<PAGE>
As filed with the Securities and Exchange Commission on May 4, 1999
Registration No. 333-75219
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
Amendment No. 3 to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
PHONE.COM, INC.
(Formerly known as "Unwired Planet, Inc.")
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
Delaware 3661 94-3219054
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
----------------
800 Chesapeake Drive
Redwood City, California 94063
(650) 562-0200
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
----------------
Alain Rossmann
Chairman and Chief Executive Officer
Phone.com, Inc.
800 Chesapeake Drive
Redwood City, California 94063
(650) 562-0200
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
----------------
Copies to:
<TABLE>
<S> <C>
Mark A. Medearis Mark A. Bertelsen
Laurel Finch Jon C. Gonzales
Carl L. Spataro, Jr. Elise M. Brinck
Venture Law Group Wilson Sonsini Goodrich & Rosati
A Professional Corporation Professional Corporation
2775 Sand Hill Road 650 Page Mill Road
Menlo Park, CA 94025 Palo Alto, CA 94304
(650) 854-4488 (650) 493-9300
</TABLE>
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
----------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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- ----------------------------------------------------------------------------------
Proposed
Proposed Maximum
Title Of Each Class Maximum Aggregate Amount Of
Of securities Amount To Be Offering Price Offering Registration
To Be registered Registered (1) Per Share (2) Price (2) Fee
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.001................ 4,600,000 shares $12.00 $55,200,000 $15,346 (3)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
(1) Includes 600,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act.
(3) Previously paid.
----------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this Prospectus is not complete and may be changed. We may +
+not sell these securities until the Registration Statement filed with the +
+Securities and Exchange Commission is effective. This Prospectus is not an +
+offer to sell these securities, and it is not soliciting an offer to buy +
+these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 4, 1999
Shares
[LOGO]
Common Stock
4,000,000 shares
---------
Prior to this offering, there has been no public market for the common stock
of Phone.com, Inc. The initial public offering price of the common stock is
expected to be between $10.00 and $12.00 per share. We have made application to
list the common stock on The Nasdaq Stock Market's National Market under the
symbol "PHCM."
The underwriters have an option to purchase a maximum of 600,000 additional
shares to cover over- allotments of shares.
Investing in the common stock involves risks. See "Risk Factors" starting on
page 6.
<TABLE>
<CAPTION>
Underwriting
Discounts and Proceeds to
Price to Public Commissions Phone.com
--------------- --------------- ---------------
<S> <C> <C> <C>
Per Share....................... $ $ $
Total........................... $ $ $
</TABLE>
The shares of common stock will be delivered on or about , 1999.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Credit Suisse First Boston
BancBoston Robertson Stephens
Hambrecht & Quist
U.S. Bancorp Piper Jaffray
Prospectus dated , 1999
<PAGE>
[INSIDE FRONT COVER]
[COLOR ARTWORK]
PHONE.COM works with device manufacturers, including the following companies,
to enable Internet access for wireless telephones.
[Description of graphic on inside front cover page: Unwired Planet logo in
center of concentric circles. Located around the circles are photos of
wireless telephones that incorporate UP.Browser, as well as logos and names of
the manufacturers.]
UP.Applications, UP.Browser, UP.Link, UP.Organizer, UP.Web, and the
Phone.com name and logotype are trademarks, UP.Mail is a registered trademark
of Phone.com, Inc. All Rights Reserved. All other brand, company or product
names and marks are used only for the purpose of identification and may be
trademarks or registered trademarks, which are the sole property of their
respective owners. Copyright(C) 1999 Phone.com, Inc. All Rights Reserved.
<PAGE>
[Description of graphics and text on left front gatefold page:]
[Series of photos of persons using wireless telephones enabled with UP.Browser.
Next to the photos are the following captions, as well as screen captures and
the logos of the Internet content providers referenced in each caption:]
TRAVEL
I use UP.Browser to connect to Biztravel.com for flight information.
YELLOW PAGES
With UP.Browser and InfoSpace.com, I found the local 24-hour copy center, as
well as a nearby Chinese restaurant.
EMAIL
I check my email on my phone screen. With UP.Browser I can respond with an email
or an automatically dialed voice call.
NEWS
With Data Broadcasting Corporation and UP.Browser I have key news items and
information about customers and competitors at my fingertips.
SPORTS
I get stats and scores from SportsFeed, right on the screen of my wireless
telephone.
<PAGE>
[Description of graphics and text on right front gatefold page]
UP.LINK SERVER SUITE is a turnkey software solution that enables network
operators to offer Internet-based services to their wireless subscribers.
UP.Link Server Suite also provides network operators with subscriber
provisioning and network management functions on a robust and scalable software
platform.
[Description of graphic: Schematic of components of UP.Link Server Suite in the
center of concentric circles. The schematic is connected on the left by a
horizontal line to a radio tower with the words "WIRELESS NETWORK" next to it.
The schematic is connected on the right by a diagnonal line to a computer server
labeled "Network Operator Telephony Applications" and by a horizontal line to a
cloud labeled "Internet." The cloud, in turn is connected by vertical lines to
two computer servers labeled "Content Provider Web Sites" and "Corporate
Applications."]
The components of UP.Link Server Suite include:
UP.Applications is a suite of wireless Internet-based applications including
UP.Mail, an email application; UP.Organizer, a suite of personal information
management applications; and UP.Web, a Web-based interface for accessing
UP.Organizer data using personal computers.
The Services component includes the following services, which interact with
applications through a framework of open application programming interfaces.
The Push Server allows applications to push information to wireless subscribers.
The Fax Server enables the forwarding of email and other data content to fax
machines. The Identity Server maintains a subscriber registry that retains
subscribers' service settings and allows network operators to track their
subscribers' service usage. The Content Translation Framework provides forward
and backward compatibility of content formats between different generations of
browsers and wireless telephones.
UP.Link gateway provides network-layer functions and connects Internet- and
intranet-based services to wireless networks and wireless telephones.
The Administration component provides a Web-based administration control system
to keep the network operator's Internet-based network components up and running,
assess system status and provision new subscribers.
