate number of securities to which transaction applies:

     

   (3)   

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

     

   (4)   

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   (5)   

Total fee paid:

     

   Fee paid previously with preliminary materials.
   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
   (1)   

Amount Previously Paid:

     

   (2)   

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Table of Contents

 

LOGO

 

Notice of the 2022 Annual Meeting of Shareholders

 

 

Nuance Communications, Inc.

One Wayside Road    Burlington, MA 01803

 

 

 

Live Audio Webcast

 

www.virtualshareholdermeeting.com/NUAN2022

 

March 1, 2022

 

10:00 a.m. Eastern Time

 

Online access begins at 9:45 a.m. Eastern Time

Items of Business

 

(1)

Election of the nine directors named in the proxy statement;

 

(2)

Approval of a non-binding advisory resolution regarding the compensation of the Company’s named executive officers;

 

(3)

Ratification of the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm; and

 

(4)

Transaction of such other business as may properly come before the meeting or any postponement or adjournment thereof.

Voting

Your vote is important. Voting over the Internet or by telephone, written proxy or voting instruction card will ensure your representation at the Annual Meeting regardless of whether you attend the virtual meeting.

 

LOGO   LOGO   LOGO
   

 

VIA THE INTERNET

Visit the website listed on your

proxy card, notice or voting

instruction form

 

 

 

BY PHONE

Call the phone number listed

on your proxy card or voting

instruction form

 

 

 

BY MAIL

Complete, sign, date and return your

proxy card or voting instruction form in the

envelope provided

 

Important Meeting Information

Meeting Access

This year’s Annual Meeting will be a completely virtual meeting of shareholders, conducted via an online platform that will allow shareholders to participate and submit questions directly to our Board of Directors and management. We believe a virtual meeting format facilitates shareholder attendance and participation by enabling all shareholders to participate fully, equally and without cost, from any location around the world. In addition, the virtual annual meeting format increases our ability to engage with all shareholders, regardless of size, resources or physical location and enables us to protect the health and safety of all attendees, particularly in light of the COVID-19 pandemic.

The Annual Meeting can be accessed by visiting www.virtualshareholdermeeting.com/NUAN2022, where you will be able to listen to the meeting live, submit questions and vote online. To participate in and vote at the Annual Meeting, you will need the 16-digit control number included on your Notice of Internet Availability of Proxy Materials, on your proxy card, or on the instructions that accompanied your proxy materials.


Table of Contents

Notice of the 2022 Annual Meeting of Shareholders

 

Record Date

Shareholders of record as of the close of business on January 3, 2022 will be entitled to notice of, and to vote and ask questions at, the Annual Meeting and at any postponements or adjournments thereof.

Technical Issues

We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. Contact 1-844-986-0822 (US) or 1-303-562-9302 (international) for any technical difficulties or trouble accessing the virtual meeting, or if you are unable to locate your 16-digit control number.

Asking Questions

During the Annual Meeting, shareholders can submit questions in the “Ask A Question” box on the virtual meeting page, which can be accessed at www.virtualshareholdermeeting.com/NUAN2022. During the Annual Meeting, we will answer as many shareholder-submitted questions as time permits, and any questions that we are unable to address during the Annual Meeting will be published and answered on the investor page of our website following the meeting, with the exception of any questions that are irrelevant to the purpose of the Annual Meeting or our business or that contain inappropriate or derogatory references. If we receive substantially similar questions, we will group such questions together and provide a single response to avoid repetition.

Proxy Materials

We are relying upon the U.S. Securities and Exchange Commission rules that allow issuers to furnish proxy materials to their shareholders via the Internet. Pursuant to these rules, instead of mailing a printed copy of the Company’s proxy materials to each shareholder, the Company has elected to provide access to its proxy materials over the Internet. Accordingly, with the exception of certain shareholders who requested to receive printed copies of the Company’s proxy materials by mail, shareholders of record will receive a Notice of Internet Availability of Proxy Materials that explains how to access and review the Company’s proxy materials on the Internet, how to submit the proxy card on the Internet, and how to request to receive a printed copy of the Company’s proxy materials. The Company expects to mail the Notice of Internet Availability of Proxy Materials on or about January 14, 2022.

The Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021 accompanies this Notice of the 2022 Annual Meeting of Shareholders and the proxy statement. These documents may also be accessed free of charge at www.proxyvote.com.

Proposed Merger with Microsoft

On April 11, 2021, we entered into an Agreement and Plan of Merger with Microsoft Corporation. Subject to the terms and conditions of the Merger Agreement, Microsoft, through a wholly-owned subsidiary, has agreed to acquire all of the outstanding shares of Nuance common stock for $56.00 per share in an all-cash transaction. As a result of the Merger, Nuance will cease to be a publicly traded company. The acquisition has been approved by Nuance’s shareholders, and we expect it to close by the end of the first calendar quarter of 2022, subject to the satisfaction of certain regulatory approvals and other customary closing conditions. For additional information related to the Merger Agreement, please refer to the definitive proxy statement previously filed with the SEC and other relevant materials in connection with the transaction that we may file with the SEC containing important information about Nuance and the Merger. In the event that the transaction closes prior to the scheduled 2022 Annual Meeting, the 2022 Annual Meeting will not be held.

By Order of the Board of Directors,

 

 

LOGO

Wendy Cassity

Secretary

Burlington, Massachusetts

January 14, 2022

 

 

 

LOGO          2022 Proxy Statement


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Meeting Information

 

 

 

Meeting Information

2022 Annual Meeting of Shareholders

 

LOGO          LOGO          LOGO

Date and Time:

 

March 1, 2022

10:00 a.m. Eastern Time

   

Location:

 

Virtually via live audio webcast at

www.virtualshareholdermeeting.com/NUAN2022  

 

   

Record Date:

 

January 3, 2022

Voting Items

The following table summarizes the proposals to be considered at the 2022 Annual Meeting and the Board voting recommendations with respect to each proposal.

 

Proposal

Number

 

Proposal

   Board’s
Recommendation
  

Page     

Number     

1

  Elect the nine nominees named in this Proxy Statement as directors    LOGO   FOR each

Director Nominee

   3

2

  Approve a non-binding advisory resolution regarding compensation of the Company’s named executive officers   

 

LOGO

 

 

FOR

   58

3

  Ratify the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2022   

 

LOGO

 

 

FOR

   59

 

 

 

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Proxy Statement

 

Annual Meeting of Shareholders

March 1, 2022

 

 

This Proxy Statement (this “Proxy Statement”) is furnished in connection with the solicitation of proxies by Nuance Communications, Inc. (“Nuance,” “the Company,” “we,” “us,” and “our”) on behalf of the Board of Directors (the “Board” or “Board of Directors”) from holders of the outstanding shares of the Company’s common stock (“Common Stock”), for use at the 2022 Annual Meeting of Shareholders of the Company (“2022 Annual Meeting”), and at any adjournments or postponements thereof. The 2022 Annual Meeting will be held virtually on March 1, 2022 at 10:00 a.m. Eastern Time and can be accessed by visiting www.virtualshareholdermeeting.com/NUAN2022, where you will be able to listen to the meeting live, submit questions and vote online. We intend to mail a Notice of Internet Availability of Proxy Materials, and this Proxy Statement and the accompanying form of proxy to certain requesting shareholders, on or about January 14, 2022.

Table of Contents

 

Voting Rights      iv  
Record Date and Share Ownership      iv  
Proxies      1  
Shareholder Proposals and Director Nominations for the 2023 Annual Meeting of Shareholders      1  
Proxy Solicitation Costs      2  
Proposal One—Election of Directors      3  

Information Regarding the Nominees for Election as Directors

     3  

Vote Required; Recommendation of the Board

     7  
Corporate Governance      8  

Corporate Governance Overview and Shareholder Engagement

     8  

Board Leadership Structure

     8  

Chairman Responsibilities

     8  

Independence of our Board

     9  

Corporate Governance Guidelines

     9  

Board Composition and Annual Evaluation Process

     10  

Committees of the Board of Directors

     10  

Functions of the Committees

     11  

Board and Committee Meeting Attendance

     14  

Annual Meeting Attendance

     14  

Communication with the Board of Directors

     14  

Code of Ethics

     14  

Stock Ownership Guidelines

     14  

Board’s Role in Strategy and Risk Oversight

     15  

Board’s Role in ESG Oversight

     16  

Compensation Risk Assessment

     17  

Compensation of Non-Employee Directors

     18  
Executive Compensation, Management and Other Information      20  

Information Concerning Current Executive Officers

     20  
Compensation Committee Report      24  
Compensation Discussion and Analysis      25  

Named Executive Officers

     25  

Compensation Philosophy and Objectives

     25  

Engaging with Shareholders and Evolving our Executive Compensation Program

     25  

Fiscal 2021 Compensation Program Changes

     26  

Fiscal 2022 Compensation Program Changes

     27  

Compensation Governance Highlights

     27  

Elements of Fiscal 2021 Executive Compensation

     27  

Compensation-Setting Process

     28  

Compensation Peer Group

     29  

Base Salary

     29  

Annual Bonus under our Short-Term Incentive Plan

     30  

Long-Term Incentive Compensation

     38  

Other Compensation-Related Information

     40  

Post-Employment Compensation

     41  

Equity Granting Policy

     42  

Tax Considerations

     42  
Fiscal 2021 Summary Compensation Table      43  
Fiscal 2021 Grants of Plan-Based Awards Table      46  
 

 

 

 

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Proposal Three—Ratification of Appointment of Independent Registered Public Accounting Firm      59  

Audit Fees During Fiscal Years 2021 and 2020

     59  

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

     59  

Vote Required; Recommendation of the Board

     60  
Audit Committee Report      61  
Security Ownership of Certain Beneficial Owners and Management      62  
Section 16(a) Beneficial Ownership Reporting Compliance      63  
Other Matters      64  
Householding of Annual Meeting Materials      64  
Electronic Delivery of Future Proxy Materials      64  
Annual Report on Form 10-K      64  
Annex A—Reconciliation of GAAP to Non-GAAP Financial Measures      A-1  
 

 

 

 

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Voting Rights

 

 

 

Voting Rights

Each share of Common Stock entitles the holder thereof to one vote on matters to be acted upon at the 2022 Annual Meeting, including the election of directors. Votes cast electronically at the 2022 Annual Meeting or by proxy will be tabulated by Broadridge Financial Solutions, Inc., the Inspector of Elections. Any proxy that is voted according to the instructions included in the Notice of Internet Availability of Proxy Materials or on the proxy card will be voted in accordance with the instructions thereon, and if no instructions are given, will be voted: (i) ”FOR” the election of all of the director nominees as described in Proposal One; (ii) “FOR” the nonbinding advisory resolution regarding the compensation of the Company’s named executive officers under Proposal Two; (iii) “FOR” ratification of the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm described in Proposal Three; and (iv) as the proxy holders deem advisable in their sole discretion on any other matters that may properly come before the 2022 Annual Meeting. A shareholder may indicate when it votes by the Internet, by telephone or on the enclosed proxy that it is abstaining from voting on a particular matter (an “abstention”). A broker may indicate that it does not have discretionary authority as to certain shares to vote on a particular matter (a “broker non-vote”). Abstentions and broker non-votes are each tabulated separately.

The Inspector of Elections will determine whether or not a quorum is present at the 2022 Annual Meeting. In general, Delaware law and the Bylaws provide that a majority of the shares issued and outstanding and entitled to vote, present in person or represented by proxy, constitutes a quorum. Abstentions and broker non-votes of shares that are entitled to vote are treated as shares that are present in person or represented by proxy for purposes of determining the presence of a quorum.

In determining whether a proposal has been approved, abstentions are treated as present in person or represented by proxy and entitled to vote, but not as voting for such proposal, and hence have the same effect as votes against such proposal, while broker non-votes are not treated as present in person or represented by proxy but not entitled to vote, and hence have no effect on the vote for such proposal.

Record Date and Share Ownership

Holders of record of Common Stock as of the close of business on January 3, 2022 have the right to receive notice of and to vote at the 2022 Annual Meeting. On January 3, 2022, the Company had 318,831,275 shares of Common Stock issued and outstanding.

 

 

 

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Proxies

 

 

Proxies for use at the 2022 Annual Meeting are being solicited by the Company from its shareholders. Any person giving a proxy in the form accompanying this Proxy Statement has the power to revoke it at any time before its exercise by (i) filing with the Secretary of the Company a signed written statement revoking his or her proxy or (ii) submitting an executed proxy bearing a date later than that of the proxy being revoked. A proxy may also be revoked by attendance at the 2022 Annual Meeting and the election to vote by Internet during the virtual meeting. Attendance at the 2022 Annual Meeting will not by itself constitute the revocation of a proxy.

Shareholder Proposals and Director Nominations for the 2023 Annual Meeting of Shareholders

As previously discussed above, on April 11, 2021, the Company entered into the Merger Agreement with Microsoft. While the transaction is subject to the satisfaction of certain regulatory approvals and other customer closing conditions, the transaction is currently expected to close during 2022. As a result, it is not certain that the Company will hold an annual meeting of shareholders in 2023. However, assuming that the Company does, shareholders may present proper proposals or nominations for inclusion in the Company’s proxy statement and for consideration at next year’s annual meeting of shareholders by submitting their proposals or nominations in writing to the Company’s Secretary in a timely manner. The Bylaws require that certain information and acknowledgments with respect to the proposal or nomination be set forth in the shareholder’s notice. A copy of the relevant Bylaw provision is available upon written request to Nuance Communications, Inc., One Wayside Road, Burlington, MA 01803, Attention: Investor Relations. In addition, the Bylaws were filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K with the Securities and Exchange Commission (the “SEC”) on November 7, 2019 and an amendment to the Bylaws was filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K with the SEC on April 13, 2021. Both the Bylaws and the amendment thereto may be accessed through the SEC’s website at www.sec.gov/edgar.

Inclusion of Shareholder Proposals in Proxy Statement

Proposals of shareholders that are intended to be presented at the Company’s 2023 Annual Meeting of Shareholders (the “2023 Annual Meeting”) must comply with the requirements of SEC Rule 14a-8. A shareholder’s proposal must be delivered to or mailed and received by us no later than September 16, 2022 in order for it to be included in the Company’s proxy statement and form of proxy relating to the meeting.

Inclusion of Director Nominees in Proxy Statement

The Bylaws provide that a shareholder, or group of up to 20 shareholders, that has owned continuously for at least three years an aggregate of at least 3% of the outstanding Common Stock, may nominate and include in the Company’s proxy materials director nominees constituting up to 20% of the number of directors in office as of the deadline for such nomination, provided that the shareholder(s) and nominee(s) satisfy the requirements in the Bylaws. To be timely, a nomination notice and required information must be delivered to or mailed and received by the Secretary at our principal executive offices not later than the close of business on the 120th day and not earlier than the close of business on the 150th day prior to the anniversary of the date (as stated in our proxy materials) the definitive proxy statement with respect to the preceding year’s annual meeting was first sent to shareholders; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after the anniversary of the preceding year’s annual meeting, notice by the shareholder to be timely must be so received no earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of (i) the 60th day prior to such annual meeting or (ii) the 10th day following the date on which we publicly announce the meeting date. Assuming the date of our 2023 Annual Meeting is not so advanced or delayed, shareholders who wish to include a director

 

 

 

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Proxies

 

 

 

nominee in our 2023 proxy statement must notify us no earlier than August 17, 2022 and no later than the close of business on September 16, 2022. Such notice must provide the information required by our Bylaws.

Inclusion of Shareholder Proposals or Nominations in Annual Meeting Agenda but Not in Proxy Statement

A shareholder proposal or a nomination for director to be presented at the Company’s 2023 Annual Meeting that is not to be included in the Company’s proxy statement and form of proxy relating to the meeting must be delivered to or mailed and received by the Company (a) not later than the close of business on the 90th calendar day, nor earlier than the close of business on the 120th day, prior to the first anniversary of the preceding year’s annual meeting, or (b) not later than the close of business on the 45th calendar day, nor earlier than the close of business on the 75th calendar day, prior to the first anniversary of the date on which we first mailed our proxy materials for the preceding year’s annual meeting, whichever period occurs first. Assuming the date of our 2023 Annual Meeting is not so advanced or delayed, shareholders who wish to make a proposal at the 2023 Annual Meeting must notify us no earlier than October 3, 2022 and no later than the close of business on November 2, 2022. Such notice must provide the information required by the Bylaws with respect to each matter the shareholder proposes to bring before the 2023 Annual Meeting.

Proxy Solicitation Costs

The expense of solicitation of proxies will be borne by the Company. In addition to solicitation of proxies by mail, certain officers, directors and Company employees, who will receive no additional compensation for their services, may solicit proxies by telephone or in person. The Company is required to request brokers and nominees who hold stock in their name to furnish this proxy material to beneficial owners of the stock and will reimburse such brokers and nominees for their reasonable out-of-pocket expenses in so doing.

 

 

 

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Proposal One — Election of Directors

 

 

 

At the 2022 Annual Meeting, nine directors will be elected to the Board. The Nominating & Governance Committee of the Board of Directors recommended, and the Board of Directors approved, Lloyd Carney, Mark Benjamin, Daniel Brennan, Thomas Ebling, Robert Finocchio, Laura Kaiser, Michal Katz, Mark Laret, and Sanjay Vaswani as nominees for election at the 2022 Annual Meeting. The term of office of each person elected as a director will continue until the next annual meeting of shareholders or until a successor has been elected and qualified.

Information Regarding the Nominees for Election as Directors

 

Lloyd Carney

 

LOGO

 

Independent
Chairman of the Board

 

Age: 59

 

Board Member since:
September 2018

 

  

Biography:

 

Mr. Carney has been chairman and chief executive officer of Carney Global Ventures, LLC, a global investment vehicle, since March 2007. From September 2018 until March 2020, Mr. Carney served as the CEO of ChaSerg Technology Acquisition Corp, a special purpose acquisition company. From 2013 to 2017, Mr. Carney served as CEO of Brocade Communications Systems, Inc. Prior to that, he served as President and CEO of Xsigo Systems, Inc. from 2008 to 2012. He has also served in senior capacities at several other companies, including International Business Machines Corporation, Micromuse, Inc., Juniper Networks, Inc. and Nortel Networks Corporation. Mr. Carney currently serves on the board of directors of Visa Inc. and as a member of its Audit and Risk Committee, on the board of directors of Vertex Pharmaceuticals Inc. and as a member of its Audit and Finance Committee, and on the board of directors of Grid Dynamics Holdings, Inc. as its chairman. He earned a B.S. in electronic engineering technology from Wentworth Institute of Technology and a master’s in applied business management from Lesley University.

 

Qualifications:

 

Because of his extensive experience in running global technology companies and his experience aligning operations and infrastructure, we believe Mr. Carney is well qualified to serve on our Board.

 

Committee Membership:

 

  None

 

 

Mark Benjamin

 

LOGO

 

Chief Executive Officer

 

Age: 51

 

Director/Officer since:
April 2018

 

  

Biography:

 

Mr. Benjamin has served as the Company’s CEO since April 2018. With extensive experience serving technology markets, Mr. Benjamin has a proven record of advancing growth initiatives related to cloud, SaaS, mobile, big data, and IoT solutions. Prior to joining Nuance, he served as President and Chief Operating Officer of NCR Corporation from October 2016 until March 2018, where he oversaw sales, solutions management, business and product development, services and supply chain operations. Before that, he spent more than 20 years holding various leadership appointments at Automatic Data Processing, Inc., including President of Global Enterprise Solutions, where he led a team of 20,000 employees, and managed a multi-billion-dollar portfolio across more than 100 countries. Mr. Benjamin holds a bachelor’s degree in International Finance and Marketing from the University of Miami.

 

Qualifications:

 

Because of his extensive experience in management and leadership, and because of his role as our CEO, we believe Mr. Benjamin is well qualified to serve on our Board.

 

Committee Membership:

 

  None

 

 

 

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Proposal One — Election of Directors

 

 

 

Daniel Brennan

 

LOGO

 

Audit Committee Member

 

Age: 56

 

Board Member since:
September 2018

 

  

Biography:

 

Mr. Brennan has served as the Executive Vice President and Chief Financial Officer of Boston Scientific Corporation since 2014. Prior to that, he served in various other positions at Boston Scientific Corporation, including as Senior Vice President and Corporate Controller from 2010 to 2013, and as Vice President and Assistant Corporate Controller in 2009. Mr. Brennan has a B.S. and an MBA from Babson College.

 

Qualifications:

 

Due to his deep understanding of complex healthcare markets, and his financial and accounting expertise, we believe that Mr. Brennan is well qualified to serve on our Board.

 

Committee Membership:

 

  Audit

 

 

Thomas Ebling

 

LOGO

 

Compensation
Committee Member

 

Age: 66

 

Board Member since:
September 2018

 

  

Biography:

 

Mr. Ebling has served as Executive-in-Residence at General Catalyst Partners and CEO of Scipio Boston, LLC since 2017. Previously, he served at Demandware, Inc., as Chairman, President and CEO from 2014 to 2016 and as President and CEO from 2009 to 2014. Prior to that, Mr. Ebling served as CEO of Lattice Engines, Inc. from 2007 to 2009 and as CEO of Profit Logic, Inc. and Torrent Systems, Inc. He earned his B.S. in mathematics from Williams College.

