Nuance Communications, Inc.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Application for relief from prospectus requirements for the first trades of common shares by Canadian shareholders after spin-off by a U.S. publicly traded company to investors by issuing shares of spun-off entity -- Distribution not covered by legislative prospectus exemptions -- There is no market for the securities of the issuer in Canada -- The number of Canadian participants and their share ownership are de minimis -- Relief granted, subject to conditions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53 and 74.

National Instrument 45-106 Prospectus Exemptions, ss. 2.11 and 2.31.

National Instrument 45-102 Resale of Securities, s. 2.6.

TRANSLATION

September 27, 2019

IN THE MATTER OF THE SECURITIES LEGISLATION OF QUÉBEC AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF NUANCE COMMUNICATIONS, INC. (the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption (the Exemption Sought) from the prospectus requirement in the Legislation in connection with the proposed distribution (the Spin-Off) by the Filer of the shares of common stock (Cerence Shares) of Cerence Inc. (Cerence), a wholly-owned subsidiary of the Filer, by way of a dividend in specie to holders (Filer Shareholders) of shares of common stock of the Filer (Filer Shares) resident in Canada (Canadian Shareholders).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Autorité des marchés financiers is the principal regulator (the Principal Regulator) for this application;

(b) the Filer has provided notice that section 4.7(1) of Regulation 11-102 respecting Passport System (chapter V-1.1, r. 1) (Regulation 11-102) is intended to be relied upon in each of the other jurisdictions of Canada, other than Ontario; and

(c) the decision is the decision of the Principal Regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in Regulation 14-101 respecting Definitions (chapter V-1.1, r. 3) and Regulation 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a corporation incorporated in Delaware with principal executive offices in Burlington, Massachusetts, U.S.A. The Filer is a global provider of conversational artificial intelligence innovations.

2. The Filer is a reporting issuer in the provinces of Alberta, Ontario and Québec, and currently has no intention of becoming a reporting issuer under the securities laws of any other jurisdiction of Canada.

3. The authorized capital stock of the Filer consists of 560 million Filer Shares, US$0.001 par value per share, and 40 million shares of preferred stock, US$0.001 par value per share. As of August 30, 2019, there were 285,876,799 Filer Shares and no preferred shares issued and outstanding.

4. The Filer Shares are listed on the Nasdaq Stock Market (NASDAQ) and trade under the symbol "NUAN". Other than the foregoing listing on NASDAQ, no securities of the Filer are listed or posted for trading on any exchange or market in Canada or outside of Canada. The Filer has no present intention of listing or posting its securities on any Canadian exchange or market.

5. The Filer is subject to the 1934 Act and the rules, regulations and orders promulgated thereunder.

6. Based on a geographic breakdown of registered holders prepared for the Filer by American Stock Transfer & Trust Company (the Filer's transfer agent), as of September 13, 2019 there were 5 registered Canadian Shareholders, representing approximately 0.87% of the registered shareholders of the Filer worldwide, and holding 2,561 Filer Shares, representing approximately 0.0009% of the outstanding Filer Shares. The Filer does not expect these numbers to have materially changed since that date.

7. Based on a geographic analysis of beneficial shareholders prepared for the Filer by Broadridge Financial Solutions, Inc., as of September 4, 2019, there were 1,782 beneficial Canadian Shareholders, representing approximately 1.27% of the beneficial holders of Filer Shares worldwide, and holding approximately 5,775,735 Filer Shares, representing approximately 2.02% of the outstanding Filer Shares. The Filer does not expect these numbers to have materially changed since that date.

8. Based on the information above, the number of registered and beneficial Canadian Shareholders and the proportion of Filer Shares held by such shareholders are de minimis.

9. The Filer is in the process of separating, through a series of transactions, its automotive technology business (the Cerence Business) into its wholly-owned subsidiary, Cerence (and its subsidiaries). In addition, prior to the Spin-Off, the Filer will sell approximately 1.8% of the outstanding Cerence Shares to one or more third party non-affiliate purchasers which will hold such shares immediately after the Spin-Off. The Filer will then distribute the Cerence Shares it holds, pro rata to Filer Shareholders by way of a dividend in specie, being 98.2% of the then outstanding Cerence Shares. The Filer will distribute such Cerence Shares on the basis of one Cerence Share for every eight Filer Shares held as of September 27, 2019.

10. Cerence is a corporation incorporated in Delaware with principal executive offices in Burlington, Massachusetts, U.S.A. It is currently a wholly-owned subsidiary of the Filer that, at the time of the Spin-Off, will hold, directly and through its subsidiaries, the Cerence Business.

11. Cerence's authorized capital stock consists of 560 million Cerence Shares, US$0.01 par value per share, and 40 million shares of preferred stock, US$0.01 par value per share. All of the Cerence Shares are currently held directly by the Filer and no preferred shares are issued and outstanding. It is estimated that after the Spin-Off, there will be approximately 36,385,336 Cerence Shares outstanding based on the number of Filer Shares outstanding on August 30, 2019, but the actual number of Cerence Shares will be determined as of the effective date of the Spin-Off. No preferred shares are expected to be issued and outstanding.