<PAGE>
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 7
Special Note Regarding Forward-Looking Statements........................ 15
Use Of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Additional Information About Phone.com................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Consolidated Financial Data..................................... 19
Management's Discussion And Analysis Of Financial Condition And Results
Of Operations........................................................... 20
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Business................................................................... 35
Management................................................................. 51
Certain Transactions....................................................... 63
Principal Stockholders..................................................... 65
Description Of Capital Stock............................................... 67
Shares Eligible For Future Sale............................................ 70
Underwriting............................................................... 72
Notice To Canadian Residents............................................... 74
Legal Matters.............................................................. 75
Experts.................................................................... 75
Where You Can Find More Information........................................ 75
Index To Consolidated Financial Statements................................. F-1
</TABLE>
------------
Dealer Prospectus Delivery Obligation
Until , 1999 (25 days after the commencement of this offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to unsold allotments or subscriptions.
3
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all the information you
should consider before buying shares in this offering. You should read the
entire prospectus carefully.
Phone.com, Inc.
We are a leading provider of software that enables the delivery of Internet-
based services to mass-market wireless telephones. Using our software, network
operators can provide Internet-based services to their wireless subscribers,
and wireless telephone manufacturers can turn their mass-market wireless
telephones into mobile Internet appliances. Wireless subscribers thus have
access to Internet- and corporate intranet-based services, including email,
news, stocks, weather, travel and sports. In addition, subscribers have access
via their wireless telephones to network operators' intranet-based telephony
services, which may include over-the-air activation, call management, billing
history information, pricing plan subscription and voice message management.
Our software platform consists of the UP.Link Server Suite, which is installed
on network operators' systems, and UP.Browser, which is embedded in wireless
telephones.
We were a pioneer in the convergence of the Internet and mobile telephony.
To provide a worldwide standard for the delivery of Internet-based services
over mass-market wireless telephones, we formed the Wireless Application
Protocol Forum in close cooperation with co-founders Ericsson, Motorola and
Nokia. In April 1998, the WAP Forum published technical specifications for
application development and product interoperability, substantial portions of
which are based on our technology and on Internet standards. Over 90 leading
network operators, telecommunications device and equipment manufacturers, and
software companies worldwide have joined the WAP Forum as of March 1999.
We focus on selling our UP.Link Server Suite and related technical support
to network operators to enable them to offer a variety of wireless Internet-
based services to their subscribers. The UP.Link Server Suite includes (1) a
means of exchanging data between the Internet and mass-market wireless
telephones, commonly referred to as a gateway; (2) a service platform that
performs subscriber management and service provisioning functions and
communicates with the network operator's customer care and billing systems; and
(3) Internet-based wireless applications such as email and personal information
management software. As of April 1999, 23 network operators have licensed our
software and have commenced or announced commercial service or are in market or
laboratory trials. Our current network operator customers include:
<TABLE>
<S> <C>
. AT&T Wireless Services . IDO Corporation
. Bell Atlantic Mobile . LG TeleCom
. Bell Mobility . Nextel
. SFR/CEGETEL . Omnitel
. DDI Corporation . Orange
. Deutsche Telekom Mobilnet . Telecom Italia Mobile
. France Telecom Mobile . Telenor
. GTE Wireless . Telstra
</TABLE>
The UP.Browser is a browser and messaging software product that is
specifically designed for mass-market wireless telephones. We license our
UP.Browser software to wireless telephone
4
<PAGE>
manufacturers, who embed UP.Browser into their products. In order to encourage
these manufacturers to include UP.Browser in their wireless telephone models,
no per-unit royalty is charged. As of April 1999, 23 wireless telephone
manufacturers have licensed UP.Browser, including
<TABLE>
<S> <C>
. Alcatel . Panasonic (Matsushita)
. Casio . Qualcomm
. Hitachi . Sagem
. Hyundai . Samsung Electronics
. IGS . Sharp
. Kyocera . Siemens
. LG Information & Communications . Sony
. Mitsubishi . Toshiba
. Motorola
</TABLE>
In addition, Ericsson and Nokia have announced that they will introduce
wireless telephones that will be interoperable with the UP.Link Server Suite.
Our current stockholders include the following companies or their
affiliates:
<TABLE>
<S> <C>
. AT&T Wireless Services . Kyocera Corporation
. Bell Atlantic Mobile . Mitsubishi Electric Corporation
. Bell Mobility . Paribas
. Citicorp . Qualcomm
. DDI Corporation . Reuters
. Gemplus . Sema Group
. Hikari Tsushin . Siemens
. Itochu Corporation
</TABLE>
Our principal executive offices are located at 800 Chesapeake Drive, Redwood
City, California 94063, and our telephone number is (650) 562-0200.
The Offering
<TABLE>
<C> <S>
Common stock offered....................... 4,000,000 shares
Common stock to be outstanding after this
offering.................................. 30,506,858 shares
Working capital and general
Use of proceeds............................ corporate purposes
Proposed Nasdaq National Market symbol..... PHCM
</TABLE>
This table is based on shares outstanding as of March 31, 1999. This table
excludes:
. 3,321,346 shares subject to outstanding options at a weighted average
exercise price of $1.86 as of March 31, 1999,
. 31,486 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $3.81 per share as of March 31, 1999,