 

Qualifications:

 

Due to his vast experience in software applications, cloud infrastructure, and data warehousing, including as a member of the board of directors of numerous privately-held companies, we believe that Mr. Ebling is well qualified to serve on our Board.

 

Committee Membership:

 

  Compensation

 

 

 

 

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Proposal One — Election of Directors

 

 

 

Robert Finocchio

 

LOGO

 

Audit Committee Chair

 

Age: 70

 

Board Member since:
April 2015

 

  

Biography:

 

Mr. Finocchio has been a Dean’s Executive Professor at Santa Clara University’s Leavey School of Business since September 2000 and was a former chairman of its Board of Trustees. From July 1997 to September 2000, he served as Chairman of Informix Corporation and from July 1997 to July 1999, he served as its CEO and President. From 1988 to 1997, Mr. Finocchio held several positions at 3Com Corporation, including President of 3Com Systems, Executive Vice President of Network Systems Operations and Executive Vice President of Field Operations. He also served in numerous executive and management roles at IBM, Rolm Corporation and Bank of America. Mr. Finocchio also serves on the boards of Skyfront Inc., JustAnswer.com, and Vistage International and previously served on the boards of Echelon Corporation (until September 2018) and Broadcom Corporation (until February 2016). Mr. Finocchio earned a B.S. in economics from the University of Santa Clara and an MBA from the Harvard Graduate School of Business Administration.

 

Qualifications:

 

Mr. Finocchio’s experience as chairman and CEO of a technology company, executive leadership positions at various technology companies, and board experience make him well qualified to be a member of our Board of Directors.

 

Committee Membership:

 

  Audit (Chair)

 

 

Laura S. Kaiser

 

LOGO

 

Compensation
Committee Member

 

Age: 61

 

Board Member since:
December 2017

 

  

Biography:

 

Ms. Kaiser has served as President and CEO of SSM Health since May 2017. Prior to SSM Health, Ms. Kaiser served as Executive Vice President and Chief Operating Officer of Intermountain Healthcare from March 2012 to April 2017. Prior to Intermountain Healthcare, Ms. Kaiser served in numerous leadership roles at Ascension Health. Ms. Kaiser holds a Bachelor of Science in Health Services Management from the University of Missouri-Columbia and a Master of Business Administration and a Master of Healthcare Administration from Saint Louis University.

 

Qualifications:

 

We believe Ms. Kaiser’s substantial experience as a senior executive at numerous health care companies makes her well qualified to be a member of our Board of Directors.

 

Committee Memberships:

 

  Compensation

 

 

 

 

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Proposal One — Election of Directors

 

 

 

Michal Katz

 

LOGO

 

Audit Committee Member

 

Nominating & Governance
Committee Member

 

Age: 54

 

Board Member since:
September 2018

 

  

Biography:

 

Ms. Katz has served as head of investment & corporate banking for the Americas for Mizuho Financial Group, Inc. since November 2019. Prior to that, Ms. Katz was a Managing Director and Co-Head of the Global Technology Investment Banking Group at RBC Capital Markets, LLC (“RBC”) from 2013 through August 2019 and then an employee of RBC on garden leave through October 2019. She served as Managing Director and Global Head, Software, at Barclays Capital Inc. from 2008 to 2013, and prior to that served as Managing Director and in other roles at Lehman Brothers Inc. from 1996 to 2008. Ms. Katz earned a B.A. in political science from the Binghamton University and a J.D. from New York University.

 

Qualifications:

 

Due to her deep experience with strategic and digital transformation initiatives, and strong insights into the intersection of the financial and technology markets, we believe Ms. Katz is well qualified to serve on our Board.

 

Committee Memberships:

 

  Audit

  Nominating & Governance

 

 

Mark Laret

 

LOGO

 

Chair of Nominating &

Governance Committee

 

Age: 67

 

Board Member since:
June 2010

 

  

Biography:

 

From April 2000 through December 2021, Mr. Laret served as President and CEO of the University of California San Francisco Health system, including UCSF Medical Center and UCSF Benioff Children’s Hospitals. From 2007 to January 2018, Mr. Laret served as a director of Varian Medical Systems, Inc. Mr. Laret earned a B.A. from UCLA and a master’s degree in political science from the University of Southern California.

 

Qualifications:

 

We believe Mr. Laret’s corporate executive experience in the healthcare industry and his significant professional expertise and background in medical and technical issues make him well qualified to be a member of our Board of Directors.

 

Committee Memberships:

 

  Nominating & Governance (Chair)

 

 

 

 

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Proposal One — Election of Directors

 

 

 

Sanjay Vaswani

 

LOGO

 

Compensation
Committee Chair

 

Nominating & Governance Committee Member

 

Age: 62

 

Board Member since:
February 2018

 

  

Biography:

 

Mr. Vaswani has been a managing partner of the Center for Corporate Innovation, Inc., a professional services firm focused on the technology and healthcare industries, since 1990. From 1987 to 1990 he was with McKinsey & Company. Prior to that, Mr. Vaswani was employed by Intel Corporation. Mr. Vaswani previously served as a director of Brocade Communications Systems, Inc. from April 2004 until the sale of Brocade to Broadcom Ltd. in November 2017 and as a director at Blue Star Infotech Ltd. and Persistence Software, Inc. Mr. Vaswani received a B.B.A. degree from the University of Texas at Austin and an M.B.A. degree from the Wharton School of Business at the University of Pennsylvania.

 

Qualifications:

 

Mr. Vaswani’s leadership and prior board experience, together with his global perspective and corporate advisory experience makes him well qualified to be a member of our Board of Directors.

 

Committee Membership:

 

  Compensation Committee (Chair)

  Nominating & Governance

 

Vote Required; Recommendation of the Board

Each nominee for director shall be elected to the Board if the votes cast for such nominee’s election exceed the votes against and withheld from such nominee’s election. Unless marked to the contrary, proxies received will be voted “FOR ALL” the Board’s nominees. Withhold votes will have the same effect as a vote “Against” the proposal. Broker non-votes will have no effect on the outcome of the vote.

THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR ALL” ON THE ELECTION OF THE FOREGOING NOMINEES TO SERVE AS DIRECTORS UNTIL THE NEXT ANNUAL MEETING OF SHAREHOLDERS.

 

 

 

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Corporate Governance

 

 

Corporate Governance Overview and Shareholder Engagement

We are committed to good corporate governance, which we believe promotes the long-term interests of our shareholders and strengthens our Board and management accountability. Highlights of our corporate governance practices include the following:

 

  Annual elections of directors

 

  Separate Chairman and CEO

 

  Annual ESG report aligned with the SASB framework

 

  Signed the CEO action for diversity and inclusion pledge

 

  Board composed of all non-employee directors (other than CEO)

 

  100% independent committee members

 

  Majority voting for directors

 

  Shareholder right to call special meeting

 

  Proxy access

We believe that effective corporate governance should also include regular, constructive conversations with our shareholders. The Board and management have historically conducted extensive shareholder outreach to solicit feedback on the Company’s corporate governance. In response to shareholder feedback from the last few years and a comprehensive assessment of Nuance’s governance practices, the Board has made a number of significant changes to the Company’s corporate governance practices in recent years, including those highlighted above. In light of Nuance’s pending acquisition by Microsoft, we did not conduct shareholder outreach relating to corporate governance this year.

Board Leadership Structure

Our current leadership structure splits the roles of CEO and Chairman. As part of our CEO transition in 2018, our Board considered the appropriate leadership structure for the Board and decided to separate the Chair and CEO. Our Corporate Governance Guidelines provide our Board of Directors with flexibility to select the appropriate leadership structure based on the specific needs of our business and the best interests of our shareholders. The Board has determined that the current leadership structure allows our CEO to focus on the operations of our business while the Chairman focuses on leading the Board in its responsibilities, and is in the best interests of Nuance’s shareholders at this time as well as in the foreseeable future. The Board will continue to evaluate its leadership structure on an ongoing basis and make any changes as appropriate.

As Chairman of our Board, Mr. Carney has the following responsibilities:

Chairman Responsibilities

 

 

Preside over, set agenda for and chair board meetings and shareholder meetings

 

 

Serve as principal representative of the Board

 

 

Facilitate boardroom discussions among independent directors on key issues

 

 

Coordinate with the Board’s committee chairs

 

 

Act as liaison between the Board and the management team

 

 

Communicate any issues of concern to the CEO

 

 

Assist with the annual board evaluation process and conduct discussions with non-employee directors

 

 

Represent the Company in stakeholder engagements, as appropriate

 

 

 

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Independence of our Board

The Board has determined that Messrs. Brennan, Carney, Ebling, Finocchio, Laret and Vaswani and Mses. Kaiser and Katz are independent under the director independence standards of the Nasdaq Stock Market LLC (“Nasdaq”) and the SEC, including Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board has also determined that each member of our standing committees is independent within the meaning of both Nasdaq’s and the SEC’s director independence standards. In making these determinations, the Board solicited information from each of our directors regarding whether such director, or any member of his or her immediate family, had a direct or indirect material interest in any transaction involving Nuance, or received personal benefits outside the scope of such person’s normal consideration.

There are no family relationships among any of our directors or executive officers.

Corporate Governance Guidelines

The Board is governed by its Corporate Governance Guidelines, which are available under “Corporate Governance—Governance Documents” in the Investors section of our website, www.nuance.com. These guidelines cover, among other items, the following significant topics:

Board Selection Process and Qualifications.    The Nominating & Governance Committee is responsible for reviewing the skills and characteristics required of prospective Board members and is responsible for recommending to the Board candidates for directorship. Among the criteria the Board may consider are experience, diversity, an understanding of the fiduciary responsibilities that are required of a member of the Board, and the time commitment and energy necessary to diligently carry out those responsibilities. With respect to diversity, the Board may consider such factors as gender, race, ethnicity, differences in professional background, experience at policy making levels in business, finance and technology and other areas, education, skill, and other individual qualities and attributes. While the Company does not have a formal policy with regard to the consideration of diversity in identifying director nominees, the Board does endorse the value of seeking qualified directors from backgrounds relevant to the Company’s mission, strategy and business operations and perceived needs of the Board at a given time.

Director’s Eligibility, Education, and Term of Office.    Directors may not serve on the board of directors of more than four other public companies without first obtaining specific approval from the Board. Each director is required to notify the Chairman and the Chair of the Nominating & Governance Committee upon a change in principal professional responsibilities. The Nominating & Governance Committee may consider such change of status in recommending to the Board whether the director should continue serving as a member of the Board, and the Nominating & Governance Committee reassesses the commitments of the Board members on an ongoing basis to ensure each director has sufficient time to be a fully engaged member of our Board. The Board encourages, and the Company will reimburse the costs associated with, directors participating in continuing director education. The Board believes that term and age limits may result in the loss of long-serving directors who over time have developed unique and valuable insights into the Company’s business and therefore can provide a significant contribution to the Board. As a result, there are no term limits or age limits for our directors.

Board Leadership.    The leadership of the Board shall include a Chairman of the Board and, if the Chairman of the Board is an employee, a Lead Independent Director designated by the Nominating & Governance Committee. The Lead Independent Director, who shall be independent under the independence rules of Nasdaq, shall serve as the focal point for non-employee directors in resolving conflicts with the CEO, or other non-employee directors, and coordinating feedback to the CEO on behalf of non-employee directors regarding business issues and Board management. While Nuance currently has an Independent Chairman, our Corporate Governance Guidelines outline the responsibilities of a lead independent director, who would be appointed if the Chairman were not independent. These enhanced responsibilities include:

 

 

Support a strong Board culture and encourage director participation by fostering an environment of open dialogue and constructive feedback among the directors;

 

 

Serve as a liaison between the Chairman and the independent directors;

 

 

Act as a sounding board and advisor to the Chief Executive Officer, along with other directors;

 

 

 

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Call and chair the closed sessions of the independent directors;

 

 

Lead Board meetings in the absence of the Chairman;

 

 

If requested by major stockholders, ensure that he or she is available, together with the Chairman, for consultation and direct communication;

 

 

Advise as to the Board’s information needs and work with the Chairman to coordinate and provide feedback, input and approval regarding Board meeting agendas, schedules and information sent to the Board in order to support board deliberations and enable sufficient time for discussion of agenda items;

 

 

Together with the Chairman, lead the Board in its review of the results of the annual self-assessment process, including acting on director feedback as needed; and

 

 

Perform such other responsibilities as may be designated by the Board from time to time.

Committees.    The Board includes the following standing committees: Audit, Compensation and Nominating & Governance. Committees may be created or disbanded upon approval of the Board. The Nominating & Governance Committee recommends, and the full Board approves, the composition of the Board’s standing committees. The charters of each standing committee are reviewed periodically with a view to delegating committees the authority of the Board concerning specified matters appropriate to such committee.

Board Composition and Annual Evaluation Process

Our Board members’ comprehensive set of skills and diverse backgrounds are designed to ensure effective oversight of our business strategy and our corporate governance practices. The Board consists of directors with a diversity of gender, ethnicity, skills and experiences, with women and ethnically diverse directors representing 44% of our Board. Each of our non-employee directors has extensive professional experience relevant to Nuance’s current profile and strategic needs. Our average director tenure is 4.8 years.

In an effort to maintain a Board of Directors with collectively diverse skills and experiences that evolve with the Company and its strategy, our Board conducts annual self-evaluations overseen by the Nominating & Governance Committee. This evaluation process plays a critical role in ensuring our Board functions effectively, as well as identifies any gaps in the necessary skills needed to effectively oversee the Company’s management, strategy and risk profile. In fiscal 2021, at the direction of the Nominating & Governance Committee, our annual self-evaluations took the form of a discussion among each Committee and the full Board of its effectiveness for the past year. These discussions covered topics including Board operations and performance, the relationship of the committees and Board with management and external advisors, the skills mix and diversity of the Board members, the composition and leadership of each of the committees, and the effectiveness of the Chairman as leader of the Board.

Committees of the Board of Directors

The composition, duties and responsibilities of our committees are as set forth below. Each of these committees has a written charter approved by our Board. Copies of these committee charters as well as our Corporate Governance Guidelines are available, without charge, upon request in writing to Nuance Communications, Inc., One Wayside Road, Burlington, MA 01803, Corporate Secretary, or under “Corporate Governance—Governance Documents” in the Investors section of our website, www.nuance.com.

All members of the committees are appointed by the Board and meet the independence requirements of the respective committees on which they serve.

 

 

 

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Functions of the Committees

 

Audit Committee

    

 

Met six times during fiscal year 2021.

 

Current Committee Members:

 

  Robert Finocchio (Chair)

  Daniel Brennan

  Michal Katz

 

  

Primary Responsibilities

 

  Reviewing the engagement of the Company’s independent registered public accounting firm

 

  Reviewing the annual financial statements

 

  Considering matters relating to accounting policy and internal controls

 

  Reviewing whether non-audit services provided by the independent registered public accounting firm affect the accountants’ independence

 

  Reviewing the scope of annual audits

 

  Providing oversight and review at least annually of the Company’s financial risk management policies, including its investment policies

 

  Reviewing and discussing with management, the independent auditor and the internal auditor the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures

 

  Oversight of the Company’s ethics and compliance program

 

  Periodically reviewing the Company’s Code of Conduct and Ethics

 

  Shared oversight (along with the full Board) of the Company’s cybersecurity and privacy risk management programs

 

Financial Expertise and Independence

 

Each of Messrs. Brennan and Finocchio and Ms. Katz is a non-employee director who meets the applicable requirements for financial literacy. The Board has determined that Messrs. Brennan and Finocchio are audit committee financial experts as defined by Item 407(d)(5)(ii) of Regulation S-K of the Exchange Act.

 

In addition, our Board has determined that each of Messrs. Brennan and Finocchio and Ms. Katz meets the definition of an “independent director” for purposes of serving on an audit committee under Rule 10A-3 and the Nasdaq rules. None of our Audit Committee members simultaneously serves on the audit committees of more than three public companies, including ours.

 

Report

 

The Audit Committee Report is included in this Proxy Statement beginning on page 61.

 

 

 

 

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Compensation Committee

    

 

Met six times during fiscal year 2021.

 

Current Committee Members:

 

  Sanjay Vaswani (Chair)

  Laura Kaiser

  Thomas Ebling

  

Primary Responsibilities

 

  Overseeing, evaluating and approving compensation plans, policies and practices applicable to, and approving the compensation of, the Company’s executive officers

 

  Annually reviewing and approving for the CEO and executive officers of the Company the short- and long-term incentive plans and payouts

 

  Designing and overseeing the CEO performance review process, which for fiscal 2021 included reviewing the CEO’s self-evaluation and leading evaluation of his performance with the full Board

 

  Overseeing employment agreements, severance arrangements, and change in control agreements/provisions

 

  Making regular reports to the Board on compensation matters

 

  Administering the Company’s equity-based incentive compensation

 

Independence

 

Our Board has determined that each of Ms. Kaiser and Messrs. Ebling and Vaswani meet the definition of an “independent director” under Nasdaq corporate governance standards and under the Exchange Act.

 

Report

 

The Compensation Committee Report and the Compensation Discussion and Analysis are included in this Proxy Statement beginning on page 24 and 25, respectively.

 

Compensation Advisor

The Compensation Committee retains the right to engage independent advisors to assist in fulfilling its charter and is responsible for assessing their performance and independence as required under any applicable law, regulation, or listing standard. The Compensation Committee engaged Semler Brossy in August 2018 to serve as its independent advisor. Semler Brossy advised the Compensation Committee with respect to trends in executive compensation, review of market information, and assessment of compensation actions required under its charter.

Semler Brossy has not provided any other services to us nor received compensation from us other than with respect to the services described above. Based on the consideration of the various factors as set forth in the rules of the SEC and the listing standards of Nasdaq, the Compensation Committee has determined that its relationship with Semler Brossy has not raised any conflict of interest.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee has been or is an officer or employee of the Company. In addition, none of the Company’s executive officers serves on the board of directors or compensation committee of a company that has an executive officer that serves on the Company’s Board or Compensation Committee.

 

 

 

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Nominating & Governance Committee

Met four times during fiscal year 2021.

 

Current Committee Members:

 

  Mark Laret (Chair)

  Michal Katz

  Sanjay Vaswani

  

Primary Responsibilities

 

  Overseeing the corporate governance practices of the Board, including its annual self-evaluation process

 

  Considering and periodically reporting to the full Board on matters relating to the identification, selection and qualification of candidates to serve as directors

 

  Recommending to the Board on an annual basis the candidates to be nominated by the Board for election as directors at the Company’s annual meeting of shareholders

 

  Evaluating the current composition and organization of the Board and its committees, determining future requirements, and making recommendations to the Board concerning the appointment of directors to committees of the Board, and recommending the selection of chairs of committees of the Board

 

  Reviewing aspects of human capital management including reviewing executive officer succession planning, reporting its findings and recommendations to the Board, and working with the Board to evaluate potential successors to executive management positions, as well as review of talent management, culture, diversity and inclusion

 

  Overseeing the Company’s environmental, social and governance strategy and reporting

 

Independence

 

The Nominating & Governance Committee is comprised entirely of directors who meet the independence requirements under the Nasdaq corporate governance standards and under the Exchange Act.

 

Consideration of Shareholder Nominees for Director

The Nominating & Governance Committee will consider properly submitted shareholder nominations for candidates for membership on the Board as well as candidates recommended for consideration by the Nominating & Governance Committee as described below under “Identifying and Evaluating Nominees for Directors.” Any shareholder nominations must comply with the requirements of the Company’s Bylaws and should include all information relating to such nominee as would be required to be disclosed in solicitations of proxies for the election of such nominee as a director pursuant to Regulation 14A under the Exchange Act, such nominee’s written consent to be named in the proxy statement as a nominee and to serve as a director if elected, as well as a written statement executed by such nominee acknowledging that as a director of the Company, such nominee will owe a fiduciary duty under the General Corporation Law of the State of Delaware exclusively to the Company and its shareholders. In addition, shareholder nominations should be submitted within the time frame as specified under “Shareholder Proposals and Director Nominations for the 2023 Annual Meeting of Shareholders” above for inclusion in the proxy materials or agenda, as appropriate, and addressed to: Nuance Communications, Inc., Attention: Corporate Secretary, One Wayside Road, Burlington, MA 01803.

A shareholder that instead desires to merely recommend a candidate for consideration by the Nominating & Governance Committee shall direct the recommendation in writing to Nuance Communications, Inc., Attention: Corporate Secretary, One Wayside Road, Burlington, MA 01803, and must include the candidate’s name, home and business contact information, detailed biographical data and qualifications, information regarding any relationships between the candidate and the Company within the last three years and evidence of the nominating person’s ownership of Company stock.

 

 

 

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Board and Committee Meeting Attendance

All directors attended at least 75% of the board and committee meetings held during fiscal 2021.