12. The distribution agent will distribute to each Filer Shareholder entitled to Cerence Shares in connection with the Spin-Off, the number of whole Cerence Shares to which the Filer Shareholder is entitled in book-entry form. No fractional Cerence Shares will be issued to the Filer Shareholders as part of the Spin-Off. Instead, the distribution agent will aggregate all fractional Cerence Shares into whole Cerence Shares, sell such whole Cerence Shares in the open market at prevailing market prices and distribute the aggregate cash proceeds of the sales (net of brokerage fees, transfer taxes and other costs) pro rata to each Filer Shareholder who would otherwise have been entitled to receive fractional Cerence Shares in the Spin-Off (net of any required applicable withholding taxes). Interest will not be paid on the amounts of payment made in lieu of fractional Cerence Shares.

13. Filer Shareholders will not be required to pay any consideration for the Cerence Shares or to surrender or exchange Filer Shares or take any other action to receive their Cerence Shares. The Spin-Off will occur automatically and without any investment decision on the part of Filer Shareholders.

14. Subject to the satisfaction of certain conditions, it is currently anticipated that the Spin-Off will become effective on or around October 1, 2019, and following the Spin-Off, Cerence will cease to be a subsidiary of the Filer.

15. Cerence has received approval from NASDAQ to list the Cerence Shares on NASDAQ under the symbol "CRNC".

16. After completion of the Spin-Off, the Filer Shares will continue to be listed and traded on NASDAQ.

17. Cerence is not a reporting issuer in any jurisdiction in Canada nor are its securities listed on any stock exchange in Canada. Pursuant to the Spin-Off, Cerence will become a reporting issuer under the Securities Act (Québec) (chapter V-1.1) by operation of law. Cerence does not have any intention to become a reporting issuer in any other jurisdiction of Canada or to list its securities on any stock exchange in Canada after completion of the Spin-Off.

18. The Spin-Off will be effected under the laws of the State of Delaware.

19. Because the Spin-Off will be effected by way of a dividend of Cerence Shares to Filer Shareholders, no shareholder approval of the Spin-Off is required (or being sought) under Delaware law.

20. In connection with the Spin-Off, Cerence has filed with the SEC a registration statement on Form 10 under the 1934 Act, detailing the Spin-Off. Cerence filed its registration statement on August 21, 2019 and subsequently filed an amendment thereto on September 4, 2019, which registration statement (as amended, the Registration Statement) was declared effective by the SEC on September 6, 2019.

21. Filer Shareholders have received a copy of Cerence's information statement (the Information Statement) (forming part of the Registration Statement) detailing the terms and conditions of the Spin-Off. All materials relating to the Spin-Off sent by or on behalf of the Filer and Cerence in the United States (including relating to the Information Statement) have been sent concurrently to Canadian Shareholders. Any future materials relating to the Spin-Off sent by or on behalf of the Filer or Cerence in the United States will be sent concurrently to Canadian Shareholders.

22. The Information Statement contains prospectus-level disclosure about Cerence as required to comply with the SEC requirement for Form 10.

23. Canadian Shareholders who receive Cerence Shares pursuant to the Spin-Off will have the benefit of the same rights and remedies in respect of the disclosure documentation received in connection with the Spin-Off that are available to Filer Shareholders resident in the United States

24. Following completion of the Spin-Off, Cerence will be subject to the requirements of the 1934 Act and the rules and regulations of NASDAQ. Cerence will send concurrently to holders of Cerence Shares resident in Canada the same disclosure materials required to be sent under applicable United States securities laws to holders of Cerence Shares resident in the United States.

25. There will be no active trading market for the Cerence Shares in Canada following the Spin-Off and none is expected to develop. Consequently, it is expected that any resale of Cerence Shares distributed in connection with the Spin-Off will occur through the facilities of NASDAQ or any other exchange or market outside of Canada on which the Cerence Shares may be quoted or listed at the time that the trade occurs or to a person or company outside of Canada.

26. The distribution to Canadian Shareholders of Cerence Shares in connection with the Spin-Off would be exempt from the prospectus requirement pursuant to subsection 2.31(2) of Regulation 45-106 respecting Prospectus Exemptions (chapter V-1.1, r. 21) but for the fact that Cerence is not a reporting issuer under the securities legislation of any jurisdiction in Canada.

27. Neither the Filer nor Cerence is in default of any securities legislation in any jurisdiction of Canada.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that the first trade in the Cerence Shares acquired pursuant to the Spin-Off will be deemed to be a distribution that is subject to section 2.6 of Regulation 45-102 respecting Resale of Securities (chapter V-1.1, r. 20).

"Elaine Lanouette"
Directrice principale de l'encadrement des structures de marché