. an aggregate of 5,672,807 shares available for future issuance under our
1995 Stock Plan, 1996 Stock Plan, 1999 Directors' Stock Option Plan and
1999 Employee Stock Purchase Plan as of March 31, 1999.
5
<PAGE>
Summary Consolidated Financial Data
<TABLE>
<CAPTION>
Nine Months
December 16, 1994 Year Ended June 30, Ended March 31,
(Inception) to -------------------------- -----------------
June 30, 1995 1996 1997 1998 1998 1999
----------------- ------- ------- -------- ------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Revenues:
License................ $ -- $ -- $ 80 $ 522 $ 289 $ 1,530
Maintenance and support
services.............. -- -- 212 1,683 635 3,786
Consulting services.... -- -- -- -- -- 1,401
------ ------- ------- -------- ------- --------
Total revenues........ -- -- 292 2,205 924 6,717
------ ------- ------- -------- ------- --------
Gross profit (loss)..... -- -- (61) 1,047 150 4,023
------ ------- ------- -------- ------- --------
Operating loss.......... (103) (2,666) (8,455) (11,605) (8,258) (14,402)
------ ------- ------- -------- ------- --------
Net loss................ $ (103) $(2,470) $(7,991) $(10,623) $(7,730) $(13,973)
====== ======= ======= ======== ======= ========
Basic and diluted net
loss per share......... $(0.02) $ (0.53) $ (1.67) $ (2.03) $ (1.50) $ (2.49)
====== ======= ======= ======== ======= ========
Shares used in computing
basic and diluted net
loss per share......... 4,671 4,704 4,776 5,221 5,142 5,618
====== ======= ======= ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
March 31, 1999
-------------------
Actual As Adjusted
------- -----------
<S> <C> <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term investments......... $47,831 $87,651
Total assets.............................................. 57,320 97,140
Equipment loan and capital lease obligations, less current
portion.................................................. 607 607
Total stockholders' equity................................ 31,998 71,818
</TABLE>
- --------
See Note 1 of Notes to Consolidated Financial Statements for an explanation of
the method used to determine the number of shares used to compute the net loss
per share amounts.
The as adjusted numbers in the table above are adjusted to give effect to
receipt of the net proceeds from the sale of shares of common stock offered by
us at an assumed initial public offering price of $11.00 per share after
deducting the estimated underwriting discounts and commissions and estimated
offering expenses payable by us. See also "Use of Proceeds," "Capitalization"
and "Underwriting."
Except as otherwise noted herein, all information in this prospectus assumes
no exercise of the underwriters' over-allotment option and gives effect to:
. the conversion of all outstanding shares of our convertible preferred
stock into shares of common stock upon completion of this offering,
. a two-for-three reverse stock split to be completed prior to this
offering, and
. the filing of our amended and restated certificate of incorporation upon
completion of this offering.
6
<PAGE>
RISK FACTORS
You should carefully consider the following risks before making an
investment decision. The risks described below are intended to highlight risks
that are specific to us and are not the only ones that we face. Additional
risks and uncertainties, such as those that generally apply to our industry or
to companies undertaking initial public offerings, also may impair our business
operations. You should also refer to the other information set forth in this
prospectus, including the discussions set forth in "Special Note Regarding
Forward-Looking Statements," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," as well as our
consolidated financial statements and the related notes. You should rely only
on the information contained in this document. We have not authorized anyone to
provide you with information that is different. The information in this
document may only be accurate on the date of this document.
Our future profitability is uncertain because we have a limited operating
history.
Because we commenced operations in December 1994 and commercially released
our first products in June 1996, we only have a limited operating history on
which you can base your evaluation of our business. We may not continue to grow
or achieve profitability. We face a number of risks encountered by early stage
companies in the wireless telecommunications and Internet software industries,
including:
. our need for network operators to launch and maintain commercial services
utilizing our products;
. the uncertainty of market acceptance of commercial services utilizing our
products;
. our substantial dependence on products with only limited market
acceptance to date;
. our need to introduce reliable and robust products that meet the
demanding needs of network operators and wireless telephone
manufacturers;
. our need to expand our marketing, sales, consulting and support
organizations, as well as our distribution channels;
. our ability to anticipate and respond to market competition;
. our need to manage expanding operations; and
. our dependence upon key personnel.
Our business strategy may not be successful, and we may not successfully
address these risks. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-- Overview."
We expect to continue to experience losses.
Because we expect to continue to incur significant product development,
sales and marketing, and administrative expenses, we will need to generate
significant revenues to become profitable and sustain profitability on a
quarterly or annual basis. We may not achieve or sustain our revenue or profit
goals, and our ability to do so depends on a number of factors outside of our
control, including the extent to which:
. there is market acceptance of commercial services utilizing our products;
. our competitors announce and develop, or lower the prices of, competing
products; and
. our strategic partners dedicate resources to selling our products and
services.
7
<PAGE>
As a result, we may not be able to increase revenue or achieve profitability
on a quarterly or annual basis. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."
Our quarterly operating results are subject to significant fluctuations, and
our stock price may decline if we do not meet expectations of investors and
analysts.
Our quarterly revenues and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter. If we do not meet
expectations of investors and analysts in a given quarter, our stock price
could decline. Most of our expenses are relatively fixed. As a result, any
shortfall in revenues relative to our expectations could cause a significant
decline in our quarterly operating results. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Quarterly Results of
Operations."
Our sales cycle is long, and our stock price could decline if sales are delayed
or cancelled.
Quarterly fluctuations in our operating performance are exacerbated by our
sales cycle, which is lengthy, typically between nine and twelve months, and
unpredictable. Because our products represent a significant capital investment
for our customers, we spend a substantial amount of time educating customers
regarding the use and benefits of our products and they in turn spend a
substantial amount of time performing internal reviews and obtaining capital
expenditure approvals before purchasing our products. Any delay in sales of our
products could cause our quarterly operating results to vary significantly from
projected results, which could cause our stock price to decline. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results of Operations."
Our success depends on acceptance of our products and services by network
operators.
From inception through March 31, 1999, 42% of our total cumulative revenues
have come from fees paid to us by wireless telephone manufacturers that embed
our browser in their wireless telephones. However, our future success depends
on our ability to increase revenues from sales of our UP.Link Server Suite
software and related services to new and existing network operator customers,
and we may not be able to achieve widespread adoption by these customers. This
dependence is exacerbated by the relatively small number of network operators
worldwide. We currently have only a limited number of network operator
customers. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview."
The market for the delivery of Internet-based services through wireless
telephones is rapidly evolving, and we may not be able to adequately address
this market.
The market for the delivery of Internet-based services through wireless
telephones is rapidly evolving and is characterized by an increasing number of
market entrants that have introduced or developed, or are in the process of
introducing or developing, products that facilitate the delivery of Internet-
based services through wireless telephones. As a result, the life cycle of our
products is difficult to estimate. We may not be able to develop and introduce
new products, services and enhancements that respond to technological changes
or evolving industry standards on a timely basis, in which case our business
would suffer. In addition, we cannot predict the rate of adoption by wireless
subscribers of these services or the price they will be willing to pay for
these services. As a result, it is extremely difficult to predict the pricing
of these services and the future size and growth rate of this market.