Annual Meeting Attendance

Although we do not have a formal policy regarding attendance by members of the Board of Directors at our annual meetings of shareholders, directors are encouraged to attend annual meetings of the Company. All of our directors attended the 2021 Annual Meeting.

Communication with the Board of Directors

Although we do not have a formal policy regarding communications with the Board of Directors, shareholders who are interested in communicating with the Board of Directors are encouraged to do so by submitting an email to generalcounsel@nuance.com or by writing to us at Nuance Communications, Inc., Attention: Corporate Secretary, One Wayside Road, Burlington, MA 01803. Shareholders who would like their submission directed to a particular member of the Board of Directors may so specify.

Code of Ethics

Our Board of Directors adopted a Code of Conduct and Business Ethics applicable to all of our directors, officers and employees. Our Code of Conduct and Business Ethics can be found at “Corporate Governance—Governance Documents” in the Investors section of our website, www.nuance.com. We will provide to any person without charge, upon request, a copy of our Code of Conduct and Business Ethics. Such a request should be made in writing and addressed to Nuance Communications, Inc., Attention: Investor Relations, One Wayside Road, Burlington, MA 01803. If we make any substantive amendments to the Code of Conduct and Business Ethics or grant any waiver, including any implicit waiver, from a provision of the Code of Conduct and Business Ethics affecting our executive officers, we will disclose the nature of such amendment or waiver on that website or in a Current Report on Form 8-K.

Stock Ownership Guidelines

The Board has approved stock ownership guidelines for our executive officers and non-employee directors. These guidelines were adopted to further align the interests of our executive officers and non-employee directors with the interests of our shareholders and to promote the Company’s commitment to sound corporate governance practices.

Under these guidelines, the target share ownership levels are five times base salary for our CEO, three times base salary for our other executive officers, and five times the annual cash retainer for our non-employee directors. The following shares and units count towards satisfaction of the guidelines: shares owned outright by the executive or non-employee director or his or her immediate family members residing in the same household; shares held in trust for the benefit of the executive or non-employee director or his or her family; 50% of unvested restricted stock units; and vested shares or units held in any deferral plan. Unvested performance awards do not count for purposes of satisfying the guidelines.

Each executive and non-employee director must achieve the guideline amount within five years of becoming subject to the guidelines. In addition, until an individual has reached the appropriate target level, an executive is required to retain 25% of the net shares received as a result of the exercise of stock options or vesting of long-term equity awards, and a non-employee director is required to retain 25% of the net shares received as a result of the exercise of stock options or vesting of restricted stock units.

The Nominating & Governance Committee reviews these guidelines and compliance with these guidelines on an annual basis. As of January 12, 2022, all non-employee directors and NEOs had satisfied our stock ownership guidelines.

 

 

 

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Board’s Role in Strategy and Risk Oversight

Strategy

A central focus for our Board is oversight of our corporate strategy and management’s execution of such strategy. The Board believes that this is a continuous process that requires regular attention from the full Board as well as each Board committee. This ongoing effort focuses the Board on the Company’s operational and financial performance over the short, intermediate and long term.

Fiscal 2021 was a busy year for our Board as they oversaw the continued implementation of the strategic transformation of the Company, including the completion of the Company’s sale of its medical transcription and EHR implementation businesses and the Company’s agreement to be acquired by Microsoft, as well as the Company’s continued focus on its strategic initiatives of accelerating cloud transition in Healthcare, focusing on AI-first approach in Enterprise, accelerating innovation activities, and expanding go-to-market presence, including in international markets. At each Board meeting, the full Board discussed the progress of these strategic initiatives, receiving updates from our executive officers as well as other managers from key business units.

Risk Management

The Board has an active role, as a whole and also at the committee level, in overseeing management of Company risk. This role is one of informed oversight rather than direct management of risk. The Board regularly reviews and consults with management on strategic direction, and challenges and risks faced by the Company. The Board also reviews and discusses with management quarterly financial results and forecasts. The following graphic and subsequent paragraphs summarize the Board’s role in risk oversight at Nuance:

 

 

LOGO

 

 

 

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The full Board oversees the Company’s overall enterprise risk management framework and program. In addition, the Audit Committee oversees management of financial risks, including investment and foreign currency fluctuation risk mitigation policies and risks. The Board and Audit Committee share oversight of cybersecurity and privacy risk, receiving quarterly reporting and updates from senior management and the Company’s experts in areas such as cybersecurity threats, technologies and solutions deployed internally and for the benefit of Company customers and technologies, and policies and procedures to address these risks. The Compensation Committee of the Board is responsible for overseeing the management of risks relating to and arising from the Company’s compensation plans and arrangements. The Nominating & Governance Committee oversees the composition of our Board and development of our directors, as well as oversees management in executing corporate human capital management initiatives and defining the corporate culture. These committees provide regular reports—generally on a quarterly basis—to the full Board.

Management has responsibility for the direct management and oversight of legal, financial, cybersecurity, privacy and commercial compliance matters, which includes identifying areas of risk and implementing policies, procedures and practices to mitigate the identified risks. In fiscal 2020, Nuance enhanced its enterprise risk management program. The Company engaged a third-party consultant to conduct a risk identification survey. Survey results were then reviewed with the executive-level Nuance Risk Committee to decide upon a register of key risks for oversight by the Nuance Risk Committee and the Board. Each key risk was assigned to an executive sponsor and program lead responsible for implementing a mitigation plan for that risk. Program leads meet regularly to review progress against mitigation plans and report regularly to the Nuance Risk Committee and the Board.

Additionally, the CFO, Chief Legal Officer and Senior Director of Corporate Compliance provide regular reports to the Audit Committee concerning financial, tax, legal and compliance related risks and the Company’s Chief Legal Officer, Chief Information Officer, Chief Information Security Officer and Chief Privacy Officer report to the Board regularly on cybersecurity and privacy. Management also provides the Audit Committee with periodic reports on the Company’s ethics and compliance programs and efforts, investment policy and practices, and compliance with debt covenants. The Compensation Committee’s independent compensation consultant provides analysis of risks related to the Company’s compensation programs and practices to the Compensation Committee.

Board’s Role in ESG Oversight

As part of our strategic transformation, we have focused on defining our corporate culture, leading with purpose and introducing a number of new corporate giving and social responsibility programs. The Board and management recognize the importance of minimizing our environmental impact and maximizing our positive corporate social responsibility. After focusing over the last few years on refreshing our Board and improving our corporate governance and executive compensation practices, our Board is now spending more time and attention focused on the “E” (Environmental) and “S” (Social) elements of ESG. Led by our Nominating & Governance Committee and informed by our management team, the Board is committed to improving our ESG impacts and increasing disclosure of our ESG practices.

 

 

 

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Corporate Governance

 

 

 

Together with our Board, Nuance is committed to creating value and making a positive and lasting impact for our employees, customers, shareholders, and community. In July 2021 we issued our second annual ESG report, which outlines our sustainability strategy and programs, as well as the work we are doing to drive meaningful change socially, economically, and environmentally. In our 2021 ESG Report, we cover a broad range of topics: actions that we have taken to create a supportive, ethical, and equitable culture for our employees; an overview of the ways we are investing in and caring for our communities; how we are ensuring our customers’ products and data are secure; ways we are increasing our engagement and alignment with our shareholders; activities we are taking to reduce our carbon footprint; and how we support our customers both in normal times and amidst a global pandemic. Below are some key ESG highlights:

 

Corporate Governance & Business Ethics              Data Privacy, Compliance, and Security
   

Continue to implement initiatives to foster the highest ethical standards, including:

 

–   Ethics helpline to detect any potential unethical or unlawful conduct

 

–   Detailed Supplier Code of Conduct and Code of Ethics and Business Conduct

 

–   Robust Enterprise Risk Management program

 

   

–   Maintain highly-available and redundant infrastructure to support high customer demands that are also compliant with industry standards

 

–   Maintain and update Nuance Trust Center to inform customers, stakeholders, and other interested parties about data privacy, security, and compliance initiatives

   
Reduction of Carbon Footprint     Commitment to Employees
   

–   Continue to take substantial steps to lower our GHG emissions footprint and mitigate exposure to climate-related risks by transitioning to the public cloud and upgrading our IT infrastructure

 

–   Simplified the packaging for our consumer products to cut down on waste and minimize our impact on the environment

 

   

–   Continue to invest in professional development initiatives, including mentorship programs, manager academy, executive leadership training, and online professional educational resources

 

–   In fiscal 2021, Nuance received a record number of employer of choice awards when it was named to 16 ‘top places to work’ lists

 

We encourage you to review the full version of our 2021 ESG report, which can be found at “ESG Report & Trust Center” in the Investors section of our website, www.nuance.com.

Human Capital Management

The Board plays an active role in overseeing the Company’s human capital management efforts. The full Board has worked closely with the executive management team, and in particular the Company’s Chief People Officer, in helping to shape the newly defined culture and focus efforts on developing formal human capital management and talent development initiatives to better support our workforce as the Company continues to evolve. The Board and management strive to foster a diverse and inclusive, collaborative environment for all employees and strongly believe that formalizing current and future corporate initiatives that support this vision will further drive positive company performance. The Board’s oversight activities in this area include review of CEO and executive officer succession planning, review of diversity and other employee metrics, and review of the results of the Company’s annual employee engagement survey.

Compensation Risk Assessment

In December 2021, the Compensation Committee conducted its annual review of Nuance’s compensation philosophy and strategy, including compensation-related risk management. The Compensation Committee reviews the Company’s compensation programs for executives and employees, including both short-term compensation and long-term equity-based incentive awards. We believe that the mix and design of the elements of our executive compensation are well balanced and do not encourage our employees, including our executives, to take or assume unreasonable risk.

 

 

 

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Compensation of Non-Employee Directors

Non-employee director compensation is recommended by the Compensation Committee and approved by the Board. In recommending the types and amounts of non-employee director compensation to the Board, the Compensation Committee generally considers market information provided and reviewed by its independent compensation consultant regarding the non-employee director pay practices of the peer companies described in the Compensation Discussion and Analysis below.

Under our non-employee director compensation program, cash compensation is paid quarterly in arrears and equity awards are granted under our 2020 Stock Plan on an annual basis. The Company also reimburses non-employee directors for their expenses in connection with their attendance at Board and committee meetings.

The structure of our non-employee director compensation program for fiscal 2021 is set forth below:

 

Cash

        Amount  

Board service retainer

      $ 60,000   

Committee members

  

Audit:

Compensation:

Nominating & Governance:

   $

$

$

15,000 

15,000 

5,000 

 

 

 

Committee Chairs

  

Audit:

Compensation:

Nominating & Governance:

   $

$

$

35,000 

30,000 

15,000 

 

 

 

Independent Chairman of the Board

        $ 150,000   

Committee member, committee chair and independent Chairman of the Board fees were paid in addition to the annual board service retainer. The committee chair fee is paid in lieu of the committee member fee for the chair of a committee.

 

Equity

   Terms    Value  

Annual Award

  

Target amount converted to restricted stock units (“RSUs”) using the closing price of a share of our Common Stock on the date of grant

 

Cliff vests after one year, subject to continued service through that date

 

Newly appointed directors will receive a prorated award upon election to the board.

   $ 250,000   

In fiscal 2020, we adopted a non-qualified deferred compensation plan pursuant to which non-employee directors could elect to defer their receipt of all or a portion of their cash compensation. One non-employee director participated in this plan during fiscal 2021.

 

 

 

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Cash and equity compensation paid to non-employee members of the Board for fiscal 2021 is included in the table below:

FISCAL 2021 DIRECTOR COMPENSATION TABLE

 

Name

   Fees Earned or
Paid in Cash
($)
   Stock
Awards
($)
 (1)(2)
   Charitable
Match
Contributions 
(3)
     Other (4)      Total ($)

Daniel Brennan

     75,000    249,985      —                    324,985 

Lloyd Carney

   210,000    249,985      20,000      5,608    485,593 

Thomas Ebling

     75,000    249,985      20,000           344,985 

Robert Finocchio Jr.

     95,000    249,985      20,000           364,985 

Laura Kaiser (5)

     75,000    249,985      20,000           344,985 

Michal Katz

     74,917    249,985      20,000           344,902 

Mark Laret

     80,083    249,985      20,000           350,068 

Sanjay Vaswani

     95,000    249,985      20,000           364,985 

 

(1)

Amounts reported in the Stock Awards column represent the grant date fair value of the RSU awards granted to the non-employee directors during fiscal 2021, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation (“FASB ASC Topic 718”), excluding the effect of estimated forfeitures, based on the closing market price of our Common Stock on the grant date (which was $44.09 per share for the annual RSU award).

 

(2)

The aggregate number of stock awards, in the form of unvested RSUs, held by each non-employee director as of September 30, 2021 is set forth in the following table:

 

Name

   Unvested
Shares
Subject to
Outstanding
  Stock Awards  
 

Mr. Brennan

     5,670       

Mr. Carney

     5,670       

Mr. Ebling

     5,670       

Mr. Finocchio

     5,670       

Ms. Kaiser

     5,670       

Ms. Katz

     5,670       

Mr. Laret

     5,670       

Mr. Vaswani

     5,670       

 

(3)

The amounts shown reflect matching contribution made by the Nuance Foundation under the Nuance Cares charitable matching program for fiscal 2021. The program provides a matching charitable contribution of up to $20,000 per calendar year per director.

 

(4)

Director compensation during the year included the value of family members accompanying a director on business related travel. For personal use of Company-owned aircraft, we value the aggregate incremental cost to the Company using a method that takes into account the cost of fuel, trip-related cabin services, crew travel expenses, on-board catering, landing fees, trip-related hangar parking costs and other variable costs. Since our aircraft is used primarily for business travel, the calculation does not include the fixed costs that do not change based on usage, such as pilots’ salaries, the acquisition cost of the aircraft and the cost of maintenance not related to trips.

 

(5)

Ms. Kaiser elected to defer her cash and stock compensation for the plan year beginning January 1, 2021. The cash compensation deferred for fiscal 2021 is $56,250. The full value of her stock compensation is deferred for fiscal 2021.

 

 

 

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Executive Compensation, Management and Other Information

 

 

Information Concerning Current Executive Officers

 

Mark Benjamin

 

 

LOGO

 

CEO

 

Age: 51

 

Executive Officer since:
April 23, 2018

 

  

 

Biography

 

Mr. Benjamin has served as the Company’s CEO since April 2018. With extensive experience serving technology markets, Mr. Benjamin has a proven track record of advancing growth initiatives related to cloud, SaaS, mobile, big data, and IoT solutions. Prior to joining Nuance, he served as President and Chief Operating Officer of NCR Corporation from October 2016 until March 2018, where he oversaw sales, solutions management, business and product development, services and supply chain operations. Before that, he spent more than 20 years holding various leadership appointments at Automatic Data Processing, Inc., including President of Global Enterprise Solutions, where he led a team of 20,000 employees, and managed a multi-billion-dollar portfolio across more than 100 countries. Mr. Benjamin holds a bachelor’s degree in International Finance and Marketing from the University of Miami.

 

Daniel Tempesta

 

 

LOGO

 

EVP & CFO

 

Age: 51

 

Executive Officer since:
July 21, 2015

 

  

 

Biography

 

Mr. Tempesta joined the Company in March 2008 and was appointed as the Company’s CFO in July 2015. Prior to his appointment as CFO, Mr. Tempesta served as the Company’s Chief Accounting Officer, Corporate Controller and Senior Vice President of Finance. At Nuance, Mr. Tempesta has led all of Nuance’s finance and accounting operations, as well as tax, treasury, order management, and internal control activities. Before joining Nuance, Mr. Tempesta was with Teradyne, Inc. from February 2004 to February 2008 where he held several positions, including Chief Accounting Officer and Corporate Controller. Prior to that, he was in the audit practice of PricewaterhouseCoopers L.L.P. He received an accounting degree from the Isenberg School of Management at the University of Massachusetts, Amherst.

 

 

 

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Executive Compensation, Management and Other Information

 

 

 

Wendy Cassity

 

 

LOGO

 

EVP & Chief Legal Officer

 

Age: 46

 

Executive Officer since:
November 7, 2018

 

  

 

Biography

 

Ms. Cassity joined the Company in September 2018. As Chief Legal Officer, Ms. Cassity is responsible for oversight of all legal, corporate governance, intellectual property and regulatory activities across the Company’s global operations. Prior to joining Nuance, she was general counsel of Zayo Group, a publicly-traded communications infrastructure company from January 2016 to August 2018, and general counsel of Thompson Creek Metals Company, a publicly-traded natural resources company, from 2010 to January 2016. Prior thereto, Ms. Cassity was in private practice as a corporate transactional attorney at McDermott Will & Emery, LLP and Cravath Swaine & Moore, LLP in their New York offices. Ms. Cassity holds a B.A. from the University of Arizona in English and History and received her J.D. from Columbia Law School.

 

Robert Dahdah

 

 

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EVP & Chief Revenue Officer

 

Age: 54

 

Executive Officer since:
April 15, 2019

 

  

 

Biography

 

Mr. Dahdah joined the Company in April 2019. As EVP and Chief Revenue Officer, Mr. Dahdah is responsible for leading our global sales, marketing and commercial operations organization. With nearly 30 years of global sales experience, Mr. Dahdah joins the Company from Benefitfocus, Inc., a global provider of SaaS-based benefits platforms, where he led the company’s global sales, marketing and commercial operations organization as Executive Vice President, Global Sales and Marketing. Prior to joining Benefitfocus in 2017, he was Senior Vice President, Global Sales of Verizon Communications, Inc.’s Verizon Connect business worldwide since its acquisition of Fleetmatics Group, PLC in 2016, Senior Vice President, Global Sales of Fleetmatics since 2016, Senior Vice President, Global Sales for Insurance and Risk at Fidelity National Information Services, Inc. (“FIS”) since 2015 and Senior Vice President, Global Sales at SunGard in 2015 until its acquisition by FIS, and, from 1994-2015, held progressively senior positions at ADP, most recently Senior Vice President Sales, Global Enterprise Solutions International. Mr. Dahdah holds a BS degree in Marketing/Management from Syracuse University.

 

 

 

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Executive Compensation, Management and Other Information

 

 

 

Diana Nole

 

 

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EVP & GM of Healthcare

 

Age: 56

 

Executive Officer since:
November 3, 2020

 

  

 

Biography

 

Ms. Nole joined Nuance in June 2020 as the EVP and GM of Nuance’s Healthcare division, which is focused on improving the overall physician-patient experience through cutting-edge AI technology applications.

 

She is responsible for all Healthcare business operations, growth and innovation strategy, product development, and partner and customer relationships. Over the course of her career, Ms. Nole has held numerous executive and leadership roles, including serving as the CEO of Wolter Kluwers’ Healthcare division from September 2015 to May 2020, president of Carestream’s Digital Medical Solutions business from August 2007 to August 2015, and vice president of strategy, product management, and marketing for Eastman Kodak’s Healthcare Information Technology Solutions business. Ms. Nole has dual degrees in Computer Science and Math from the State University of New York at Potsdam and earned her MBA from the University of Rochester’s Simon School.

 

Joseph Petro

 

 

LOGO

 

EVP & Chief Technology Officer

 

Age: 55

 

Executive Officer since:
July 31, 2019

 

  

 

Biography

 

Mr. Petro joined the Company in 2008. As EVP and Chief Technology Officer, Mr. Petro is responsible for overseeing research, platform development, application development, dev ops, and cloud readiness for the Company. Prior to joining Nuance, Mr. Petro served as senior vice president of product development at Eclipsys Corporation, where he oversaw the development of more than 30 solution sets spanning diverse healthcare environments. Over the course of his career, he has held a number of executive roles both in venture-backed startups and large-scale enterprises. Mr. Petro holds a B.S. in Mechanical Engineering from the University of New Hampshire and an M.S. in Mechanical Engineering from Kettering University.

 

 

 

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Executive Compensation, Management and Other Information

 

 

 

Robert Weideman

 

 

LOGO

 

EVP & GM Enterprise Division

 

Age: 63

 

Executive Officer since:
August 1, 2017

 

  

 

Biography

 

Mr. Weideman joined the Company in November 2001 and has served as EVP and GM, Enterprise Division from October 2012. He is responsible for AI-powered customer engagement solutions and services that are used by leading organizations around the world to automate and optimize the customer care experience. In his tenure with Company, he has been the general manager for the Dragon and Imaging businesses, as well as senior vice president of international marketing in the EMEA region. Previously, Mr. Weideman served as chief marketing officer for ScanSoft, and vice president of marketing and product for the Adobe Systems’ portfolio company Cardiff Software. He has also held senior marketing and management roles at TGS.com and CA (Computer Associates). Mr. Weideman holds a B.S. in Business Administration and Computer Information Systems from San Diego State University.

 

 

 

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Compensation Committee Report

 

 

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this Proxy Statement. Based on its review and discussion with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and, through incorporation by reference, in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021.