8
<PAGE>
Our network operator customers face implementation and support challenges in
introducing Internet-based services via wireless telephones, which may slow
their rate of adoption or implementation of the services our products enable.
Historically, network operators have been relatively slow to implement new
complex services such as Internet-based services. In addition, network
operators may encounter greater customer service demands to support Internet-
based services via wireless telephones than they do for their traditional voice
services. We have limited or no control over the pace at which network
operators implement these new services. The failure of network operators to
introduce and support services utilizing our products in a timely and effective
manner could harm our business. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."
To date, we have relied on sales to a small number of customers, some of whom
are our stockholders, and the failure to retain these customers or add new
customers may harm our business.
To date, a significant portion of our revenues in any particular period has
been attributable to a limited number of customers, comprised primarily of
network operators and wireless telephone manufacturers, some of whom are our
stockholders. We believe that we will continue to depend upon a limited number
of customers for a significant portion of our revenues for each quarter for the
foreseeable future. Any failure by us to capture a significant share of those
customers could materially harm our business. For example, during the year
ended June 30, 1998, AT&T Wireless Services, which will own approximately 2.5%
of our common stock after this offering, and Matsushita Communication
Industrial accounted for approximately 22% and 18%, respectively, of our total
revenues. For the nine months ended March 31, 1999, AT&T Wireless Services, DDI
Corporation, who will own approximately 0.6% of our common stock after this
offering, and a wireless telephone manufacturer accounted for approximately
14%, 11% and 13%, respectively, of our total revenues.
If wireless telephones are not widely adopted for mobile delivery of Internet-
based services, our business could suffer.
We have focused our efforts on mass-market wireless telephones as the
principal means of delivery of Internet-based services using our products. If
wireless telephones are not widely adopted for mobile delivery of Internet-
based services, our business would suffer materially. Mobile individuals
currently use many competing products, such as portable computers, to remotely
access the Internet and email. These products generally are designed for the
visual presentation of data, while wireless telephones historically have been
limited in this regard. If mobile individuals do not adopt wireless telephones
as a means of accessing Internet-based services, our business would suffer. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
We depend on the emergence of the WAP Forum's specifications as the predominant
standards for the delivery of Internet-based services through wireless
telephones.
We are currently focusing our limited resources on developing products that
are compliant with the specifications promulgated by the WAP Forum, which we
expect to be commercially available in the second half of calender year 1999.
If those specifications do not emerge as the predominant standards for
Internet-based services via wireless telephones, our business could suffer. In
particular, Microsoft Corporation and Wireless Knowledge, LLC, a joint venture
of Microsoft and Qualcomm
9
<PAGE>
Incorporated, have announced their intention to introduce products and services
that may compete directly with our UP.Link, UP.Browser and UP.Application
products. In addition, Microsoft has announced that it intends to enable its
Windows CE operating system to run on wireless handheld devices, including
wireless telephones, and to develop and market its own browser for these
devices. If we are unable to develop and market products and services that are
compliant with the current or any new specifications in a timely manner, our
business could suffer materially. See "Business--Technology."
Our business depends heavily on wireless telephone manufacturers.
Because our UP.Link Server Suite software offers enhanced features and
functionality that are not currently covered by the specifications promulgated
by the WAP Forum, subscribers currently must use UP.Browser-enabled wireless
telephones in order to fully utilize these features and functionality. Thus, if
we fail to achieve widespread integration of our UP.Browser in wireless
telephones, our business could suffer materially. All of our agreements with
wireless telephone manufacturers are nonexclusive, so they may choose to embed
a browser other than ours in their wireless telephones. We may not succeed in
maintaining and developing relationships with telephone manufacturers, and any
arrangements may be terminated early or not renewed at expiration. In addition,
wireless telephone manufacturers may not produce products using UP.Browser in a
timely manner and in sufficient quantities, if at all. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview."
The market for our products and services is highly competitive.
The market for our products and services is becoming increasingly
competitive. The widespread adoption of open industry standards such as the WAP
specifications may make it easier for new market entrants and existing
competitors to introduce products that compete with our software products. We
expect that we will compete primarily on the basis of price, time to market,
functionality, quality and breadth of product and service offerings. Our
current and potential competitors include the following:
. Wireless equipment manufacturers, such as Ericsson and Nokia;
. Microsoft and Wireless Knowledge, a joint venture of Microsoft and
Qualcomm;
. Systems integrators, such as CMG plc and APiON Ltd., and software
companies, such as Oracle Corporation; and
. Providers of Internet software applications and content, electronic
messaging applications and personal information management software
solutions.
Many of our existing competitors, as well as potential competitors, have
substantially greater financial, technical, marketing and distribution
resources than we do. See "Business--Competition."
Our software products may contain defects or errors, and shipments of our
software may be delayed.
The software we develop is complex and must meet the stringent technical
requirements of our customers. We must develop our products quickly to keep
pace with the rapidly changing Internet software and telecommunications
markets. Software products and services as complex as ours are likely to
contain undetected errors or defects, especially when first introduced or when
new versions are released. We have in the past experienced delays in releasing
some versions of our products until software problems were corrected. Our
products may not be free from errors or defects after
10
<PAGE>
commercial shipments have begun, which could result in the rejection of our
products and damage to our reputation, as well as lost revenues, diverted
development resources, and increased service and warranty costs, any of which
could harm our business. See "Business--Research and Product Development."
We depend on recruiting and retaining key management and technical personnel
with telecommunications and Internet software experience.
Because of the technical nature of our products and the dynamic market in
which we compete, our performance depends on attracting and retaining key
employees. In particular, our future success depends in part on the continued
services of each of our current executive officers. We currently maintain key
person life insurance policies for Alain Rossmann, our Chief Executive Officer,
and Charles Parrish, our Executive Vice President. We are seeking to hire a
Vice President of Worldwide Sales. Competition for qualified personnel in the
telecommunications and Internet software industries is intense, and finding
qualified personnel with experience in both industries is even more difficult.
We believe that there are only a limited number of persons with the requisite
skills to serve in many key positions, and it is becoming increasingly
difficult to hire and retain these persons. Competitors and others have in the
past, and may in the future, attempt to recruit our employees. See "Business--
Employees."
We must successfully manage our anticipated growth.