The Compensation Committee:

Sanjay Vaswani, Chairman

Thomas Ebling

Laura Kaiser

 

 

 

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Compensation Discussion and Analysis

 

 

 

 

This Compensation Discussion and Analysis section (“CD&A”) describes the material elements of our executive compensation programs and policies for fiscal 2021, the principles underlying, and objectives of, our decisions with respect to the fiscal 2021 compensation for our Named Executive Officers (“NEOs”) and the changes we have made to better align our executive compensation programs and policies with our pay-for-performance philosophy. The Nuance Board, Compensation Committee and management team are committed to maintaining a competitive and comprehensive executive compensation program aligned with market best practices and seeking ongoing shareholder feedback with respect to our program.

Named Executive Officers

Our NEOs for the fiscal year ending September 30, 2021 are:

 

Name

  

    Title

Mark Benjamin

  

Chief Executive Officer (“CEO”)

Daniel Tempesta

  

Executive Vice President and Chief Financial Officer (“CFO”)

Robert Dahdah

  

Executive Vice President and Chief Revenue Officer

Joseph Petro

  

Executive Vice President and Chief Technology Officer

Robert Weideman

  

Executive Vice President and General Manager, Enterprise Division

Compensation Philosophy and Objectives

Our compensation philosophy is designed to promote our business objectives and is based on the principle that our strategic and operational achievements result from the coordinated efforts of all employees working toward common strategic goals. Our guiding compensation principles focus on:

 

 

Aligning executive compensation with long-term shareholder value;

 

 

Attracting, retaining and motivating a high-performing team;

 

 

Rewarding executives for achieving near- and long-term business goals;

 

 

Promoting clarity and alignment with shareholders by focusing on drivers of long-term success;

 

 

Maintaining stability and minimizing change in our compensation programs going forward, where possible;

 

 

Paying for performance, with a significant portion of executive compensation linked to Company performance; and

 

 

Maintaining flexibility to address potential changes in Company strategy and structure.

Our overall compensation objective is to compensate our executive officers and other employees in a manner that attracts and retains the caliber of individuals needed to lead, manage and staff a dynamic, highly-complex business in an innovative and competitive industry, which we believe will result in successful execution of strategic priorities and consistent delivery of shareholder value.

Engaging with Shareholders and Evolving our Executive Compensation Program

Shareholder Engagement on Compensation

Our Board values our shareholders’ views on our executive compensation program. Our annual say-on-pay vote is an opportunity for us to receive feedback from shareholders regarding our executive compensation program. We were exceptionally pleased with the results of our advisory say-on-pay proposal at our last annual meeting, with 94.4% approval.

 

 

 

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Compensation Discussion and Analysis

 

 

 

Fiscal 2021 Compensation Program Changes

In the fall of 2020, Nuance reached out to shareholders owning approximately 65% of our outstanding shares and spoke with shareholders owning approximately 30% of our outstanding shares to solicit their feedback on the design of the fiscal 2021 PSU awards. The Compensation Committee specifically sought feedback on designing the fiscal 2021 PSU awards to incorporate a three-year revenue compound annual growth rate (“CAGR”) metric weighted at 20%. Shareholders were broadly supportive of selecting three-year revenue CAGR as the operational metric and the corresponding weighting of 20%.

Taking this feedback into account, in November 2020, the Compensation Committee approved basing 20% of the fiscal 2021 PSU awards upon performance against a three-year revenue CAGR metric and the remaining 80% of the awards upon our relative TSR as compared to the S&P Software & Services Index, in each case assuming target performance.

A general overview of our fiscal 2021 annual executive compensation program is below:

 

 

LOGO

The design change for our CEO’s PSU award is illustrated below:

 

 

LOGO

 

 

 

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Compensation Discussion and Analysis

 

 

 

Fiscal 2022 Compensation Program Changes

On April 12, 2021, we announced that we had entered into a definitive merger agreement with Microsoft and a wholly-owned subsidiary of Microsoft. Nuance did not perform an outreach to shareholders in fiscal 2021 due to the pending merger with Microsoft. For additional details regarding the amounts payable to our named executive officers if the merger transaction is completed, please see our Current Report on Form 8-K, dated April 12, 2021, and our Definitive Proxy Statement on Schedule 14A relating to the merger filed with the SEC on May 17, 2021.

Compensation Governance Highlights

Our executive compensation program also includes a number of key features intended to manage compensation risk, which are highlighted below.

 

What We Do

  

What We Don’t Do

  Balance between short-term and long-term pay to incentivize sustainable long-term value creation

  

×   No excise tax gross-ups

  Stock ownership requirements for our executive officers and directors

  

×   No automatic accelerated vesting of equity awards on a “change of control”

  Robust clawback policy

  

×   No pension arrangements or defined benefit retirement plans covering our executive officers

  Anti-hedging and pledging policies

  

  Independent compensation consultant advises Compensation Committee

    

Elements of Fiscal 2021 Executive Compensation

Overview of Fiscal 2021 Executive Compensation Program

The executive compensation program for our NEOs for fiscal 2021 consisted of a mix of variable and fixed compensation in order to align compensation with short- and long-term performance and shareholder value creation. These fiscal 2021 compensation elements included:

 

Pay Component

  

Rationale and Value to Shareholders

Base Salary

  

  Forms basis for competitive compensation package

 

  Reflects competitive market conditions, individual performance, and internal parity

Annual Bonus: Short-Term Incentive Plan (STIP)

  

  Motivates achievement of strategic priorities as measured by financial metrics

 

  A diversified mix of metrics intended to drive efficient growth and shareholder value creation

 

  Individual strategic objectives (“MBOs”) incentivize achievement of non-financial goals which support Company strategy

Performance-Based Restricted Stock Units (PSUs)

  

  Encourages focus on long-term shareholder value creation

 

  Aligns compensation with relative TSR, which reflects the stock price performance and compensates executives for performance relative to peers

 

  Aligns executives to achievement of long-term revenue objectives to further evolve the company’s strategic growth in revenue

Restricted Stock Units (RSUs)

  

  Encourages focus on long-term shareholder value creation

 

  Aligns to shareholder interests

 

  Provides retention incentive

 

 

 

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Compensation Discussion and Analysis

 

 

 

Our compensation philosophy places an emphasis on “at-risk” pay, with a balanced focus on short-term and long-term performance. Consistent with this philosophy, the majority of the annual compensation opportunities of our executive officers, including our NEOs, is variable in nature, the payment and value of which depends on our performance. As illustrated below, in fiscal 2021, 93% of our CEO’s total target compensation and 86% of other NEOs’ total target compensation was based on stock price or other performance metrics and was therefore at-risk.

 

                                       CEO 2021 Target Compensation (1)

 

 

LOGO

  

NEO 2021 Target Compensation (1)                                

 

 

LOGO

 

(1)

Reflects the allocation of base salary, annual target bonus opportunity, and long-term incentive award target value.

To further align the interest of our executives with our shareholders, our performance-based annual bonuses under the STIP may be paid out in cash or RSUs, or a combination of both, with vesting of any RSUs occurring shortly after the date of grant. We also grant long-term incentive compensation under our Long-Term Incentive (“LTI”) Plan in the form of RSUs and PSUs that are settled in shares of our common stock.

The performance measures we establish for the performance-based annual bonuses and the PSUs are designed to promote market share increase, revenue and earnings growth and increased shareholder returns.

In addition, the Compensation Committee uses a combination of different non-GAAP financial measures in our STIP. A description of these measures, as well as a discussion of how they are used in our executive compensation program, is set forth in this CD&A. A reconciliation of the GAAP to non-GAAP financial measures is set forth in Annex A to this Proxy Statement.

Compensation-Setting Process

The Compensation Committee reviews the compensation of our executive officers, including our NEOs, annually to ensure that it is consistent with our compensation philosophy, corporate and individual performance, changes in the competitive market and our executive officers’ individual responsibilities.

For its review of the CEO’s performance for purposes of determining the STIP payout, we conduct the following:

 

 

The CEO on a quarterly basis completes a self-evaluation of his performance relative to his MBOs established at the beginning of the fiscal year by the Compensation Committee and provides the Compensation Committee with a complete annual self-evaluation of his MBO achievements and overall performance.

 

 

The Compensation Committee reviews this MBO assessment in executive session and completes an overall CEO performance appraisal and determines the CEO’s annual performance against his MBOs as well as his annual STIP payment, if any, for the last completed year.

 

 

The Compensation Committee presents the MBO assessment and recommends the annual STIP payment to the full Board for discussion and approval.

 

 

 

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Compensation Discussion and Analysis

 

 

 

 

Taking into consideration the CEO’s performance and evaluation of the competitive market, the Compensation Committee determines adjustments, if any, to elements of the CEO’s total compensation opportunity, including performance-based compensation. The Compensation Committee recommends any adjustments to the CEO’s compensation to the full Board for discussion and approval.

For its annual review of executive officers other than the CEO, our CEO presents to the Compensation Committee on a quarterly basis his evaluation of each executive officer’s performance as well as an annual assessment at the end of the fiscal year which includes a review of each executive officer’s contribution and performance during the fiscal year compared against the executive officer’s MBOs established at the beginning of the fiscal year by our CEO. The Compensation Committee reviews and evaluates this information in consultation with the CEO.

On the basis of the MBO assessment and full performance appraisals, the Compensation Committee approves each executive officer’s STIP payout, if any, for the last completed fiscal year, as well as any compensation adjustments. Adjustments, if any, to elements of each executive officer’s total compensation opportunity, including performance-based compensation, take into account the scope of the executive officer’s responsibilities and experience; internal pay parity; an evaluation of the competitive market; and the need to retain executives.

Compensation Peer Group

The Compensation Committee reviews annually the compensation for comparable positions within our industry, the historical compensation levels of our executive officers and the individual performance of our executive officers evaluated against their individual objectives established for the preceding fiscal year.

The Compensation Committee obtains compensation data for comparable positions from publicly available proxy statements and other public filings of our compensation peer group. In addition, this data is supplemented by Radford executive compensation survey data representing a broader group of technology companies that are of similar size, with revenues greater than $1 billion.

The Compensation Committee, with the assistance of its compensation consultant, Semler Brossy, updated the compensation peer group in April 2020 for purposes of the Compensation Committee’s fiscal 2021 compensation analysis. The group consisted of the following companies:

 

Fiscal 2021 Compensation Peer Group

Akamai Technologies, Inc.

   Dolby Laboratories, Inc.    PTC, Inc.

Allscripts Healthcare Solutions, Inc.

   Fair Isaac Corporation    Synopsys, Inc.

ANSYS, Inc.

   j2 Global    Teradata Corporation

Cadence Design Systems, Inc.

   LogMeIn, Inc.    Verint Systems, Inc.

CDK Global Inc.

   OpenText Corporation    WEX Inc.

Citrix Systems, Inc.

   Pegasystems Inc.     

The Compensation Committee reviewed the peer group in May 2021 for purposes of fiscal 2022 compensation analysis to ensure alignment between the members of our peer group and our revenue and market capitalization. At that time, the Compensation Committee recommended removing LogMeIn, Inc. due to its acquisition by Francisco Partners and Evergreen, and maintaining all other current peers for fiscal 2022.

Base Salary

We use base salary to provide our executive officers, including our NEOs, with a basic fixed amount of compensation. Base salary levels reflect each executive officer’s responsibilities, performance and expertise and are intended to be competitive with the base salary levels of comparable positions at the companies in our compensation peer group.

The Compensation Committee establishes base salary levels based, in part, on a review of market data from our compensation peer group, as well as input from our compensation consultant, the job performance and level of experience of each individual

 

 

 

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Compensation Discussion and Analysis

 

 

 

executive officer, and internal pay parity considerations. The Compensation Committee did not increase the base salary of any NEO for fiscal 2021. Generally, we tie the performance-based incentive compensation opportunities and post-employment compensation arrangements for each executive officer to his or her base salary. In light of the impact of COVID-19, management had deferred merit increases for the executive team throughout fiscal 2021.

The base salaries of our NEOs during fiscal 2020 and fiscal 2021 were as follows:

 

Named Executive Officers

  

Fiscal 2020

Base Salary

  

Fiscal 2021

Base Salary

  

Percentage 

Change

Mark Benjamin

   $800,000    $800,000   

Daniel Tempesta

   $500,000    $500,000   

Robert Dahdah

   $500,000    $500,000   

Joseph Petro

   $500,000    $500,000   

Robert Weideman

   $500,000    $500,000   

Annual Bonus under our Short-Term Incentive Plan

Consistent with our compensation philosophy, the Compensation Committee has designed our executive compensation program to provide that a significant portion of our executive officers’ compensation opportunities are performance-based. To help accomplish this objective, under our STIP, we provide for performance-based annual bonus opportunities for our executive officers, including our NEOs, based 80% on the achievement of corporate financial performance objectives and 20% on individual MBOs, in each case, that are established at the beginning of the fiscal year.

During fiscal 2021, the Compensation Committee established performance objectives and payout targets under our STIP for our executive officers, including our NEOs, which were designed to promote the attainment of specific financial objectives (consistent with our annual operating plan), while, at the same time, supporting our longer-term strategic business objectives and encouraging leadership and teamwork. The Compensation Committee, after consultation with our CEO, established three financial performance measures, as well as minimum, target and maximum performance levels for each measure, as described in more detail below.

Each executive officer was assigned a target annual bonus opportunity under our STIP expressed as a percentage of his or her base salary. The target annual bonus opportunity for each executive officer for fiscal 2021 was determined by the Compensation Committee based, in part, on a review of market data from our compensation peer group, as well as input from our compensation consultant and internal pay parity considerations. The target bonus opportunities of our NEOs for fiscal 2021, which remain unchanged from fiscal 2020, were as follows:

 

Named Executive Officers

  

Fiscal 2021

Target Bonus Opportunity

     (as a percentage of base salary)  

Mark Benjamin

   150%

Daniel Tempesta

     75%

Robert Dahdah

     75%

Joseph Petro

     75%

Robert Weideman

     75%

 

 

 

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Compensation Discussion and Analysis

 

 

 

Short Term Incentive Plan Structure:

Our STIP is designed to emphasize both Company and business segment financial performance. In fiscal 2021, the STIP funding mechanism (the Program Funding Determination) includes Company revenue, operating margin, net new bookings and MBOs. STIP payouts are based on achievement of individual MBOs, in addition to Company or business segment performance.

 

1.

Under the STIP structure, a bonus pool is funded 80% based on the achievement of Company financial metrics and 20% on fiscal year MBOs. The Company financial metrics are equally weighted to non-GAAP revenue, non-GAAP operating margin and net new bookings. Non-GAAP revenue measures the growth of the business, non-GAAP operating margin measures profitability of the business and net new bookings is an indicator of future growth, measured by the expansion of existing customer relationships and acquisition of new customers.

 

2.

For each business segment or corporate function, the allocation of the funding is then determined based on the achievement of three equally weighted metrics aligned to the applicable business segment or corporate function. Mr. Weideman, as EVP and GM of Enterprise, is aligned to business segment metrics, with all other NEOs aligned to corporate metrics. See illustration below for more detail.

 

3.

Then, each employee’s bonus is based 80% on the allocation achievement of the applicable business segment or corporate function, and 20% on individual achievement of fiscal year MBOs.

The three steps described above are illustrated below:

 

 

LOGO

 

 

 

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Compensation Discussion and Analysis

 

 

 

Fiscal 2021 STIP Assessment

Our Compensation Committee aligns pay with performance and the achievement of strategic initiatives by tying a significant portion of short-term incentive awards to the achievement of rigorous financial goals. For fiscal 2021, the Compensation Committee established performance targets for three equally-weighted performance measures: non-GAAP revenue, non-GAAP operating margin and net new bookings, which the Compensation Committee determined were critical to the successful execution of our fiscal 2021 operating plan and were important measures of our growth and profitability.

The minimum threshold, target and maximum performance levels for each of these measures for fiscal 2021, as set by the Compensation Committee at the beginning of the year, are set forth below. The STIP provides for non-linear interpolation between minimum and target levels, and between target and maximum levels.

 

Funding Metrics

   Threshold    Target    Maximum  

Non-GAAP Revenue

     $ 1,302      $ 1,387      $ 1,432

Non-GAAP Operating Margin

       24.1%          26.7%          28.0%  

Net New Bookings

     $ 258.5      $ 396.7      $ 437.4

In fiscal 2021, we had excellent financial results in the first half of the year and were on track to achieve at least target performance relative to each of our targets for the year. However, as we entered the second half of the year, our Board and management decided to accelerate key strategic investments and initiatives in order to drive our long-term growth, which necessarily had an adverse effect on certain aspects of our short-term financial targets due to increased investment and expenditures. In Enterprise, we expedited our pivot from on-premise to the cloud, expanding our customer lifetime value opportunity, and that will continue to be a vital initiative as we move into fiscal 2022 and beyond. In Healthcare, we accelerated operational investments in DAX, while also further expanding our Sales team to support the tremendous momentum and opportunity across the portfolio. We executed well against these initiatives, creating significant momentum as we enter fiscal 2022, and we are strongly positioned to accelerate our recurring and cloud growth in both businesses.

Due to the strategic investments and initiatives listed above, the Company did not achieve the targets set at the beginning of the year, and its STIP for fiscal 2021 would have been funded at 62%, as illustrated below:

Funding achieved for fiscal 2021, before adjustments:

 

Funding Metrics

   Threshold      Target      Maximum      Actual
Results
     % of
Achievement
 

Bonus  

Funding %  

Non-GAAP Revenue

     $ 1,302        $ 1,387        $ 1,432        $ 1,362        98%     94%

Non-GAAP Operating Margin

     24.1%        26.7%        28.0%        22.3%        84%       0%

Net New Bookings

     $ 258.5        $ 396.7        $ 437.4        $    349        88%     92%

MBO

     0%        100%        150%        100%      100%   100%
                         STIP Funding % - Original Targets     62%

In light of the impact of the strategic investment decisions made by the Company during 2021 that adversely impacted our results relative to our revenue and operating margin financial targets, the Compensation Committee approved adjustments to the payouts in order to more appropriately reflect management’s performance and success for the fiscal year. The Compensation Committee took into consideration the following in approving such adjustments:

 

 

Investments to support accelerated growth strategic investments in Healthcare, particularly relating to DAX sales and research and development, which provide significantly more attractive revenue growth and future profit profile;

 

 

Enterprise pivot to Cloud revenue models, which, by design, results in lower license revenue in exchange for long term recurring revenue;

 

 

Continued portfolio simplification with successful divestment of the Company’s health information management transcription and EHR go-live services businesses in February 2021;

 

 

 

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Compensation Discussion and Analysis

 

 

 

 

6% organic revenue growth, the Company’s highest since 2012;

 

 

Healthcare revenue growth and continued organic growth for Enterprise; and

 

 

Overall new ARR growth at 104% and above-plan performance in DAX.

In light of the impact of the accelerated investments and the successes as noted above, the Compensation Committee approved the following adjusted results, resulting in 97% STIP funding:

Funding achieved for fiscal 2021 per adjusted results:

 

Funding Metrics

   Threshold      Target      Maximum      Adjusted
Results
     % of
Achievement
    

Bonus  

Funding %  

 

Non-GAAP Revenue

     $ 1,302        $ 1,387        $  1,432          $  1,380           100%            98%      

Non-GAAP Operating Margin

     24.1%          26.7%        28.0%          26.6%           100%            100%      

Net New Bookings

     $ 258.5        $ 396.7        $  437.4          $    349           88%            92%      

MBO

     0%          100%        150%          100%           100%            100%      
                         STIP Funding % - Adjusted Results        97%      

All named executive officers were aligned to Corporate financial metrics for purposes of allocation, with the exception of Mr. Weideman. Mr. Weideman was aligned to Enterprise financial targets, which include non-GAAP Revenue of $560.6 million, non-GAAP operating margin of 31.9% and Net New Bookings of $157.0 million. Actual results for the Enterprise division include non-GAAP revenue $535.4 million, non-GAAP operating margin 25.7% and Net New Bookings $130.8 million, which would have resulted in a 52% payout. The adjusted financial performance of the Enterprise division reflects adjustments for accelerated investments and a pivot to cloud revenue models. The adjusted Enterprise division financial results include non-GAAP revenue $547.9 million, non-GAAP operating margin 29.6% and Net New Bookings $130.8 million, resulting in an 88% payout.

Fiscal 2021 NEO STIP Payout

Individual awards under the STIP are determined by multiplying each executive’s target annual bonus by the percentage of the Company financial performance (weighted at 80%) and the percentage of MBOs achieved (weighted at 20%). The actual bonus payments to our NEOs for fiscal 2021 were as follows:

 

Named Executive Officers

   Target Bonus
($)
  

Financial
Achievement

(%)

 

MBO
Achievement

(%)

  Actual
Bonus
  (1)
($)
   Actual
Bonus
(shares)
  

Bonus  

Payout %  

          80%
Weighting
  20%
Weighting
             

Mark Benjamin (2)

     $ 1,200,000        97 %       120 %     $ 1,200,000        21,719        100.0 %

Daniel Tempesta

     $ 375,000        97 %       115 %     $ 377,250        6,828        100.6 %

Robert Dahdah

     $ 375,000        97 %       125 %     $ 384,750        6,963        102.6 %

Joseph Petro

     $ 375,000        97 %       140 %     $ 396,000        7,167        105.6 %

Robert Weideman

     $ 375,000        88 %       100 %     $ 339,000        6,135        90.4 %

 

 

(1)

The amount shown in this column was paid in the form of RSUs with an equal value based on the closing price of our common stock on November 19, 2021, or $55.25 per share, which was the date the Compensation Committee approved the grant effective date of the fiscal 2021 bonuses. These RSU awards vested in full on December 3, 2021.