To succeed in the implementation of our business strategy, we must rapidly
execute our sales strategy and further develop products and expand service
capabilities, while managing anticipated growth by implementing effective
planning and operating processes. If we fail to manage our growth effectively,
our business could suffer materially. To manage anticipated growth, we must:
. continue to implement and improve our operational, financial and
management information systems;
. hire, train and retain additional qualified personnel;
. continue to expand and upgrade core technologies; and
. effectively manage multiple relationships with various network operators,
wireless telephone manufacturers, content providers, applications
developers and other third parties.
Our systems, procedures and controls may not be adequate to support our
operations, and our management may not be able to achieve the rapid execution
necessary to exploit the market for our products and services. See "Business--
Employees."
Our success, particularly in international markets, depends in part on our
ability to maintain and expand our distribution channels.
Our success depends in part on our ability to increase sales of our products
and services through value-added resellers and systems integrators and to
expand our indirect distribution channels. If we are unable to maintain the
relationships that we have with our existing distribution partners, increase
revenues derived from sales through our indirect distribution channels, or
increase the number of distribution partners with whom we have relationships,
then we may not be able to increase our revenues or achieve profitability.
To date, almost all of our revenues from international markets have resulted
from our direct sales efforts. However, we expect that network operators in
international markets generally will require that our products and support
services be supplied through value-added resellers and systems
11
<PAGE>
integrators. Thus, we expect that a significant portion of international sales
will be made through value-added resellers and systems integrators, and the
success of our international operations will depend on our ability to maintain
productive relationships with value-added resellers and systems integrators.
In addition, our agreements with our distribution partners do not restrict
the sale by them of products and services that are competitive with our
products and services, and each of our partners generally can cease marketing
our products and services at their option and, in some circumstances, with
little notice and with little or no penalty. See "Business--Sales and
Marketing."
We depend on others to provide content and develop applications for wireless
telephones.
In order to increase the value to customers of our product platform and
encourage subscriber demand for Internet-based services via wireless
telephones, we must successfully promote the development of Internet-based
applications and content for this market. If content providers and application
developers fail to create sufficient applications and content for Internet-
based services via wireless telephones, our business could suffer materially.
Our success in motivating content providers and application developers to
create and support content and applications that subscribers find useful and
compelling will depend, in part, on our ability to develop a customer base of
network operators and wireless telephone manufacturers large enough to justify
significant and continued investments in these endeavors. See "Business--
Research and Product Development" and "--Sales and Marketing."
If we are unable to integrate our products with third-party technology, such as
network operators' systems, our business may suffer.
Our products are integrated with network operators' systems and wireless
telephones. If we are unable to integrate our platform products with these
third-party technologies, our business could suffer materially. For example,
if, as a result of technology enhancements or upgrades of these systems or
telephones, we are unable to integrate our products with these systems or
telephones, we could be required to redesign our software products. Moreover,
many network operators use legacy, or custom-made, systems for their general
network management software. Legacy systems are typically very difficult to
integrate with new server software such as our UP.Link Server Suite. We may not
be able to redesign our products or develop redesigned products that achieve
market acceptance. See "Business--Research and Product Development."
We rely on technology licensed to us by others.
We license technology that is incorporated into our products from third
parties, such as RSA Data Security, Inc. and other companies. Any significant
interruption in the supply of any licensed software could cause a decline in
product sales, unless and until we are able to replace the functionality
provided by this licensed software. We also depend on these third parties to
deliver and support reliable products, enhance their current products, develop
new products on a timely and cost-effective basis, and respond to emerging
industry standards and other technological changes. The failure of these third
parties to meet these criteria could materially harm our business. See
"Business--Research and Product Development."
We may be unable to adequately protect our proprietary rights.
Our success depends significantly on our ability to protect our proprietary
rights to the technologies used in our products. If we are not adequately
protected, our competitors could use the
12
<PAGE>
intellectual property that we have developed to enhance their products and
services, which could harm our business. We rely on patent protection, as well
as a combination of copyright and trademark laws, trade secrets,
confidentiality provisions and other contractual provisions, to protect our
proprietary rights, but these legal means afford only limited protection. See
"Business--Intellectual Property Rights."
We may be sued by third parties for infringement of their proprietary rights.
The telecommunications and Internet software industries are characterized by
the existence of a large number of patents and frequent litigation based on
allegations of patent infringement or other violations of intellectual property
rights. As the number of entrants into our market increases, the possibility of
an intellectual property claim against us grows. Any intellectual property
claims, with or without merit, could be time-consuming and expensive to
litigate or settle and could divert management attention from administering our
core business. See "Business--Intellectual Property Rights."
International expansion is an important part of our strategy, and this
expansion carries specific risks.
International sales of products and services accounted for 7% and 44% of our
total revenues in the years ended June 30, 1997 and 1998, respectively, and 64%
of our total revenues for the nine months ended March 31, 1999. We expect
international sales to continue to account for a significant portion of our
revenues, although the percentage of our total revenues derived from
international sales may vary. Risks inherent in our international business
activities include business risks, economic and political risks, and legal
risks. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview" and "Business--Sales and Marketing."
We face year 2000 risks.
Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, beginning on January
1, 2000, computer systems and software used by many companies in a wide variety
of industries, including technology, transportation, utilities, finance and
telecommunications, will produce erroneous results or fail unless they have
been modified or upgraded to process date information correctly. Year 2000
compliance efforts may involve significant time and expense, and uncorrected
problems could materially and adversely affect our business. We may face claims
based on year 2000 issues arising from the integration of multiple products,
including ours, within an overall system. Network operators may also cease or
delay purchase and installation of new complex systems, such as our server
software products, as a result of, and during, their own internal year 2000
testing. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Year 2000 Readiness Disclosure."
We may acquire technologies or companies in the future, and these acquisitions
could result in the dilution of our stockholders and disruption of our
business.
We may acquire technologies or companies in the future. Entering into an
acquisition entails many risks, any of which could materially harm our
business, including:
. diversion of management's attention from other business concerns;
. failure to assimilate the acquired company with our pre-existing
business;
13
<PAGE>
. potential loss of key employees from either our pre-existing business or
the acquired business;
. dilution of our existing stockholders as a result of issuing equity
securities; and
. assumption of liabilities of the acquired company.