 

(2)

Mr. Benjamin’s resulting bonus % payout was 101.6% after applying the weighting of financial and MBO metrics. However, the Compensation Committee exercised discretion to cap Mr. Benjamin’s payout % at 100% of target in light of the adjustments to the bonus payouts.

 

 

 

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Fiscal 2021 Management Based Objectives

The CEO’s strategic MBO goals were established by the Compensation Committee at the beginning of fiscal 2021 and communicated to him. There is a rigorous process in place to ensure fair and independent assessment of the CEO’s performance. As illustrated below, this process includes quarterly self-evaluations, quarterly Compensation Committee review, and a live discussion where the Board provides an overview of the CEO’s annual performance against the MBOs and resulting earned compensation.

 

  Rigorous MBO Performance Review Process

  1.  CEO Self Evaluation: The CEO completes self-evaluations quarterly on his performance against his MBO goals

  2.  Board Review of Self Evaluation: The Board annually reviews the CEO’s self-evaluations

  3.  Live Discussion: In an annual executive session of the Board, the directors share with the CEO all factors that went into their determination of MBO performance, including the aforementioned self evaluation among other factors

For all other NEOs, our CEO established the MBO goals at the beginning of the fiscal year and set goals that would align the focus of each executive with the strategic transformation plan for the Company. Each NEO has established MBOs that align and focus the executive on the successful execution of key strategic initiatives, cost saving improvements and human capital management priorities. In establishing the MBOs, our CEO reviewed the MBOs with each NEO, and considered input from the respective NEO. At the end of the fiscal year, our CEO assessed the performance of each NEO and presented his recommendations on each NEO’s individual MBO performance to the Compensation Committee for approval.

The 2021 MBOs and performance assessments for each NEO are detailed below.

Mr. Benjamin

2021 MBOs for Mr. Benjamin

 

 

Execute growth goals by focusing on key verticals, strategic and focused international expansion, launching and ramping up new solutions, expanding markets, and leveraging our partner relationships; Build customer loyalty and deepen trust by providing a superior and singular Nuance experience.

 

 

Enable ability to drive Cloud revenue and annual recurring revenue (“ARR”) growth in fiscal 2021 and beyond.

 

 

Successfully execute on strategic transformation initiatives.

 

 

Establish, develop and retain a strong and qualified team with a focus on succession planning, improved internal mobility, and building a diverse and equitable talent pipeline at all levels of the organization aligned with the company site strategy and fully integrated with our Values to foster a strong inclusive culture and One Nuance experience.

 

 

Increase operational and organizational efficiency through greater collaboration across teams, streamlining processes, and focusing on efforts to build accountability, mitigate risk, and make Nuance easy to do business with internally and externally.

 

 

Reduce complexity across the company, including site strategy and legal entity reductions.

 

 

Drive greater collaboration of the Healthcare and Enterprise divisions to increase overall value of the combined portfolio to Nuance, including through product development, go-to-market (“ GTM”), sales, and leveraging the core technology stack across both divisions.

The Compensation Committee reviewed Mr. Benjamin’s performance against his MBOs, and determined that Mr. Benjamin:

 

 

Successfully executed on key growth initiatives, expanding our largest/most strategic accounts including a focus on international expansion.

 

 

Expedited the important shift from on-premise to cloud and accelerated operational investments in DAX to support the tremendous momentum and opportunity across the portfolio; strongly positioning the Company to accelerate our recurring and cloud growth in both businesses in fiscal 2022.

 

 

 

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Led successfully the strategic divestiture of our medical transcription and EHR optimization businesses and in collaboration with other members of the leadership team, fully implemented a Global Deal Optimization Team to drive deal velocity and market expansions.

 

 

Key leader in driving Nuance’s Company-wide Values into how we conduct business every day, invested in key talent, and continued with communications with employees, which is very effective in leading the Company and supporting employees during the on-going pandemic. Employee engagement and overall employee sentiment maintained at an all-time high level and the Company achieved multiple external recognitions as an Employer of Choice.

 

 

Effectively messaged Nuance’s ESG priorities and progress through publication of FY2021 ESG report.

 

 

Drove increased operational and organizational efficiency by streamlining processes and implementing technology solutions to drive accountability and transparency through internal business operations.

Based on this review, the Board and Compensation Committee determined Mr. Benjamin earned 120% of the MBO portion of his annual STIP award.

Mr. Tempesta

2021 MBOs for Mr. Tempesta

 

 

Enable ability to drive Cloud revenue and ARR growth in fiscal 2021 and beyond.

 

 

Successfully execute on strategic transformation initiatives.

 

 

Establish, develop and retain a strong and qualified team with a focus on succession planning, improved internal mobility, and building a diverse and equitable talent pipeline at all levels of the organization aligned with the company site strategy and fully integrated with our Values to foster a strong inclusive culture and One Nuance experience.

 

 

Increase operational and organizational efficiency through greater collaboration across teams, streamlining processes, and focusing on efforts to build accountability, mitigate risk, and make Nuance easy to do business with internally and externally; Reduce complexity across the company, including site strategy and legal entity reductions.

 

 

Drive greater collaboration of the Healthcare and Enterprise divisions to increase overall value of the combined portfolio to Nuance, including through product development, GTM, sales, and leveraging the core technology stack across both divisions.

The CEO and the Compensation Committee reviewed Mr. Tempesta’s performance against his MBOs, and determined that Mr. Tempesta:

 

 

Expedited the important shift from on-premise to cloud and accelerated operational investments in DAX to support the tremendous momentum and opportunity across the portfolio; strongly positioning the Company to accelerate our recurring and cloud growth in both businesses in fiscal 2022.

 

 

Successfully completed the strategic divestiture of our medical transcription and EHR optimization businesses and in collaboration with other members of the leadership team, fully implemented a Global Deal Optimization Team to drive deal velocity and market expansions.

 

 

Building on the comprehensive review of succession and business continuity plans to ensure organizational sustainability and future scalability, reorganized the finance team with continued emphasis on developing high-potential employees and adding diverse talent under each leader.

 

 

In collaboration with other members of the leadership team, executed on our comprehensive global site strategy, reducing legal entities and facility reductions and successfully completed launches of a new human capital system and a cloud-based revenue accounting system on time and on budget.

 

 

In collaboration with other members of the leadership team, successfully launched a Patient Engagement System leveraging the portfolio and relationships across Enterprise and Healthcare.

 

 

 

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Based on this review, the Compensation Committee, upon the recommendation of the CEO, determined that Mr. Tempesta earned 115% of the MBO portion of his annual STIP award.

Mr. Dahdah

2021 MBOs for Mr. Dahdah

 

 

Execute growth goals by focusing on key verticals, strategic and focused international expansion, launching and ramping up new solutions, expanding markets, and leveraging our partner relationships; Build customer loyalty and deepen trust by providing a superior and singular Nuance experience.

 

 

Enable ability to drive Cloud revenue and ARR growth in fiscal 2021 and beyond.

 

 

Successfully execute on strategic transformation initiatives.

 

 

Establish, develop and retain a strong and qualified team with a focus on succession planning, improved internal mobility, and building a diverse and equitable talent pipeline at all levels of the organization aligned with the company site strategy and fully integrated with our Values to foster a strong inclusive culture and One Nuance experience.

 

 

Increase operational and organizational efficiency through greater collaboration across teams, streamlining processes, and focusing on efforts to build accountability, mitigate risk, and make Nuance easy to do business with internally and externally; Reduce complexity across the company, including site strategy and legal entity reductions.

 

 

Drive greater collaboration of the Healthcare and Enterprise divisions to increase overall value of the combined portfolio to Nuance, including through product development, GTM, sales, and leveraging the core technology stack across both divisions.

The CEO and the Compensation Committee reviewed Mr. Dahdah’s performance against his MBOs, and determined that Mr. Dahdah:

 

 

Implemented changes to enhance focus on Digital identifying gaps in offerings and go to market strategies as well as changes in Patient Engagement Services that resulted in a 350% achievement over plan.

 

 

Exceeded DAX expansion goal exiting fiscal 2021 with a run rate that exceeded expectations. Leveraged incentive plans to drive cloud revenue and further ARR growth.

 

 

In collaboration with other members of the leadership team, fully implemented a Global Deal Optimization Team to drive deal velocity and market expansions.

 

 

Implemented changes to enable growth, including: the development and promotion of mid-level and senior leadership roles within the sales and marketing organizations and redesign of compensation plans to improve focus and accelerate results.

 

 

In collaboration with other members of the leadership team, successfully launched a Patient Engagement System leveraging the portfolio and relationships across Enterprise and Healthcare.

Based on this review, the Compensation Committee, upon the recommendation of the CEO, determined that Mr. Dahdah earned 125% of the MBO portion of his annual STIP award.

Mr. Petro

2021 MBOs for Mr. Petro

 

 

Execute growth goals by focusing on key verticals, strategic and focused international expansion, launching and ramping up new solutions, expanding markets, and leveraging our partner relationships; Build customer loyalty and deepen trust by providing a superior and singular Nuance experience.

 

 

Enable ability to drive Cloud revenue and ARR growth in fiscal 2021 and beyond.

 

 

Successfully execute on strategic transformation initiatives.

 

 

 

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Establish, develop and retain a strong and qualified team with a focus on succession planning, improved internal mobility, and building a diverse and equitable talent pipeline at all levels of the organization aligned with the company site strategy and fully integrated with our Values to foster a strong inclusive culture and One Nuance experience.

 

 

Increase operational and organizational efficiency through greater collaboration across teams, streamlining processes, and focusing on efforts to build accountability, mitigate risk, and make Nuance easy to do business with internally and externally; Reduce complexity across the company, including site strategy and legal entity reductions.

 

 

Drive greater collaboration of the Healthcare and Enterprise divisions to increase overall value of the combined portfolio to Nuance, including through product development, GTM, sales, and leveraging the core technology stack across both divisions.

The CEO and the Compensation Committee reviewed Mr. Petro’s performance against his MBOs, and determined that Mr. Petro:

 

 

Successfully achieved true interlock with all of the Company’s businesses. Delivered commitments that resulted in expansion of roadmaps in all businesses and several hundred product releases.

 

 

Successfully delivered all roadmap commitments with intelligent engagement, Gatekeeper 2.0, international growth, CAPD and Powershare.

 

 

Successfully executed key strategic priorities, including: delivering on ACI roadmap commitments bringing a tech only self-editing physician solution into market and installation of central research platform cloud transformation installed in the UK with prototypes in the US underway. Achieved a reduction of cybersecurity risks, receiving several certifications in PCI, FedRamp and Hitrust.

 

 

Successfully completed the strategic divestiture of our medical transcription and EHR optimization businesses and in collaboration with other members of the leadership team.

 

 

Ensured continued organizational sustainability and future scalability with emphasis on developing high-potential employees and building the pipeline with diverse talent at all levels.

 

 

In collaboration with other members of the leadership team, supported successfully numerous key sales deals with existing and new clients. Core technology was effectively extended across both businesses and successfully launched Patient Engagement System.

Based on this review, the Compensation Committee, upon the recommendation of the CEO, determined Mr. Petro earned 140% of the MBO portion of his annual STIP award.

Mr. Weideman

2021 MBOs for Mr. Weideman

 

 

Execute growth goals by focusing on key verticals, strategic and focused international expansion, launching and ramping up new solutions, expanding markets, and leveraging our partner relationships; Build customer loyalty and deepen trust by providing a superior and singular Nuance experience.

 

 

Enable ability to drive Cloud revenue and ARR growth in fiscal 2021 and beyond.

 

 

Successfully execute on strategic transformation initiatives.

 

 

Establish, develop and retain a strong and qualified team with a focus on succession planning, improved internal mobility, and building a diverse and equitable talent pipeline at all levels of the organization aligned with the company site strategy and fully integrated with our Values to foster a strong inclusive culture and One Nuance experience.

 

 

Increase operational and organizational efficiency through greater collaboration across teams, streamlining processes, and focusing on efforts to build accountability, mitigate risk, and make Nuance easy to do business with internally and externally; Reduce complexity across the company, including site strategy and legal entity reductions.

 

 

 

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Drive greater collaboration of the Healthcare and Enterprise divisions to increase overall value of the combined portfolio to Nuance, including through product development, GTM, sales, and leveraging the core technology stack across both divisions.

The CEO and the Compensation Committee reviewed Mr. Weideman’s performance executing against his MBOs, and determined that Mr. Weideman:

 

 

Executed on growth goals by focusing on key verticals significantly expanding our largest most strategic accounts.

 

 

Accelerated pivot from on-premise to the cloud resulting in increased Annual Recurring Revenue growth.

 

 

In collaboration with other members of the leadership team, fully implemented a Global Deal Optimization Team to drive deal velocity and market expansions.

 

 

Established, developed and retained a strong and qualified team with a focus on succession planning and improved internal mobility. Implemented an executive lead manager academy cohorts to accelerate professional development.

Based on the review, the Compensation Committee, upon the recommendation of the CEO, determined that Mr.  Weideman earned 100% of the MBO portion of his annual STIP award.

Long-Term Incentive Compensation

Long-term incentive (LTI) compensation is used to incentivize strong sustained financial performance and to encourage retention by providing NEOs with equity ownership interests that vest over multiple years. We believe a focus on long-term Company performance also discourages employees from taking actions that focus only on our short-term success. The Compensation Committee believes that granting a mix of both time-based and performance-based equity awards enhances our ability to retain our executive officers by providing a portion of their long-term incentive compensation opportunity in the form of full value equity awards that will vest if they remain employed and a portion that will be earned if performance vesting conditions are satisfied and they remain employed through the performance period.

LTI Changes for Fiscal 2021

 

 

In fiscal 2021, we expanded our LTI design by adding a financial metric. For fiscal 2021, our PSUs will be aligned 80% to relative total shareholder return and 20% to a three-year revenue CAGR. Prior to fiscal 2021, our PSUs were aligned 100% to relative total shareholder return.

In fiscal 2021 for our CEO, 60% of the long-term incentive compensation was in form of PSUs and 40% in the form of RSUs and, for our NEOs, 50% was in the form of PSUs and 50% in the form of RSUs, in each case, determined based on the nominal number of shares underlying the award as of the grant date and assuming target performance for PSUs.

An illustration of the fiscal 2021 LTI Plan design is below:

 

 

LOGO

Relative TSR Payout scale has interpolation between payout levels

 

 

 

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LTI Awards for Fiscal 2021

At its November 2020 meeting, the Compensation Committee approved awards of RSUs and PSUs for all NEOs for fiscal 2021. The RSUs vest ratably over three years. The PSUs for fiscal 2021 are earned 80% based on the Company’s TSR as compared to the S&P Software & Services Industry index and 20% based on the Company’s revenue growth. Both metrics are measured over a three-year performance period commencing November 3, 2020 and ending November 3, 2023. The awards have a threshold payout of 50% at the 25th percentile, target payout of 100% at the 50th percentile and maximum payout opportunity of 200% at the 75th percentile, with linear interpolation in between performance levels. For the awards aligned to TSR, payout is capped at 100% in the event TSR is negative. The CEO and other NEOs were granted the following 2021 LTI awards:

 

Named Executive Officers

   RSU Value (1)    PSU Value (1)    Total

Mark Benjamin

   $3,600,000    $5,400,000    $9,000,000

Daniel Tempesta

   $1,375,000    $1,375,000    $2,750,000

Robert Dahdah

   $1,150,000    $1,150,000    $2,300,000

Joseph Petro

   $1,450,000    $1,450,000    $2,900,000

Robert Weideman

   $1,250,000    $1,250,000    $2,500,000

 

 

(1)

The Compensation Committee approved the value authorized to be delivered with respect to the awards listed in the table above, and the number of shares underlying each award (with PSUs determined based on target) was determined by dividing that value by $33.47, the 30-trading day average closing price leading up to and including the grant date as quoted on Nasdaq. The grant date value fair of the RSU awards, as presented in the Summary Compensation Table, is $32.57 per RSU, the closing stock price on the date of grant. The grant date fair value for 80% of the PSU awards aligned to relative TSR is $43.36 per PSU, which was determined using a Monte Carlo simulation model. As a result of the performance conditions associated with the PSU awards aligned to relative total shareholder return and the opportunity for a participant to earn up to 200% of the target award, the grant date fair value under the accounting rules for the PSUs is approximately 33% higher than for the RSUs. The grant date fair value for 20% of the PSU awards aligned to revenue growth is $32.57 per PSU, the closing stock price on the date of grant. The resulting weighted average grant date fair value, as presented in the Summary Compensation Table, is $41.20.

Fiscal 2021 Equity Award Outcomes

2-year TSR Award—Assessed November 6, 2020

In November 2018, the Compensation Committee established performance measures and targets for certain outstanding PSUs that were authorized by the Compensation Committee in previous fiscal years but did not have performance targets established. The Compensation Committee chose relative TSR as the performance measure for the PSUs granted in previous years, to be measured over the remaining two-year performance period for the awards. The maximum payout opportunity was 150% of target shares.

The Compensation Committee certified achievement of the performance measures related to PSU awards for Messrs. Tempesta, Petro and Weideman that were eligible to be earned and vest based on two-year relative TSR as compared to the S&P Software & Services Select Industry Index for the period November 6, 2018 to November 6, 2020. Awards subject to the 2-year relative TSR metric had the opportunity to achieve 50% payout at the 25th percentile, 100% payout at 50th percentile and 150% payout at 75th percentile, with linear interpolation between performance levels. Payout is capped at 100% if the absolute TSR is negative at the end of the performance period.

Our two-year relative TSR for the performance period was 130% and ranked at the 81st percentile of the Index Group. As a result, and as shown in the chart below, the payout was 150%.

 

Name

   Relative TSR
Ranking Target
     Relative TSR
Ranking
    

PSUs at
Target

(Shares)

   % of
Achievement
  Final PSU
Payout
(Shares)

Daniel Tempesta

         29,166    150%   43,749

Joseph Petro

     50th percentile        81st percentile      24,943    150%   37,414

Robert Weideman

                     29,166    150%   43,749

 

 

 

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CEO New Hire 3-year TSR Award—Assessed April 2021

The Compensation Committee certified achievement of the performance measures related to the CEO New Hire PSU awards for Mr. Benjamin that was eligible to be earned and vest based on three-year relative TSR as compared to the S&P Software & Services Select Industry Index for the period April 23, 2018 to April 23, 2021. The award subject to the 3-year relative TSR metric had the opportunity to achieve 50% payout at the 25th percentile, 100% payout at 50th percentile and 150% payout at 75th percentile, with linear interpolation between performance levels. Payout is capped at 100% if the absolute TSR is negative at the end of the performance period.

Our three-year relative TSR for the performance period was 269% and ranked at the 93rd percentile of the Index Group. As a result, and as shown in the chart below, the payout was 200%.

 

Name

   Relative TSR
Ranking Target
     Relative TSR
Ranking
    

PSUs at
Target

(Shares)

   % of
Achievement
  Final PSU
Payout
(Shares)

Mark Benjamin

     50th percentile        93rd percentile      382,966    200%   765,932

Other Compensation-Related Information

Compensation Risk Assessment

The Compensation Committee conducted its annual review in December 2021 of Nuance’s compensation philosophy and strategy, and as part of this review, assessed compensation-related risks. The Compensation Committee reviews the Company’s compensation programs for executives and employees, including both short-term compensation and long-term equity-based incentive awards. We believe that the mix and design of the elements of our executive compensation are well balanced and do not encourage our employees, including our executive officers, to take or assume unreasonable risk.

Compensation Recovery Policy (“Clawback”)

We maintain a compensation recovery (“clawback”) policy which provides that, in the event that we are required to prepare an accounting restatement, we may recover from any executive officer any incentive compensation erroneously paid or awarded in excess of what would have been paid under the accounting restatement. This policy covers the three-year period preceding the date on which we are required to prepare the accounting restatement.

Derivatives Trading, Hedging and Pledging Policies

We maintain an insider trading policy that applies to all of our employees worldwide, including our executive officers, and members our Board. The policy prohibits short sales and prohibits our employees from engaging in any transaction in publicly-traded options and derivatives on our stock. This policy also prohibits our employees from trading our stock on margin (i.e., borrowing money from a brokerage firm, bank or other entity in order to buy our stock).

Retirement, Welfare and Personal Benefits

We offer our United States employees, including our executive officers, comprehensive health and welfare programs including medical, wellness, dental, vision, disability, life insurance and accidental death and dismemberment protection. In addition, we offer a Section 401(k) plan and employee stock purchase plan.

The Company established the Nuance Cares program, pursuant to which the Nuance Foundation, a non-profit foundation affiliated with the Company, matches eligible charitable contributions up to $1,000 made by our employees and up to $20,000 for our non-employee directors, CEO and SVP level and above employees that are direct reports to our CEO, including our executive officers.