We have no current agreements or negotiations underway with respect to any
acquisitions.
Our stock price, like that of many companies in the Internet and
telecommunications software industries, may be volatile.
We expect that the market price of our common stock will fluctuate as a
result of variations in our quarterly operating results. These fluctuations may
be exaggerated if the trading volume of our common stock is low. In addition,
due to the technology-intensive and emerging nature of our business, the market
price of our common stock may rise and fall in response to:
. announcements of technological or competitive developments;
. acquisitions or strategic alliances by us or our competitors;
. the gain or loss of a significant customer or order; and
. changes in estimates of our financial performance or changes in
recommendations by securities analysts.
Our executive officers and directors own a large percentage of our voting stock
and could exert significant influence over matters requiring stockholder
approval after this offering.
Immediately after this offering, our executive officers and directors and
their respective affiliates, will continue to own approximately 39% of our
outstanding common stock. Accordingly, these stockholders may, as a practical
matter, be able to exert significant influence over matters requiring approval
by our stockholders, including the election of directors and the approval of
mergers or other business combinations. This concentration could have the
effect of delaying or preventing a change in control.
Our certificate of incorporation and bylaws and Delaware law contain provisions
that could discourage a takeover.
Provisions of our certificate of incorporation and bylaws and Delaware law
may discourage, delay or prevent a merger or acquisition that a stockholder may
consider favorable. These provisions include the following:
. establishing a classified board in which only a portion of the total
board members will be elected at each annual meeting;
. authorizing the board to issue preferred stock;
. prohibiting cumulative voting in the election of directors;
. limiting the persons who may call special meetings of stockholders;
. prohibiting stockholder action by written consent; and
. establishing advance notice requirements for nominations for election of
the board of directors or for proposing matters that can be acted on by
stockholders at stockholder meetings.
See "Management--Board Composition" and "Description of Capital Stock--Anti-
Takeover Provisions of Delaware Law and Charter Provisions."
14
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," and elsewhere in this prospectus are forward-looking
statements. These statements involve known and unknown risks, uncertainties,
and other factors that may cause our or our industry's actual results, levels
of activity, performance, or achievements to be materially different from any
future results, levels of activity, performance, or achievements expressed or
implied by these forward-looking statements. These factors are described in
"Risk Factors," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and other sections of this prospectus.
In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or "continue" or the negative of these
terms or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of forward-
looking statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform them to actual results.
15
<PAGE>
USE OF PROCEEDS
The net proceeds to us from the sale of the 4,000,000 shares of common stock
offered by us are estimated to be approximately $39.8 million (approximately
$46.0 million if the underwriters' over-allotment option is exercised in full)
at an assumed initial public offering price of $11.00 per share, after
deducting the estimated underwriting discounts and commissions and the
estimated offering expenses.
We intend to use the net proceeds of this offering primarily for additional
working capital and other general corporate purposes, including increased sales
and marketing expenditures, increased research and development expenditures and
capital expenditures. We have not yet determined the actual expected
expenditures and thus cannot estimate the amounts to be used for each of these
purposes. The amounts and timing of these expenditures will vary depending on a
number of factors, including the amount of cash generated by our operations,
competitive and technological developments and the rate of growth, if any, of
our business. We may also use a portion of the net proceeds to acquire
additional businesses, products and technologies or to establish joint ventures
that we believe will complement our current or future business. However, we
have no specific plans, agreements or commitments to do so and are not
currently engaged in any negotiations for any acquisition or joint venture. The
amounts that we actually expend for working capital purposes will vary
significantly depending on a number of factors, including future revenue
growth, if any, and the amount of cash we generate from operations. As a
result, we will retain broad discretion in the allocation of the net proceeds
of this offering. Pending the uses described above, we will invest the net
proceeds in short-term, interest-bearing, investment-grade securities.
The principal purposes of this offering are to create a public market for
our common stock, to obtain additional capital, to increase our visibility and
to facilitate future access to the public capital markets.
DIVIDEND POLICY
We have never paid cash dividends on our common stock. We currently intend
to retain any future earnings to fund the development and growth of our
business. Therefore, we do not currently anticipate paying any cash dividends
in the foreseeable future. In addition, the terms of our current equipment loan
prohibit us from paying dividends without our lender's consent.
ADDITIONAL INFORMATION ABOUT PHONE.COM
We were incorporated in Delaware under the name "Libris, Inc." in December
1994 and changed our name to"Unwired Planet, Inc." in April 1996. In April
1999, we changed our name from "Unwired Planet, Inc." to "Phone.com, Inc." Our
principal executive offices are located at 800 Chesapeake Drive, Redwood City,
California 94063, and our telephone number is (650) 562-0200. The address of
our Web site is "www.phone.com." Information contained on our Web site shall
not be deemed to be a part of this prospectus.
16
<PAGE>
CAPITALIZATION
The following table sets forth the following information:
. the actual capitalization of Phone.com as of March 31, 1999;
. the pro forma capitalization of Phone.com after giving effect to the
conversion of all outstanding shares of convertible preferred stock into
20,174,170 shares of common stock and the filing of our amended and
restated certificate of incorporation upon completion of this offering;
and
. the as adjusted capitalization to give effect to the sale of shares of
common stock at an assumed initial public offering price of $11.00 per
share in this offering after deducting the estimated underwriting
discounts and commissions Phone.com expects to pay in connection with
this offering and estimated offering expenses payable by Phone.com.