 

 

 

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We provide our executive officers, including our NEOs, with certain perquisites and personal benefits, as described in the table below, the incremental costs to us of which are reflected in the Summary Compensation Table below. The Compensation Committee believes these personal benefits are reasonable and consistent with our overall executive compensation program because they better enable us to attract and retain superior individuals for our key executive positions. In addition, certain of these personal benefits are provided to ensure our executive officers’ health and financial affairs are taken care of in a manner that enables them to focus their full attention on their respective positions.

The Compensation Committee reviews and approves the personal benefits provided to our executive officers on an annual basis.

Enhanced welfare benefits and other personal benefits provided to our CEO and other executive officers for fiscal 2021 (other than the personal security described above) are as follows:

 

Enhanced

Wellness Benefit

 

Term Life

Insurance Policy

 

Charitable

Contribution

Match

 

Enhanced Long-

Term Disability

Coverage

 

Personal

Aircraft

Use (1)

 

Tax, Financial

Planning and Legal

Expense

Reimbursement

Coverage of enhanced Executive physical examination or concierge medical services up to $5,000

  $500,000 term life policy, subject to medical clearance   Company match of up to $20,000 for eligible charitable contributions   Coverage of 60% of eligible earnings capped at a maximum benefit of $18,500 per month  

CEO: Available for personal use as approved by the Board.

 

Other Executive Officers: Generally only business travel but family members may accompany executive officer on business travel with CEO approval and, in limited cases, the CEO may approve other personal aircraft use.

  $15,000 per calendar year benefit

 

(1)

To increase the number of in-person meetings with our customers, as well as to reduce the physical strain of heavy travel schedules, we own a corporate aircraft and also lease a charter aircraft from time to time for business-related travel. The Compensation Committee has adopted a policy governing the use of the corporate aircraft, which states that the corporate aircraft must primarily be used for business travel and can be used on a limited basis for personal use. Specifically, the policy permits the corporate aircraft to be available for the personal use of our CEO for his protection and the protection of our assets, to reduce his travel time and allow him to devote more time to work duties. The CEO can also approve personal use of the aircraft by others for commuting between home and Company office locations and for other personal travel and does so to reduce travel time and allow more time for work duties for the other NEOs and other key employees. During fiscal 2021, there was no taxable benefit realized by any of the NEOs.

In addition to the benefits included in the table above, personal security services were provided to the CEO for a period of time following the announcement of the Microsoft transaction. The incremental cost of such services is included in the Summary Compensation Table.

Post-Employment Compensation

The Compensation Committee has approved agreements with our CEO and certain other executive officers, including each of the other NEOs, which provide for certain payments and benefits upon certain specified terminations of employment, including certain specified terminations of employment following a change of control of the Company. In exchange for these payments and benefits, each executive officer must release the Company from any claims relating to his or her employment and termination of employment.

 

 

 

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We believe that these protections are necessary to help motivate and retain our executive officers and, in some cases, helped induce them to forego other opportunities or leave their then-current employment for the uncertainty of a demanding position in a new and unfamiliar organization. We also believe that these protections will help our executive officers maintain continued focus and dedication to their responsibilities to help maximize shareholder value when analyzing a potential transaction that could involve a change of control of the Company.

Further details of these agreements are outlined in the narrative following the “Potential Payments upon Termination or Change of Control” table further in this proxy.

Equity Granting Policy

We grant equity awards to select new hires on a quarterly basis, generally the second month in the quarter. We grant equity awards to select employees in two annual cycles in the first and fourth quarter of the fiscal year and periodically grant off-cycle awards for significant promotions.

Equity awards are granted as payment for annual bonuses for certain of our employees, including our named

executive officers, in lieu of paying cash for a portion of our employees. Awards are granted promptly following the final

determination of achievement and payout levels by the Compensation Committee. Awards are granted and vest shortly

thereafter.

The Compensation Committee does not grant equity awards in anticipation of the release of material nonpublic information. Similarly, we do not time the release of material nonpublic information about the Company based on equity award grant dates.

Tax Considerations

Section 162(m) of the Internal Revenue Code (Section 162(m)) limits the tax deductibility of compensation for certain executive officers that is more than $1 million. The Compensation Committee takes into consideration the potential deductibility of the compensation as one of the factors to be considered when establishing the Company’s executive compensation program. However, the Compensation Committee believes that its primary responsibility is to provide a compensation program that attracts, retains and rewards the executive officers and other key employees that are important to the Company’s success. Accordingly, the Compensation Committee, in its judgment, may authorize and has authorized compensation payments that are limited as to tax deductibility.

 

 

 

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Fiscal 2021 Summary Compensation Table

The following table sets forth the compensation awarded to, earned by or paid to the NEOs during fiscal 2021, and, if applicable, fiscal 2020 and fiscal 2019.

On April 12, 2021, we announced that we had entered into a definitive merger agreement with Microsoft and a wholly-owned subsidiary of Microsoft. For additional details regarding the amounts payable to our named executive officers if the merger transaction is completed, please see our Current Report on Form 8-K, dated April 12, 2021, and our Definitive Proxy Statement on Schedule 14A relating to the merger filed with the SEC.

 

Name and
  Principal Position

   Year    Salary
($)
   Bonus
($)
   Stock
Awards
($)
 (2)
  

Non-Equity

Incentive Plan

Compensation

($) (3)

   All Other
Compensation
($)
   Total
($)

Mark Benjamin

       2021      $ 800,000             $ 10,149,627      $ 1,200,000      $ 68,250      $ 12,217,877 

CEO

       2020        800,000               10,150,040        1,200,000        28,967        12,179,007 
       2019        800,000               9,768,924        1,236,960        776,299        12,582,183 

Daniel Tempesta

       2021      $ 500,000             $ 3,030,332      $ 377,250      $ 34,635      $ 3,942,217 

Executive Vice President and CFO

       2020        500,000               3,384,383        375,000        28,578        4,287,961 
       2019        493,750               6,002,626        371,550        32,779        6,900,705 

Robert Dahdah

       2021      $ 500,000      $      $ 2,534,437      $ 384,750      $ 42,742      $ 3,461,929 

Executive Vice President

Chief Revenue Officer (1)

       2020        498,750        300,000        2,584,443        375,000        18,054        3,776,247 

Joseph Petro

       2021      $ 500,000             $ 3,195,614      $ 396,000      $ 26,626      $ 4,118,240 

Executive Vice President

       2020        500,000               2,892,121        375,000        16,213        3,783,334 

Chief Technology Officer

       2019        500,000               4,875,939        394,050        8,586        5,778,575 

Robert Weideman

       2021      $ 500,000             $ 2,754,827      $ 339,000      $ 4,803      $ 3,598,630 

Executive Vice President

       2020        500,000               3,076,743        375,000        14,461        3,966,204 

GM, Enterprise Division

       2019        500,000               5,578,501        315,000        4,928        6,398,429 

 

(1)

No amounts are reported for fiscal 2019 for Mr. Dahdah because he was not a named executive officer of the Company in such year.

 

(2)

The amounts reported represent the grant date fair value of the stock awards granted to Named Executive Officers in each covered fiscal year, as determined in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. The stock awards included in the table for each fiscal year include stock awards that were treated as granted in the fiscal year under FASB ASC Topic 718, even if the stock award was authorized by the Board or Compensation Committee in an earlier fiscal year. The assumptions used to calculate the grant date fair value of the stock awards reported in the Stock Awards column are set forth in Note 17 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for fiscal 2021 filed with the SEC on November 18, 2021.

 

  

For PSU awards, the amounts reported are based on the probable outcome of the performance conditions associated with the award. Based on the probable outcome of such performance conditions, the grant date fair value of the 2021 PSU awards is $6,994,761 for Mr. Benjamin, $1,781,058 for Mr. Tempesta, $1,489,598 for Mr. Dahdah, $1,878,182 for Mr. Petro and $1,619,112 for Mr. Weideman the grant date fair value. The grant date fair value of the 2020 PSU awards is $6,820,762 for Mr. Benjamin, $1,953,848 for Mr. Tempesta, $1,492,032 for Mr. Dahdah, $1,669,658 for Mr. Petro and $1,776,243 for Mr. Weideman and the grant date fair value of the 2019 PSU awards is $5,529,887 for Mr. Benjamin, $3,238,318 for Mr. Tempesta, $2,664,485 for Mr. Petro and $3,065,503 for Mr. Weideman.

 

  

Assuming that the highest level of performance conditions are achieved with respect to the PSU awards granted (and thus the maximum number of shares that may be issued under the PSUs are issued), the grant date fair value of the fiscal 2021 PSU awards would be: $10,508,515 for Mr. Benjamin, $2,675,756 for Mr. Tempesta, $2,237,885 for Mr. Dahdah, $2,821,669 for Mr. Petro, and $2,432,458 for Mr. Weideman. The grant date fair value of the fiscal 2020 PSU awards would be: $9,988,435 for Mr. Benjamin, $2,861,246 for Mr. Tempesta, $2,184,956 for Mr. Dahdah, $2,445,075 for Mr. Petro, and $2,601,160 for Mr. Weideman. The grant date fair value of the fiscal 2019 award value PSU awards would be as follows: $8,042,115 for Mr. Benjamin, $4,703,968 for Mr. Tempesta, $4,452,644 for Mr. Petro, and $4,201,319 for Mr. Weideman. The amounts reported in this column do not correspond to the actual value that may ultimately be realized by the Named Executive Officer from his equity awards. Further details on these awards can be found in Fiscal 2021 Grants of Plan-based Awards Table below and in the CD&A above.

 

 

 

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Compensation Discussion and Analysis

 

 

 

(3)

The amounts reported represent fiscal 2021 bonuses paid under our STIP. Messrs. Benjamin, Tempesta, Dahdah, Petro and Weideman received their fiscal 2021 bonuses in the form of RSUs, which vested in full on December 3, 2021. The number of RSUs granted was determined using the closing price of our common stock on November 19, 2021, or $55.25 per share.

 

Name

   STIP
Value Earned or Paid
   Restricted Stock
Units Issued
   Vesting Date

Mark Benjamin

     $ 1,200,000           21,719       December 3, 2021 

Daniel Tempesta

     $ 377,250           6,828       December 3, 2021 

Robert Dahdah

     $ 384,750           6,963       December 3, 2021 

Joseph Petro

     $ 396,000           7,167       December 3, 2021 

Robert Weideman

     $ 339,000           6,135       December 3, 2021 

 

 

 

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All Other Compensation

The following table sets forth a schedule of the amounts included in “All Other Compensation” for fiscal 2021, as presented in the Summary Compensation Table.

 

Name

  Matching
401(k)
Contributions
  Enhanced
Life
Insurance
and LTD
Premiums
  Financial
Planning
Benefit
  Executive
Wellness
Benefit
  Security
Protection
 (1)
  Charitable
Match
(2)
    Total ($)  

Mr. Benjamin

      11,600         920         12,890         7,800         19,040         16,000       $ 68,250 

Mr. Tempesta

      9,635         188         —         4,812         —         20,000       $ 34,635 

Mr. Dahdah

      10,769         188         7,435         4,350         —         20,000       $ 42,742 

Mr. Petro

      11,438         188         15,000         —         —         —       $ 26,626 

Mr. Weideman

      4,615         188         —         —         —         —       $ 4,803 

 

(1)

The value of personal security services provided to the CEO for a period of time following the announcement of the Microsoft transaction.

 

(2)

The amounts shown reflect matching contribution made by the Nuance Foundation under the Nuance Cares charitable matching program for fiscal 2021.

 

 

 

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Fiscal 2021 Grants of Plan-Based Awards

The following table sets forth all plan-based awards granted to the NEOs during fiscal 2021. The RSU and PSU awards identified in the table below are also reported in the Outstanding Equity Awards at Fiscal Year End table.

 

            Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards (1)
      Estimated Future Payouts
Under Equity Incentive
Plan Awards (2)
  All Other
Stock Awards
Number of
Shares of
Stock or Units
(#)
 

Grant Date

Fair Value of

Stock and

Option

Awards ($) (3)

   

Name

  Award
Type
  Grant
Date (3)
  Threshold
($)
  Target
($)
  Maximum
($)
      Threshold
(#)
  Target
(#)
  Maximum
(#)
   

Mark Benjamin

      STIP        10/1/2020       300,000       1,200,000       1,800,000                            
   

 

RSU 

   

 

11/3/2020

                               

 

107,548   

   

 

3,502,731

   
   

 

PSU 

   

 

11/3/2020

                   

 

80,661

   

 

161,322

   

 

322,644

       

 

6,994,761

   

Daniel Tempesta

      STIP        10/1/2020       93,750       375,000       562,500                            
   

 

RSU 

   

 

11/3/2020

                               

 

41,077   

   

 

1,337,837

   
   

 

PSU 

   

 

11/3/2020

                   

 

20,539

   

 

41,077

   

 

82,154

       

 

1,781,058

   

Robert Dahdah

      STIP        10/1/2020       93,750       375,000       562,500                            
   

 

RSU 

   

 

11/3/2020

                               

 

34,355   

   

 

1,118,908

   
   

 

PSU 

   

 

11/3/2020

                   

 

17,178

   

 

34,355

   

 

68,710

       

 

1,489,598

   

Joseph Petro

      STIP        10/1/2020       93,750       375,000       562,500                            
   

 

RSU 

   

 

11/3/2020

                               

 

43,318   

   

 

1,410,824

   
   

 

PSU 

   

 

11/3/2020

                   

 

21,659

   

 

43,317

   

 

86,634

       

 

1,878,182

   

Robert Weideman

      STIP        10/1/2020       93,750       375,000       562,500                            
   

 

RSU 

   

 

11/3/2020

                               

 

37,343   

   

 

1,216,224

   
     

 

PSU 

   

 

11/3/2020

                                           

 

18,671

   

 

37,342

   

 

74,684

             

 

1,619,112

         

Type of Award:

STIP = Short Term Incentive Plan

RSU = Restricted Stock Unit

PSU = Performance Stock Unit

 

(1)

The Company’s practice is to pay annual bonuses under the STIP in the form of RSUs, which may be subject to additional vesting requirements as determined by the Compensation Committee. The amounts reported in the “Threshold,” “Target” and “Maximum” columns represent the amounts that would be payable under the STIP assuming achievement of performance targets at threshold, target and maximum performance levels. The actual amount paid to each NEO under the STIP with respect to fiscal 2021 was determined based upon the final assessment of achievement of the performance targets for the fiscal year. The actual bonus payments to each NEO and the form of payment are disclosed in the CD&A above.

 

(2)

Represents the threshold, target and maximum number of shares that may be earned with respect PSUs granted in fiscal 2021, 80 percent of which are eligible to be earned and vest based on our relative TSR over a three-year performance period and 20 percent of which are eligible to be earned and vest based on a three-year revenue CAGR.

 

(3)

The amounts reported represent the grant date fair value of each equity award, computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures, and, for PSUs, based on probable outcome of the performance conditions associated with the awards. See footnote (3) to the Summary Compensation Table for more information about the values shown here and the maximum grant date fair values associated with PSUs. The amounts reported in this column do not correspond to the actual value that may ultimately be realized by the NEO from his equity awards.

Narrative Disclosure to the Fiscal 2021 Summary Compensation Table and Fiscal 2021 Grants of Plan-Based Awards Table

For a description of Mr. Benjamin’s employment agreement, see “Potential Payments upon Termination or Change in Control” and “Employment Agreement with Mr. Benjamin” below.

 

 

 

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Fiscal 2021 Outstanding Equity Awards at Fiscal Year-End Table

The following table sets forth all outstanding equity awards held by each NEO as of September 30, 2021. The equity awards were all in the form of RSUs and PSUs. None of the NEOs held options at September 30, 2021. For purposes of valuing the outstanding awards, the amounts below are based on a per share price of $55.04 for the Common Stock, which was the closing market price of the Common Stock as reported on the Nasdaq on September 30, 2021, the last day of the fiscal year.

On April 12, 2021, we announced that we had entered into a definitive merger agreement with Microsoft and a wholly-owned subsidiary of Microsoft. For additional details regarding the treatment of outstanding equity awards for our named executive officers if the merger transaction is completed, please see our Current Report on Form 8-K, dated April 12, 2021, and our Definitive Proxy Statement on Schedule 14A relating to the merger filed with the SEC.

Effective with the spin-off of our Automotive division on October 1, 2019, equity awards that were outstanding prior to the spin-off date were equitably adjusted to preserve the value of the awards. The awards were adjusted by a conversion ratio of 1.16667 per 1 RSU or PSU then held. The share numbers presented in the table below are adjusted to account for the spin-off.

 

Name

  Authorization
Date
  Type of Award   Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
    Market
Value of
Shares or
Units of Stock
That Have Not
Vested ($)
    Type of Award  

Equity Incentive
Plan Awards:
Number of
Unearned
Shares, or

Units or Other
Rights
That Have Not
Vested (#)

   

Equity Incentive 

Plan Awards: 

Market or 

PayoutValue of 

Unearned 

Shares, 

Units or 

Other Rights That 

Have Not Vested 

($)

 

Mark Benjamin

  November 6, 2018   RSU     90,704  (1)      $   4,992,348     PSU     272,114  (5)      $ 14,977,155  
 

November 5, 2019

 

RSU

 

 

136,804 

(2) 

 

 

7,529,692

 

 

PSU

 

 

307,810 

(6) 

 

 

16,941,862

 

 

November 3, 2020

 

RSU

 

 

107,548 

(3) 

 

 

5,919,442

 

 

PSU

 

 

161,322 

(7) 

 

 

8,879,163

 

  Total       335,056        $18,441,482         741,246        $40,798,180  

Daniel Tempesta

  November 6, 2018   RSU     31,179  (1)      $   1,716,092     PSU     93,538  (5)      $   5,148,332  
 

November 5, 2019

 

RSU

 

 

58,782 

(2) 

 

 

3,235,361

 

 

PSU

 

 

88,174 

(6) 

 

 

4,853,097

 

 

November 3, 2020

 

RSU

 

 

41,077 

(3) 

 

 

2,260,878

 

 

PSU

 

 

41,077 

(7) 

 

 

2,260,878

 

  Total       131,038        $  7,212,332         222,789        $12,262,307  

Robert Dahdah

  April 29, 2019   RSU     19,558  (4)      $   1,076,472     PSU           $                —  
 

November 5, 2019

 

RSU

 

 

44,888 

(2) 

 

 

2,470,636

 

 

PSU

 

 

67,333 

(6) 

 

 

3,706,008

 

 

November 3, 2020

 

RSU

 

 

34,355 

(3) 

 

 

1,890,899

 

 

PSU

 

 

34,355 

(7) 

 

 

1,890,899

 

  Total       98,801        $   5,438,007         101,688      $   5,596,908  

Joseph Petro

  November 6, 2018   RSU     24,943  (1)      $   1,372,863     PSU     74,831  (5)      $   4,118,698  
 

November 5, 2019

 

RSU

 

 

50,232 

(2) 

 

 

2,764,769

 

 

PSU

 

 

75,349 

(6) 

 

 

4,147,209

 

 

November 3, 2020

 

RSU

 

 

43,318 

(3) 

 

 

2,384,223

 

 

PSU

 

 

43,317 

(7) 

 

 

2,384,168

 

  Total       118,493        $  6,521,855         193,497        $10,650,075  

Robert Weideman

  November 6, 2018   RSU     28,345  (1)      $   1,560,109     PSU     85,035  (5)      $   4,680,326  
 

November 5, 2019

 

RSU

 

 

53,439 

(2) 

 

 

2,941,283

 

 

PSU

 

 

80,159 

(6) 

 

 

4,411,951

 

 

November 3, 2020

 

RSU

 

 

37,343 

(3) 

 

 

2,055,359

 

 

PSU

 

 

37,342 

(7) 

 

 

2,055,304

 

    Total         119,127        $  6,556,750           202,536        $11,147,581  

 

(1)

Represents the final installment of an RSU award scheduled to vest on November 6, 2021, generally subject to the named executive officer’s continued employment through the applicable vesting date.

 

(2)

Represents an RSU award that is scheduled to vest in two equal installments on November 5, 2021 and November 5, 2022, generally subject to the named executive officer’s continued employment through the applicable vesting date.

 

(3)

Represents an RSU award that is scheduled to vest in three equal installments on November 3, 2021, November 3, 2022 and November 3, 2023, generally subject to the named executive officer’s continued employment through the applicable vesting date.

 

(4)

Represents an RSU award Mr. Dahdah received upon joining the Company on April 29, 2019, which is scheduled to vest on April 29, 2022, generally subject to his continued employment through the applicable vesting date.

 

 

 

 

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(5)

Represents a PSU award (reported at target levels of performance) that will be eligible to vest, to the extent earned, at the end of a three-year performance period on November 6, 2021, generally subject to the named executive officer’s continued employment through such vesting date. The PSUs are eligible to be earned and vest based on the Company’s relative TSR compared to the S&P Software & Services Select Industry Index. The payout ranges from 50% to 200% of target, with payout capped at 100% of target if the absolute TSR is negative at the end of the performance period.

 

(6)

Represents a PSU award (reported at target levels of performance) that will be eligible to vest, to the extent earned, at the end of a three-year performance period on November 5, 2022, generally subject to the named executive officer’s continued employment through such vesting date. The PSUs are eligible to be earned and vest based on the Company’s relative TSR compared to the S&P Software & Services Select Industry Index. The payout ranges from 50% to 200% of target, with payout capped at 100% of target if the absolute TSR is negative at the end of the performance period.

 

(7)

Represents a PSU award (reported at target levels of performance) that will be eligible to vest, to the extent earned, at the end of a three-year performance period on November 3, 2023, generally subject to the named executive officer’s continued employment through such vesting date. The PSUs are eligible to be earned and vest based on the Company’s relative TSR compared to the S&P Software & Services Select Industry Index, weighted at 80%, and a financial performance metric aligned to three-year compound annual growth rate for revenue, weighted at 20%. The payout for each metric ranges from 50% to 200% of target. The relative TSR payout is capped at 100% of target if the absolute TSR is negative at the end of the performance period.

 

 

 

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Fiscal 2021 Option Exercises and Stock Vested Table

The following table sets forth the stock awards vested, and the value realized upon vesting, by the Named Executive Officers during fiscal 2021.

Effective with the spin-off of our Automotive division on October 1, 2019, equity awards that were outstanding prior to the spin-off were equitably adjusted to preserve the value of the awards. The awards were adjusted by a conversion ratio of 1.16667 per 1 RSU or PSU then held. All share numbers presented in the table below are adjusted to account for the spin-off.

 

     Stock Awards

Name

   Number of Shares
Acquired on Vesting
(#)
(1)
  

Value 

Realized on Vesting 

  ($) (2) 

Mr. Benjamin

   1,081,728    $54,134,077

Mr. Tempesta

      176,063    $  6,127,627

Mr. Dahdah

      137,367    $  6,783,786

Mr. Petro

      171,379    $  5,967,618

Mr. Weideman

      164,860    $  5,741,898

 

(1)

The number of shares vested includes fiscal 2020 annual bonuses that were paid in RSUs and were settled in shares in fiscal 2021 and other shares received in settlement of equity awards that vested in fiscal 2021.

 

(2)

Value calculated by multiplying the number of shares vesting by the closing price of a share of the Common Stock on the vesting date, less the par value of the shares.

Pension or Nonqualified Deferred Compensation Plans

The Company had no pension plans or nonqualified deferred compensation arrangements in which the NEOs participated during fiscal 2021.

 

 

 

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Potential Payments Upon Termination or Change of Control

We have agreements with each of our currently employed Named Executive Officers that provide the payments and benefits described below in connection with certain terminations of their employment, including following a change of control of the Company. To receive any of severance payments and benefits described below, the executive must execute a release of claims in favor of the Company and its affiliates and continue to comply with certain post-termination covenants in favor of the Company and its affiliates. The severance and benefits listed in the table below assume that a qualifying termination of employment and a change in control each occurred on September 30, 2021, the last day of fiscal 2021.

On April 12, 2021, we announced that we had entered into a definitive merger agreement with Microsoft and a wholly-owned subsidiary of Microsoft. For additional details regarding the amounts payable to our named executive officers if the merger transaction is completed, please see our Current Report on Form 8-K, dated April 12, 2021, and our Definitive Proxy Statement on Schedule 14A relating to the merger filed with the SEC.

 

Name

   Event or Circumstances of Termination or Event (1)
  

Termination
without Cause

or Good Reason  (2)

  

Termination without Cause

or Good Reason

in connection with

Change of Control (3)

   Disability
or Death

Mark Benjamin

              

CEO

              

Base Salary (4)

    

$

1,600,000

    

$

2,000,000

    

$

— 

Target Bonus (5)

    

 

1,200,000

    

 

2,400,000

    

 

— 

Pro-Rated Target Bonus (6)

    

 

1,200,000

    

 

1,200,000

    

 

— 

Accelerated Equity—RSU (7)

    

 

10,730,378

    

 

18,441,482

    

 

18,441,482 

Accelerated Equity—PSU (8)

    

 

    

 

40,798,180

    

 

40,798,180 

Benefits Continuation (9)

    

 

41,287

    

 

41,287

    

 

27,524 

Total

    

$

14,771,665

    

$

64,880,949

    

$

59,267,186 

Daniel Tempesta

              

CFO

              

 

 

Base Salary (10)

    

$

500,000

    

$

500,000

    

$

— 

Target Bonus (11)

    

 

    

 

375,000

    

 

— 

Pro-Rated Target Bonus (11)

    

 

375,000

    

 

    

 

— 

Accelerated Equity—RSU (12)

    

 

4,087,436

    

 

7,212,332

    

 

7,212,332 

Accelerated Equity—PSU (13)

    

 

    

 

12,262,307

    

 

12,262,307 

Benefits Continuation (9)

    

 

27,591

    

 

27,591

    

 

27,591 

Total

    

$

4,990,027

    

$

20,377,230

    

$

19,502,230 

Robert Dahdah

                  

CRO

              

 

 

Base Salary (10)

    

$

500,000

    

$

500,000

    

$

— 

Target Bonus (11)

    

 

    

 

375,000

    

 

— 

Pro-Rated Target Bonus (11)

    

 

375,000

    

 

    

 

— 

Accelerated Equity—RSU (14)

    

 

1,865,636

    

 

5,438,007

    

 

5,438,007 

Accelerated Equity—PSU (13)

    

 

    

 

5,596,908

    

 

5,596,908 

Benefits Continuation (9)

    

 

6,688

    

 

6,688

    

 

6,688 

Total

    

$

2,747,324

    

$

11,916,603

    

$

11,041,603 

Joseph Petro

                  

CTO

              

 

 

Base Salary (10)

    

$

500,000

    

$

500,000

    

$

— 

Target Bonus (11)

    

 

    

 

375,000

    

 

— 

Pro-Rated Target Bonus (11)

    

 

375,000

    

 

    

 

— 

Accelerated Equity—RSU (14)

    

 

3,550,025

    

 

6,521,855

    

 

6,521,855 

Accelerated Equity—PSU (13)

    

 

    

 

10,650,075

    

 

10,650,075 

Benefits Continuation (9)

    

 

20,998

    

 

20,998

    

 

20,998 

Total

    

$

4,446,023

    

$

18,067,928

    

$

17,192,928 

 

 

 

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Name

   Event or Circumstances of Termination or Event (1)
  

Termination
without Cause

or Good Reason  (2)

  

Termination without Cause

or Good Reason

in connection with

Change of Control (3)

   Disability
or Death

Robert Weideman

              

EVP, Enterprise Division

              

Base Salary (10)

    

$

500,000

    

$

500,000

    

$

— 

Target Bonus (11)

    

 

    

 

375,000

    

 

— 

Pro-Rated Target Bonus (11)

    

 

375,000

    

 

    

 

— 

Accelerated Equity—RSU (14)

    

 

3,715,916

    

 

6,556,750

    

 

6,556,750 

Accelerated Equity—PSU (13)

    

 

    

 

11,147,581

    

 

11,147,581 

Benefits Continuation (9)

    

 

18,419

    

 

18,419

    

 

18,419 

Total

    

$

4,609,335

    

$

18,597,750

    

$

17,722,750 

 

(1)

Equity value is based on the closing stock price of our Common Stock on September 30, 2021 ($55.04), the last trading day of fiscal 2021 and the value for PSUs assume that such awards vest at target levels. The treatment of equity awards is described in more detail below.

 

(2)

Mr. Benjamin and Mr. Tempesta are the only executives with the ability to receive benefits as a result of voluntary termination for good reason other than in connection with a change of control.

 

(3)

These benefits would be payable in connection with a termination without cause or good reason resignation within the 12 months following a change of control (or, for Mr. Benjamin, within the three months prior to or 12 months following a change of control).

 

(4)

Upon a termination without cause or resignation for good reason, Mr. Benjamin would receive payment of 200% of his base salary if such termination occurred other than in connection with a change of control and payment of 250% of his base salary if such termination occurred in connection with a change of control.

 

(5)

Upon a termination without cause or resignation for good reason, Mr. Benjamin would receive payment of 100% of his target annual bonus if such termination occurred other than in connection with a change of control and payment of 200% of his target annual bonus if such termination occurred in connection with a change of control.

 

(6)

Upon a termination without cause or resignation for good reason, Mr. Benjamin would receive a pro-rated payment of his target annual bonus for the year of termination.

 

(7)

Upon a termination without cause or good reason, time-based RSU awards scheduled to vest within the twelve month period following termination would accelerate and vest. Upon a termination without cause or resignation for good reason in connection with a change of control, or by reason of death or disability, all time-based equity awards held by Mr. Benjamin would vest in full.

 

(8)

Upon a termination without cause or resignation for good reason in connection with change of control, all TSR-based performance-based equity awards would vest in full based on actual performance, all non-TSR-based performance-based equity awards that are subject to performance goals for the year in which the change of control occurs would vest at target levels of achievement in which the change of control occurs would vest at target levels of achievement.

 

(9)

Amount is based on the cost of COBRA continuation coverage as of September 30, 2021. The COBRA benefits that would be payable to our Named Executive Officers is described below.

 

(10)

Upon a termination without cause, each of Messrs. Tempesta, Dahdah, Petro and Weideman would receive payment of 100% of his base salary. Mr. Tempesta would receive the same amount upon a resignation for good reason, and Messrs. Dahdah, Petro and Weideman would receive the same amount upon a resignation for good reason in connection with a change of control.

 

(11)

Upon a termination without cause (other than in connection with a change of control), each of Messrs. Tempesta, Dahdah, Petro and Weideman would receive a pro-rated portion of his target annual bonus. Mr. Tempesta would receive this same amount upon a resignation for good reason other than in connection with a change of control. If such termination occurred in connection with a change of control, each of Messrs. Tempesta, Dahdah, Petro and Weideman would receive 100% of the

 

 

 

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  greater of target annual bonus for the year of termination or the target bonus in effect immediately prior to the change of control. The amounts listed in the table above include each Named Executive Officer’s full target annual bonus for fiscal 2021.

 

(12)

Upon a termination without cause or resignation for good reason in connection with a change of control, or by reason of death or disability, all time-based equity awards held by Mr. Tempesta would vest in full.

 

(13)

Upon a termination without cause or resignation for good reason in connection with change of control, all TSR-based performance-based equity awards would vest in full based on actual performance, all non-TSR-based performance-based equity awards that are subject to performance goals for the year in which the change of control occurs would vest at target levels of achievement.

 

(14)

Upon a termination without cause or good reason, time-based RSU awards scheduled to vest within the twelve month period following termination would accelerate and vest. Upon a termination without cause or resignation for good reason in connection with a change of control, or by reason of death or disability, all time-based equity awards held by Messrs. Dahdah, Petro and Weideman would vest in full.

Employment Agreements

On April 12, 2021, we announced that we had entered into a definitive merger agreement with Microsoft and a wholly-owned subsidiary of Microsoft. For additional details regarding amendments to the agreements discussed below with our named executive officers if the merger transaction is completed, please see our Current Report on Form 8-K, dated April 12, 2021, and our Definitive Proxy Statement on Schedule 14A relating to the merger filed with the SEC.

Employment Agreement with Mr. Benjamin

In connection with Mr. Benjamin’s commencement of employment, on March 19, 2018, the Company and Mr. Benjamin entered into an employment agreement (the “Employment Agreement”) effective as of April 23, 2018. The Employment Agreement has an initial term of four years, renewing automatically thereafter for successive one-year terms, unless either the Company or Mr. Benjamin provides prior notice of non-renewal. The Employment Agreement provides an annual salary of $800,000 and a target annual bonus opportunity of not less than 150% of base salary, subject to the terms of the Company’s annual incentive plan then in effect for Company senior executives. The actual earned annual bonus, if any, payable to Mr. Benjamin for any fiscal year will depend upon the extent to which the applicable performance goal(s) specified by the Compensation Committee are achieved or exceeded, Mr. Benjamin is eligible for equity grants only to the extent determined by the Board or the Compensation Committee.

The Company also agreed to pay Mr. Benjamin certain other benefits, including tax planning services, executive life insurance and long-term disability benefits and an annual physical, all as described in the Employment Agreement.

In addition, Mr. Benjamin is entitled to severance benefits under the Employment Agreement if his employment terminates in certain circumstances. In the event Mr. Benjamin’s employment is terminated by the Company other than for cause, death or disability, or by Mr. Benjamin for good reason, and such termination occurs other than during the period beginning three months before and ending 12 months following a change of control (as such term is defined in the Employment Agreement), Mr. Benjamin will be entitled to receive (i) a lump sum severance payment equal to 200% of his base salary; (ii) a lump sum payment equal to 100% of his target annual bonus for the year of termination; (iii) a pro-rated payment of his target annual bonus for the year of termination based on the percentage of the fiscal year completed; (iv) 12 months’ accelerated vesting of all time-based Company equity awards and (v) continued Company-paid COBRA coverage for 18 months for Mr. Benjamin and his eligible dependents.

In the event Mr. Benjamin’s employment by the Company is terminated by the Company, other than for cause, death or disability, or by Mr. Benjamin for good reason, and such termination occurs during the period beginning three months before and ending 12 months following a change of control, Mr. Benjamin will instead be entitled to receive (i) a lump sum severance payment equal to 250% of his base salary; (ii) a lump sum payment equal to 200% of his target annual bonus; (iii) a pro-rated payment of his

 

 

 

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target annual bonus for the year of termination based on the percentage of the fiscal year completed; (iv) full vesting of all time-based Company equity awards he then holds; and (v) continued Company-paid COBRA coverage for 18 months for Mr. Benjamin and his eligible dependents.

In addition, upon a change of control, (i) Mr. Benjamin’s outstanding PSUs that are subject to financial metric performance goals for the fiscal year of the change of control will be converted to time-based RSUs, based on deemed achievement at 100% of targeted performance, which will vest based on his continued service through the end of the remaining original performance period (subject to full vesting upon termination without cause or resignation for good reason); and (ii) Mr. Benjamin’s outstanding PSUs that are subject to relative total shareholder return performance goals will be converted to time-based RSUs, based on actual performance determined as of the change of control, which will vest based on continued service for the remainder of the performance period (subject to full vesting upon termination without cause or resignation for good reason).

If Mr. Benjamin’s employment with the Company terminates because of death or disability, Mr. Benjamin will receive (i) continued Company-paid COBRA coverage for 12 months for Mr. Benjamin and his eligible dependents; (ii) full vesting of all time-based Company equity awards; and (iii) accelerated vesting of the a portion of initial PSU award (but not of any other future PSU awards) determined by shortening the performance period to the date immediately prior to termination and vesting a pro-rated portion of the award earned as of that date, based on the percentage of the performance period completed.

As a condition to receipt of any of the severance payments or benefits under the Employment Agreement, Mr. Benjamin will be required to execute a separation and release of claims agreement in favor of the Company. In connection with his employment, Mr. Benjamin has also entered into the Company’s standard form of confidential information, inventions and noncompetition agreement and the Company’s form of indemnification agreement for officers and directors. Mr. Benjamin’s severance payments and benefits also are generally conditioned on his continuing compliance with the confidential information, inventions and noncompetition agreement.

In November 2020, Mr. Benjamin’s employment agreement was amended to align the treatment of Mr. Benjamin’s outstanding equity awards in the event of his death or disability to the treatment of equity awards in the event of death reflected in awards granted under the 2020 Stock Plan for employees generally, and to clarify the treatment of performance-based equity awards with an operational metric upon a change in control, as follows:

 

 

In the event of death or disability, Mr. Benjamin will receive 100% acceleration of outstanding PSUs at target. Mr. Benjamin’s agreement, prior to amendment, provided for acceleration of outstanding time-based awards only; and

 

 

Upon change of control, added clarifying language for PSUs measured on a financial and/or operational metric to convert to time-based awards at target and to vest over remaining measurement period, or at termination of employment, if Mr. Benjamin’s employment is involuntarily terminated without cause or the executive resigns for good reason. The language was updated to align with the PSUs granted by the Compensation Committee in November 2020 that included an operational metric.

Change of Control and Severance Agreements with Other NEOs

In August 2018, the Company entered into a Change of Control and Severance Agreement with each of our currently employed Named Executive Officers, other than Mr. Benjamin (whose employment agreement is described above). The agreements have an initial three-year term ending on September 30, 2021, renewing automatically thereafter for successive three-year terms, unless the Company or the executive provides timely notice of non-renewal prior to the end of the initial or a succeeding term. If a change of control occurs within the 12 months before the end of a term, the agreement will automatically extend until 12 months following the change of control. In the event an executive’s employment is involuntarily terminated without cause (and not due to death or disability) other than within 12 months following a change of control of the Company (as those terms are defined in the agreement), the executive will be eligible to receive severance benefits consisting of: (i) 12 months’ base salary, payable in a lump sum; (ii) a pro-rated percentage of his target bonus for the fiscal year in which the termination occurs, payable in a lump sum; (iii) vesting of the pro-rated portion of the outstanding time-based Company equity awards that are scheduled to vest in the fiscal year in which the termination occurs; and (iv) 12 months’ Company-paid health insurance continuation coverage under COBRA, subject to the executive timely electing such coverage.

 

 

 

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If an executive’s employment is terminated without cause (and not due to death or disability) or executive resigns for good reason within 12 months following a change of control of the Company, the executive will instead be eligible to receive severance benefits consisting of: (i) 12 months’ base salary, payable in a lump sum; (ii) a lump sum payment equal to 100% of the greater of the executive’s annual target bonus for the year of termination or the executive’s target bonus in effect immediately prior to the change of control; (iii) full vesting of all outstanding time-based Company equity awards; and (iv) 12 months’ Company-paid health insurance continuation coverage under COBRA, subject to the executive timely electing such coverage. In addition, upon a change of control of the Company, (a) the executive’s outstanding performance-based equity awards that are subject to performance goals for the fiscal year of the change of control (other than relative TSR performance goals), will convert to time-based equity awards with respect to the number of shares that would vest at 100% of target performance, (b) the executive’s outstanding performance-based equity awards subject to relative TSR performance goals will convert to time-based equity awards with respect to the number of shares that would vest based on actual performance as of the change of control and (c) the executive’s outstanding performance-based equity awards subject to performance goals for fiscal years after the fiscal year of the change of control (other than relative TSR performance goals) will remain subject to their existing terms, except that the executive will receive acceleration of 50% of shares subject to such awards (determined assuming achievement of performance goals at 100% of target) if the executive’s employment is terminated without cause or for good reason during 12 months following a change of control. Performance-based equity awards described in clauses (a) and (b) of the preceding sentence, as so modified, will vest on the last day of the performance period, subject to the executive’s continued service through such date, or upon earlier termination without cause or resignation for good reason. If an executive’s employment with the Company terminates due to death or disability, he or his eligible dependents (as applicable) will be eligible to receive benefits consisting of 12 months’ Company-paid health insurance under COBRA and immediate acceleration of all of his outstanding and unvested time-based equity awards. To receive the foregoing severance payments and benefits, an executive would be required to enter into a separation and release agreement with the Company and continue to comply with his existing confidentiality and restrictive covenant agreements.

In addition to the benefits described above, the agreement with Mr. Tempesta includes certain enhanced severance benefits. Specifically, Mr. Tempesta will be entitled to receive severance benefits upon resignation for good reason regardless of whether such resignation occurs within the 12 months following a change in control.

In November 2020, the Change of Control and Severance Agreement with each of our named executive officers, other than Mr. Benjamin, were amended as follows:

 

 

In the event of involuntary termination of employment without cause, 100% of outstanding time-based awards that were scheduled to vest 12 months from the date of termination will accelerate and vest. Prior to this amendment, our NEOs would receive a pro-rata acceleration of awards vesting in-fiscal year only. This amendment was to align the benefit with the methodology adopted in fiscal 2019 of vesting awards on grant date anniversaries instead of on fiscal year ends;

 

 

In the event of a termination of employment due to the death or disability of the executive, 100% of outstanding PSUs will accelerate and vest at target. Prior to this amendment, the NEOs’ agreements provided for acceleration of outstanding time-based awards only; and

 

 

Upon change of control, PSUs measured on a financial and/or operational metric will convert to time-based at target and vest over remaining measurement period, or upon termination if the executive’s employment is involuntarily terminated without cause or the executive resigns for good reason. The language was updated to align with the PSU awards granted by the Compensation Committee in November 2020 that included an operational metric.

 

 

 

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CEO Pay Ratio

In accordance with SEC rules, we are providing the ratio of the annual total compensation of our CEO to the annual total compensation of our median employee (excluding our CEO). The pay ratio presented below is a reasonable estimate calculated in a manner consistent with SEC rules, based on our internal records. The SEC rules for identifying our median employee and calculating the pay ratio based on that employee’s annual total compensation, allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. Accordingly, the pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may use different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.

To identify the median employee, we began by examining a group of 6,601 of our full- and part-time employees (other than our CEO), who were employed by us as of July 31, 2021. We then excluded 288 non-U.S. employees (less than 4.4% of our global workforce) pursuant to the de minimis exemption in the following jurisdictions: Belgium (54 employees), Italy (39), France (35), Spain (31), New Zealand (23), Japan (18), Brazil (15), Sweden (14), Israel (14), Mexico (10), Hungary (9), United Arab Emirates (9), Netherlands (6), Korea (4), Turkey (2), Denmark (2), Poland (1), Argentina (1) and Switzerland (1). We then annualized the earnings of the included full-time and part-time employees who joined the Company during the one-year period ending on July 31, 2021. Base pay for employees paid in a foreign currency was converted to U.S. dollars using the applicable country’s average exchange rate as of July 31, 2021. We then ranked those employees according to their base pay earnings for the period from August 1, 2019, to July 31, 2021.

After identifying the median employee, we calculated the annual total compensation for such employee using the same methodology that we used for our Named Executive Officers for purposes of the Summary Compensation Table. Mr. Benjamin’s annual total compensation as presented in the Summary Compensation Table is used for purposes of determining the CEO pay ratio.

 

 

Ratio

The fiscal 2021 annual total compensation of our CEO was $12,217,877. The fiscal 2021 annual total compensation of our median compensated employee was $75,655 and the ratio of these amounts is approximately 161 to 1.

This information is being provided for the purposes of compliance with the pay ratio disclosure requirement. Neither the Compensation Committee nor management of the Company used the pay ratio measure in making compensation decisions.

 

 

 

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Equity Compensation Plan Information

As of September 30, 2021, there were 7,119,746 shares of Common Stock subject to full value awards (RSUs and PSUs) outstanding (assuming target performance for awards that were subject to performance-based vesting). As of September 30, 2021, there were 11,640,177 shares of Common Stock available for issuance under our equity compensation plans (assuming maximum performance for awards that were subject to performance-based vesting).

The following table provides information as of September 30, 2021 with respect to the shares of Common Stock that may be issued under our equity compensation plans.

Effective with the spin-off of our Automotive division on October 1, 2019, equity awards that were outstanding prior to the spin-off were equitably adjusted to preserve the value of the awards. All share numbers presented in the table below are adjusted to account for the spin-off.

 

     (a)
Number of
Securities to be
Issued Upon
Exercise of
Options
(2)
   (b)
Weighted
Average
Exercise Price
of
Outstanding
Options
  

(c)
Number of
Securities
Remaining
 Available for Future 

Issuance Under
Equity
Compensation
Plans (Excluding
Securities
Reflected
in Column (a))

Equity compensation plans approved by shareholders (1)

            $        14,685,044  (3) 
       

Equity compensation plans not approved by shareholders (4)

                     — 

Total equity compensation plans

            $        14,685,044 

 

(1)

Consists of our 2020 Stock Plan and our Amended and Restated 1995 Employee Stock Purchase Plan.

 

(2)

Excludes 7,119,746 securities to be issued upon vesting of RSUs and PSUs (assuming target performance for PSUs) granted under our 2020 Stock Plan and 2000 Stock Plan.

 

(3)

Includes 3,044,867 shares of the Common Stock available for future issuance under our 1995 Employee Stock Purchase Plan. Per the terms of the merger agreement with Microsoft, we suspended this plan effective August 16, 2021.

 

(4)

Excludes options assumed by the Company in the acquisition of Vlingo Corporation. As of September 30, 2021, a total of 9,355 shares of the Common Stock were issuable upon exercise of the assumed options at a weighted average exercise price of $17.18 per share and with an average weighted life remaining of 0.6 years. No additional options may be granted under any of our plans related to the assumed options. No Executive officers participate in awards under any of the assumed plans. The assumed plan covers only awards assumed in the related acquisition transactions.

 

 

 

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Transactions with Related Persons

Our Policy Regarding Related Party Transactions

The Board has adopted a written policy for approval or ratification of related party transactions. A related party for purposes of the policy is a director, nominee for director, executive officer, immediate family member of the foregoing, beneficial owner of more than 5% of the Common Stock, other counterparties with which the Company may deal such that the relationship between the parties may not appear to be at arms’ length, and certain other parties specified in the policy. A related party transaction for purposes of the policy is any financial transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which the Company (including any of its subsidiaries) was, is or will be a participant, and in which any related person had, has or will have a direct or indirect material interest irrespective of profit or loss, other than transactions available to all U.S. employees of the Company.

The Audit Committee is responsible for evaluating related party transactions and in determining whether to approve a related party transaction, it must take into account, among other factors it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related person’s interest in the transaction.

If a related party transaction is of the type that will be ongoing, the Audit Committee may establish guidelines for the Company to follow in its ongoing dealing with the related person.

A copy of our related party transactions policy can be found under “Corporate governance—Governance documents” in the Investors section of our website, www.nuance.com.

Related Party Transactions

We believe that there have not been any transaction or series of transactions since the beginning of fiscal 2021 to which we were or are to be a participant in which the amount involved exceeds $120,000 and in which any director, nominee for director, executive officer or holder of more than 5% of our Common Stock, or members of any such person’s immediate family, had or will have a direct or indirect material interest, other than compensation described in the sections titled “Executive Compensation, Management and Other Information” or “Director Compensation” elsewhere in this Proxy Statement.

 

 

 

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Proposal Two — Advisory Vote on
Compensation of Named Executive Officers

 

 

Shareholders are being asked to approve, on an advisory basis, the compensation of the NEOs as described in the CD&A beginning on page 25 and the Compensation Tables beginning on page 43.

The Board encourages you to read the CD&A and Compensation Tables sections. As described in such sections, the Board believes our fiscal 2021 executive compensation program addressed areas of feedback raised in prior engagement efforts.

In the fall of 2020, Nuance reached out to shareholders owning approximately 65% of our outstanding shares and spoke with shareholders owning approximately 30% of our outstanding shares to solicit their feedback on the design of the fiscal 2021 PSU awards.

As a result of the shareholder feedback received in these meetings, the Board approved:

 

 

Incorporation of a 3-year revenue growth performance metric for PSUs with a corresponding weighting of 20%

 

 

Maintaining relative TSR as a performance metric for PSUs with a corresponding weighting of 80%

The Board recommends that shareholders vote FOR the following resolution:

“RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the Company’s NEOs, as disclosed in this Proxy Statement, including the CD&A the Compensation Tables and the related narrative.”

Because your vote is advisory, it will not be binding upon the Board. However, the Board values shareholders’ opinions, and the Compensation Committee and Board will take into account the outcome of the advisory vote when considering future executive compensation decisions.

Vote Required; Recommendation of the Board

The affirmative vote of a majority of the shares of the Common Stock present or represented by proxy and voting at the 2022 Annual Meeting is required for approval of this proposal. Abstentions are treated as shares represented in person or by proxy and entitled to vote at the 2022 Annual Meeting and, therefore, will have the same effect as a vote “Against” the proposal. Broker non-votes will have no effect on the outcome of the proposal.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS

 

 

 

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Proposal Three — Ratification of Appointment
of Independent Registered Public Accounting Firm

 

 

In November 2021, the Audit Committee approved the retention of BDO USA, LLP (“BDO”) as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2022. We expect that a representative of BDO will be present at the 2022 Annual Meeting to make a statement if he or she desires to do so, and such representative is expected to be available to respond to appropriate questions.

Shareholders are being asked to ratify the appointment of BDO as independent registered public accounting firm for the Company for the fiscal year ending September 30, 2022. BDO was engaged as the Company’s independent registered public accounting firm by the Audit Committee on October 24, 2004 and has audited the Company’s financial statements since 2004.

Audit Fees During Fiscal Years 2021 and 2020

The following table sets forth the approximate aggregate fees paid by the Company to BDO during the fiscal years ended September 30, 2021 and 2020.

 

     Fiscal 2021      Fiscal 2020  

Audit Fees (1)

   $ 2,400,000      $ 2,419,900  

Audit-Related Fees (2)

     385,000        310,000  

Tax Fees (3)

             

All Other Fees

             

Total Fees

   $ 2,785,000      $ 2,729,900  

 

(1)

Audit Fees.    This category represents fees billed for professional services rendered by the principal accountant for the audits of the registrant’s annual financial statements and internal controls over financial reporting, review of the interim financial statements included in the registrant’s quarterly reports on Form 10-Q, statutory audits and other SEC filings.

 

(2)

Audit-Related Fees.    This category represents fees billed for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of registrant’s financial statements, primarily related to audits of specific subsidiaries and acquirees and accounting consultations.

 

(3)

Tax Fees.    This category represents fees billed for professional services rendered by the principal accountant for tax compliance in certain international jurisdictions.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

The Sarbanes-Oxley Act of 2002 and the auditor independence rules of the SEC require all independent registered public accounting firms that audit issuers to obtain pre-approval from their respective audit committees in order to provide professional services without impairing independence. As such, our Audit Committee has a policy and has established procedures by which it pre-approves all audit and other permitted professional services to be provided by our independent registered public accounting firm.

The pre-approval procedures include execution by the CFO and Audit Committee Chairperson, on behalf of the Company and the entire Audit Committee, of an audit and quarterly review engagement letter and pre-approval listing of other permitted professional services anticipated to be rendered during the foreseeable future. Additionally, from time to time, we may desire additional permitted professional services for which specific pre-approval is obtained from the Audit Committee Chairman, acting on behalf of the Company and the entire Audit Committee, before provision of such services commences. In doing this, the Company and Audit Committee have established a procedure whereby a BDO representative, in conjunction with the CFO or Chief Accounting Officer, contacts the Audit Committee Chairman and obtains pre-approval for such services on behalf of the entire Audit Committee, to be followed by a written engagement letter, as appropriate, confirming such arrangements between BDO and the Company. In addition, on a periodic basis, the entire Audit Committee is provided with a summary of all

 

 

 

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Proposal Three — Ratification of Appointment of Independent Registered Public Accounting Firm

 

 

 

pre-approved services to date for its review. During the fiscal year ended September 30, 2021, all services provided by our independent registered public accounting firm were pre-approved by the Audit Committee in accordance with this policy.

Vote Required; Recommendation of the Board

Unless marked to the contrary, proxies received will be voted “FOR” approval of the ratification of the appointment of BDO as independent registered public accounting firm for the Company for the fiscal year ending September 30, 2022.

THE BOARD UNANIMOUSLY RECOMMENDS THAT NUANCE

SHAREHOLDERS VOTE “FOR” RATIFICATION OF APPOINTMENT OF BDO USA, LLP AS THE

COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

 

 

 

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Audit Committee Report

 

 

 

The Audit Committee oversees the accounting and financing reporting processes of the Company and audits of the financial statements of the Company on behalf of the Board. The Company’s management has primary responsibility for the financial statements, for maintaining effective internal control over financial reporting, and for assessing the effectiveness of internal control over financial reporting.

The Audit Committee is governed by a charter. A copy of the charter can be accessed by clicking on “Corporate governance – Governance documents” in the Investors section of our website, www.nuance.com. The charter was last amended by the Board on April 30, 2019. The Audit Committee held six meetings during fiscal 2021. The Audit Committee is comprised solely of independent directors as defined by the Nasdaq listing standards and Rule 10A-3 of the Exchange Act.

The meetings of the Audit Committee are designed to facilitate and encourage communication among the Audit Committee, the Company and the Company’s independent auditor. For fiscal 2021, the Audit Committee discussed with the Company’s independent auditor the overall scope and plan for its audit. The Audit Committee meets with the independent auditor, with and without management present, to discuss the results of its examinations, its evaluations of the Company’s internal control over financial reporting, and the overall quality of the Company’s financial reporting.

The Audit Committee is responsible for the appointment, compensation and oversight of the Company’s independent auditor. The Audit Committee is also involved in the selection of independent auditor’s lead audit partner. The Audit Committee recognizes the importance of maintaining the independence of the Company’s independent auditor, both in fact and appearance. Each year, the Audit Committee evaluates the qualifications, performance and independence of the Company’s independent auditor and determines whether to re-engage the current independent auditor. In doing so, the Audit Committee considers the quality and efficiency of the services provided by the auditors, the auditors’ (global) capabilities and the auditors’ technical expertise and knowledge of the Company’s operations and industry. Based on this evaluation, the Audit Committee retained BDO USA, LLP as the Company’s independent auditor for the fiscal year ended September 30, 2021. BDO USA, LLP has been the independent auditor for the Company since its appointment as such for the nine months ended September 30, 2004. The members of the Audit Committee believe that, due to BDO USA, LLP’s knowledge of the Company and of the industries in which the Company operates, it is in the best interests of the Company and its shareholders to continue retention of BDO USA, LLP to serve as the Company’s independent auditor for the fiscal year ending September 30, 2022. Although the Audit Committee has the sole authority to appoint the independent auditors, the Audit Committee will continue to recommend that the Board ask the shareholders, at the annual meeting of shareholders, to ratify the appointment of the independent auditors.

The Audit Committee reviewed with management the consolidated financial statements in the Annual Report on Form 10-K for the fiscal year ended September 30, 2021, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in such financial statements. Furthermore, the Audit Committee reviewed and discussed with the Company’s management and BDO USA, LLP the evaluation of the Company’s design and functioning of its internal controls over financial reporting. The Audit Committee reviewed with BDO USA, LLP, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, as well as expressing an opinion on the effectiveness of internal control over financial reporting, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles. In addition, the Audit Committee has discussed with BDO USA, LLP the matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board. The Audit Committee has received the written disclosures and the letter from BDO USA, LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding BDO USA, LLP’s communications with the Audit Committee concerning independence, and has discussed with BDO USA, LLP its independence. The Audit Committee also considered the compatibility of non-audit services with BDO USA, LLP’s independence.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board has approved, that the audited consolidated financial statements be included in the Annual Report on Form 10-K for the year ended September 30, 2021 for filing with the SEC.

The Audit Committee

Robert Finocchio (Chair)

Daniel Brennan

Michal Katz

 

 

 

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Security Ownership of Certain Beneficial Owners
and Management

 

 

The following table sets forth certain information with respect to the beneficial ownership of the Common Stock as of January 3, 2022, unless otherwise noted, as to (1) each person (or group of affiliated persons) who is known by us to own beneficially more than 5% of the Common Stock; (2) each of our directors and nominees; (3) each NEO; and (4) all directors and executive officers of the Company as a group.

Beneficial ownership is determined in accordance with SEC rules and includes voting or investment power with respect to securities. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of the Common Stock that they beneficially own, subject to applicable community property laws. All shares of Common Stock subject to options or warrants exercisable within 60 days of January 3, 2022 are deemed to be outstanding and beneficially owned by the persons holding those options or warrants for the purpose of computing the number of shares beneficially owned and the percentage ownership of that person. They are not, however, deemed to be outstanding and beneficially owned for the purpose of computing the percentage ownership of any other person.

Subject to the paragraph above, percentage ownership of outstanding shares is based on 318,831,275 shares of Common Stock outstanding as of January 3, 2022.

 

Name and Address of Beneficial Owner (1)

   Number
Owned
  

Percent of  

Outstanding  
Shares  

5% Shareholders

      

 

 

 

 

 

      

 

 

 

 

 

Vanguard Group, Inc. (2)

       28,177,801        8.84 %

PO Box 2600 Valley Forge, PA 19482

    

 

 

 

    

 

 

 

Pentwater Capital Management. (3)

       17,565,100        5.51 %

1001 10th Ave South. Suite 216, Naples, FL 34102

    

 

 

 

    

 

 

 

Named Executive Officers (4)

      

 

 

 

 

 

      

 

 

 

 

 

Mark Benjamin

              *

Daniel Tempesta

       3,800        *

Robert Dahdah

       84,471        *

Joseph Petro

       9,397        *

Robert Weideman

       709        *

Non-Employee Directors (4)

      

 

 

 

 

 

      

 

 

 

 

 

Lloyd Carney

       5,670        *

Daniel Brennan

       53,492        *

Thomas Ebling

       53,492        *

Robert Finocchio Jr.

       126,648        *

Laura Kaiser (5)

       75,507        *

Michal Katz

       53,492        *

Mark Laret

       81,148        *

Sanjay Vaswani

       16,655        *

All directors and executive officers as a group (15 persons)

       650,029        *

 

*

Less than 1%.

 

 

 

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Security Ownership of Certain Beneficial Owners and Management

 

 

 

(1)

Unless otherwise indicated, the address for the following shareholders is c/o Nuance Communications, Inc., One Wayside Road, Burlington, MA 01803.

 

(2)

This information regarding the beneficial ownership of Vanguard Group, Inc. is based on the Form 13F filed by such shareholder on September 29, 2021.

 

(3)

This information regarding the beneficial ownership of Pentwater Capital Management LP is based on Form 13F filed by such shareholder on September 29, 2021.

 

(4)

There are no unvested restricted stock units scheduled for issuance within sixty days of the record date for any director or executive officers.

 

(5)

Includes 5,670 shares credited under the non-qualified deferred compensation plan for non-employee directors.

Section 16(A) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act and the rules of the SEC thereunder require the Company’s executive officers, directors and certain shareholders to file reports of ownership and changes in ownership of the Common Stock with the SEC. To the best of our knowledge, all of our executive officers and directors timely filed the reports required under Section 16(a) of the Exchange Act.

 

 

 

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Additional Information

 

 

 

Other Matters

Management knows of no business or nominations that will be presented for consideration at the 2022 Annual Meeting other than as stated in the Notice of the 2022 Annual Meeting of Shareholders. If, however, other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying form of proxy to vote the shares represented thereby on such matters in accordance with their best judgment.

Householding

Some banks, brokers and other nominee record holders may participate in the practice of “householding” proxy statements and their accompanying documents. This means that only one copy of our annual report, proxy statement or Notice of Internet Availability of Proxy Materials is sent to multiple shareholders in your household. We will promptly deliver a separate copy of these documents without charge to you upon written request to Nuance Communications, Inc., One Wayside Road, Burlington, Massachusetts 01803 or upon telephonic request to 781-565-5000, Attn: Investor Relations. If you want to receive separate copies of our proxy statements in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your bank, broker or other nominee record holder, or you may contact us at the above address and phone number.

Electronic Delivery of Future Proxy Materials

If you receive your proxy materials by mail, we encourage you to elect to receive future copies of our proxy materials by e-mail. To enroll in this program, follow the instructions included on your Notice of Internet Availability of Proxy Materials or in the proxy materials provided by your bank or broker. Enrollment in the online program will remain in effect for as long as your brokerage account is active or until enrollment is canceled. Enrolling to receive proxy materials online will save us the cost of printing and mailing documents and will reduce the environmental impact of our annual meetings.

Annual Report on Form 10-K

A copy of our Annual Report on Form 10-K has been posted on the Internet along with this Proxy Statement and is accessible by following the instructions in the Notice of Internet Availability of Proxy Materials. The Annual Report is not incorporated into this Proxy Statement and is not considered proxy-soliciting material.

We filed our Annual Report on Form 10-K for fiscal 2021 with the SEC on November 18, 2021. We will mail without charge, upon written request, a copy of our Annual Report on Form 10-K for fiscal 2021, excluding exhibits. Please send a written request to Investor Relations, Nuance Communications, Inc., One Wayside Road, Burlington, MA 01804 or access the report under at “Financial Information—SEC Filings “ in the Investors section of our website, www.nuance.com.

Incorporation by Reference

The information contained in this Proxy Statement under the captions “Audit Committee Report” and “Compensation Committee Report” shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor will such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference in such filing.

 

 

 

 

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Annex A — Reconciliation of GAAP to Non-GAAP

Financial Measures

 

 

 

Discussion of non-GAAP Financial Measures

We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, for making operating decisions and for forecasting and planning for future periods. Our annual financial plan is prepared both on a GAAP and non-GAAP basis, and the non-GAAP annual financial plan is approved by our board of directors. Continuous budgeting and forecasting for revenue and expenses are conducted on a consistent non-GAAP basis (in addition to GAAP) and actual results on a non-GAAP basis are assessed against the non-GAAP annual financial plan. The board of directors and management utilize these non-GAAP measures and results (in addition to the GAAP results) to determine our allocation of resources. In addition, and as a consequence of the importance of these measures in managing the business, we use non-GAAP measures and results in the evaluation process to establish management’s compensation. For example, our annual bonus program payments are based upon the achievement of consolidated non-GAAP revenue and consolidated non-GAAP earnings per share financial targets. We consider the use of non-GAAP revenue helpful in understanding the performance of our business, as it excludes the purchase accounting impact on acquired deferred revenue and other acquisition-related adjustments to revenue. We also consider the use of non-GAAP earnings per share helpful in assessing the organic performance of the continuing operations of our business. By organic performance we mean performance as if we had owned an acquired business in the same period a year ago. By constant currency organic performance, we mean performance excluding the effect of current foreign currency rate fluctuations. By continuing operations, we mean the ongoing results of the business excluding certain unplanned costs. While our management uses these non-GAAP financial measures as a tool to enhance their understanding of certain aspects of our financial performance, our management does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial statements.

 

 

 

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