This table should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
As of March 31, 1999
----------------------------
Pro As
Actual Forma Adjusted
-------- -------- --------
(In thousands, except
share data)
<S> <C> <C> <C>
Equipment loan and capital lease obligations, less
current portion.................................. $ 607 $ 607 $ 607
-------- -------- -------
Stockholders' equity:
Convertible preferred stock $0.001 par value,
20,329,720 shares authorized, 20,174,170 shares
issued and outstanding, actual;
5,000,000 shares authorized, none issued or
outstanding, pro forma
and as adjusted................................ 20 -- --
Common stock $0.001 par value, 32,000,000 shares
authorized,
6,332,688 shares issued and outstanding,
actual; 100,000,000 shares authorized,
26,506,858 shares issued and outstanding, pro
forma; and 100,000,000 shares authorized,
30,506,858 shares issued and outstanding, as
adjusted(1).................................... 6 26 30
Additional paid-in capital...................... 69,158 69,158 108,974
Deferred stock-based compensation............... (1,545) (1,545) (1,545)
Treasury stock.................................. (196) (196) (196)
Notes receivable from stockholders.............. (285) (285) (285)
Accumulated deficit............................. (35,160) (35,160) (35,160)
-------- -------- -------
Total stockholders' equity.................... 31,998 31,998 71,818
-------- -------- -------
Total capitalization........................ $ 32,605 $ 32,605 $72,425
======== ======== =======
</TABLE>
- ---------------------
(1) This table excludes the following shares:
. 3,321,346 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $1.86 per share as of March 31, 1999,
. 31,486 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $3.81 per share as of March 31, 1999,
and
. an aggregate of 5,672,807 shares available for future issuance under our
1995 Stock Plan, 1996 Stock Plan, 1999 Directors' Stock Option Plan and
1999 Employee Stock Purchase Plan as of March 31, 1999. See "Management--
Stock Plans" and Notes 4 and 5 of the Notes to Consolidated Financial
Statements.
17
<PAGE>
DILUTION
The pro forma net tangible book value of our common stock on March 31, 1999
was $32.0 million, or approximately $1.21 per share. Pro forma net tangible
book value represents the amount of our total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding.
Dilution in net tangible book value per share represents the difference between
the amount per share paid by purchasers of shares of our common stock in this
offering and the net tangible book value per share of our common stock
immediately following this offering. After giving effect to our sale of shares
of common stock offered by this prospectus at an assumed initial public
offering price of $11.00 per share and after deducting the estimated
underwriting discounts and commissions and estimated offering expenses payable
by us, our net tangible book value would have been $71.8 million, or
approximately $2.35 per share. This represents an immediate increase in net
tangible book value of $1.14 per share to existing stockholders and an
immediate dilution in net tangible book value of $8.65 per share to new
investors.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $11.00
Net tangible book value per share as of March 31, 1999........... $1.21
Increase per share attributable to new investors................. 1.14
-----
Pro forma net tangible book value per share after this offering.... 2.35
------
Dilution per share to new investors................................ $ 8.65
======
</TABLE>
The following table sets forth, as of March 31, 1999, the differences
between the number of shares of common stock purchased from us, the total price
and average price per share paid by existing investors and by the new
investors, before deducting the estimated underwriting discounts and
commissions and estimated offering expenses payable by us, assuming an initial
public offering price of $11.00 per share.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ -------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders..... 26,506,858 86.9% $ 70,003,000 61.4% $ 2.64
New investors ............ 4,000,000 13.1 44,000,000 38.6 11.00
---------- ----- ------------ -----
Total..................... 30,506,858 100.0% $114,003,000 100.0%
========== ===== ============ =====
</TABLE>
If the underwriters' over-allotment option is exercised in full, the
following will occur:
. the number of shares of common stock held by existing stockholders will
decrease to approximately 85.2% of the total number of shares of our
common stock outstanding after this offering; and
. the number of shares held by new investors will be increased to or
approximately 14.8% of the total number of shares of our common stock
outstanding after this offering.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The tables that follow present portions of our consolidated financial
statements and are not complete. You should read the following selected
consolidated financial data in conjunction with our consolidated financial
statements and related notes thereto and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this prospectus. The consolidated statements of operations data for the
years ended June 30, 1996, 1997 and 1998, and the nine months ended March 31,
1999, and the consolidated balance sheet data as of June 30, 1997 and 1998, and
March 31, 1999 are derived from our consolidated financial statements that have
been audited by KPMG LLP, independent auditors, which are included elsewhere in
this prospectus. The consolidated statements of operations data for the period
from December 16, 1994 (inception) to June 30, 1995 and the consolidated
balance sheet data as of June 30, 1995 and 1996 are derived from audited
consolidated financial statements that are not included in this prospectus. The
consolidated statements of operations data for the nine months ended March 31,
1998 is derived from our unaudited consolidated financial statements included
elsewhere in this prospectus and include, in the opinion of management, all
adjustments, consisting only of normal recurring adjustments, that we consider
necessary for the fair presentation of our consolidated financial position and
results of operations for those periods. The historical results presented below
are not necessarily indicative of the results to be expected for any future
fiscal year. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
<TABLE>
<CAPTION>
Nine Months
December 16, Year Ended June 30, Ended March 31,
1994 (Inception) -------------------------- -----------------
to June 30, 1995 1996 1997 1998 1998 1999
---------------- ------- ------- -------- ------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Revenues:
License................ $ -- $ -- $ 80 $ 522 $ 289 $ 1,530
Maintenance and
support services...... -- -- 212 1,683 635 3,786
Consulting services.... -- -- -- -- -- 1,401
------ ------- ------- -------- ------- --------
Total revenues....... -- -- 292 2,205 924 6,717
------ ------- ------- -------- ------- --------
Cost of revenues:
License................ -- -- 87 95 59 172
Maintenance and
support services...... -- -- 266 1,063 715 1,876
Consulting services.... -- -- -- -- -- 646
------ ------- ------- -------- ------- --------
Total cost of
revenues............ -- -- 353 1,158 774 2,694
------ ------- ------- -------- ------- --------
Gross profit (loss).. -- -- (61) 1,047 150 4,023
------ ------- ------- -------- ------- --------
Operating expenses:
Research and
development........... 92 1,387 3,959 5,732 3,871 8,406
Sales and marketing.... 6 757 3,198 5,011 3,307 6,504
General and
administrative........ 5 522 1,237 1,801 1,185 2,731
Stock-based
compensation.......... -- -- -- 108 45 784
------ ------- ------- -------- ------- --------
Total operating
expenses............ 103 2,666 8,394 12,652 8,408 18,425
------ ------- ------- -------- ------- --------
Operating loss....... (103) (2,666) (8,455) (11,605) (8,258) (14,402)
Interest income, net.... -- 196 464 982 528 1,139
------ ------- ------- -------- ------- --------
Loss before income
taxes............... (103) (2,470) (7,991) (10,623) (7,730) (13,263)
Income taxes............ -- -- -- -- -- 710
------ ------- ------- -------- ------- --------
Net loss............. $ (103) $(2,470) $(7,991) $(10,623) $(7,730) $(13,973)
====== ======= ======= ======== ======= ========
Basic and diluted net
loss per share......... $(0.02) $ (0.53) $ (1.67) $ (2.03) $ (1.50) $ (2.49)
====== ======= ======= ======== ======= ========
Shares used in computing
basic and diluted net
loss per share......... 4,671 4,704 4,776 5,221 5,142 5,618
====== ======= ======= ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
As of June 30, As of
---------------------------- March 31,
1995 1996 1997 1998 1999
------ ------ ------ ------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term
investments........................... $2,300 $5,848 $8,014 $33,464 $47,831
Total assets........................... 2,315 6,767 9,759 39,144 57,320
Equipment loan and capital lease
obligations, less current portion..... -- -- -- 915 607
Total stockholders' equity............. 2,243 6,464 8,125 28,393 31,998
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section of this prospectus includes a number of forward-looking
statements that reflect our current views with respect to future events and
financial performance. We use words such as "anticipates," "believes,"
"expects," "future," and "intends," and similar expressions to identify
forward-looking statements. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this prospectus.
These forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from historical results or our
predictions. These risks are described in "Risk Factors" and elsewhere in this
prospectus. See "Special Note Regarding Forward-Looking Statements."
Overview
We were incorporated in December 1994 and, from inception until June 1996,
our operations consisted primarily of various start-up activities, including
development of technologies central to our business, recruiting personnel and
raising capital. In 1995, we developed our initial technology, which enables
the delivery of Internet-based services to wireless telephones. In 1996, we
introduced and deployed our first products based on this technology. We first
recognized license revenues in August 1996, and generated license revenues of
approximately $80,000 and $522,000 for the fiscal years ended June 30, 1997 and
1998, respectively, and $1.5 million for the nine months ended March 31, 1999.
We incurred net losses of approximately $8.0 million and $10.6 million for the
fiscal years ended June 30, 1997 and 1998, respectively, and $14.0 million for
the nine months ended March 31, 1999. As of March 31, 1999, we had an
accumulated deficit of $35.2 million.
To provide a worldwide standard for the delivery of Internet-based services
over mass-market wireless telephones, we formed the WAP Forum in close
cooperation with Ericsson, Motorola and Nokia, the world's three largest
manufacturers of wireless telephones. In February 1998, the WAP Forum published
technical specifications for application development and product
interoperability based substantially on Phone.com's technology and on Internet
standards. Leading network operators, telecommunications device and equipment
manufacturers and software companies worldwide have sanctioned the
specifications promulgated by the WAP Forum.
We generate revenues from licenses, maintenance and support services and
consulting services. We receive license revenues from licensing our UP.Link
Server Suite software directly to network operators and indirectly through
value-added resellers. From our inception through March 31, 1999, cumulative
revenues from licensing our UP.Link Server Suite software represented 42% of
total cumulative revenues, inclusive of installation, training and support
services provided to network operators. Maintenance and support services
revenues also include engineering and support services provided to wireless
telephone manufacturers. Cumulative engineering and support services fees from
UP.Browser agreements with wireless telephone manufacturers represented 42% of
our total cumulative revenues from inception through March 31, 1999. Consulting
services revenues are derived from consulting services provided to network
operator customers either directly by us or indirectly through resellers.
Our future success depends on our ability to increase revenues from sales of
products and services to new and existing network operator customers. If the
market for Internet-based services via wireless telephones fails to develop or
develops more slowly than expected, then our business would be materially and
adversely affected. In addition, because there is a relatively small number of
20
<PAGE>
network operators worldwide, any failure to sell our products to network
operator customers successfully could result in a shortfall in revenues that
could not be readily offset by other revenue sources.
Our business strategy also relies to a significant extent on the widespread
propagation of UP.Browser-enabled telephones through our relationships with
network operators and wireless telephone manufacturers. In order to encourage
adoption of UP.Browser-enabled wireless telephones, we license our UP.Browser
software to wireless telephone manufacturers free of per-unit royalties and
other license fees and provide maintenance and support services for an annual
flat fee. As of April 1999, we had licensed UP.Browser to 23 wireless telephone
manufacturers. As of April 1999, four wireless telephone manufacturer customers
had made commercial shipments of telephones with the UP.Browser embedded. In
addition, we are currently providing engineering support services in connection
with 45 browser integration projects.
During the year ended June 30, 1998, AT&T Wireless Services, which will own
approximately 2.5% of our common stock after this offering, and Matsushita
Communication Industrial accounted for approximately 22% and 18%, respectively,
of our total revenues. For the nine months ended March 31, 1999, AT&T Wireless
Services, DDI Corporation, which will own approximately 0.6% of our common
stock after this offering, and a wireless telephone manufacturer accounted for
approximately 14%, 11% and 13%, respectively, of our total revenues.
For agreements entered into prior to July 1, 1998, we recognized revenues in
accordance with the provisions of the American Institute of Certified Public
Accountants' Statement of Position No. 91-1, Software Revenue Recognition.
Effective July 1, 1998, we adopted SOP 97-2, Software Revenue Recognition, as
amended. SOP 97-2 generally requires revenue earned on software arrangements
involving multiple elements to be allocated to each element based on the
relative fair value of the elements. The adoption of SOP 97-2 did not have a
significant impact on our accounting for revenues.
We license our UP.Link Server Suite products to network operators through
our direct sales force and indirectly through our channel partners. Our license
agreements do not provide for a right of return. Licenses can be purchased on
an as-deployed basis or on a prepaid basis. For licenses purchased on an as-
deployed basis, revenue is recognized as the licenses are deployed by the
network operators. For licenses purchased on a prepaid basis, prepaid license
fees are recognized under subscription accounting due to our commitment to
provide standards-compliant products for each license covered by the prepaid
arrangement. This subscription revenue is recognized ratably over the
contractual term of the prepaid arrangement (i.e., the date the prepaid
licenses expire if not used), beginning upon the earlier of acceptance or
commercial launch by the network operator. We recognize revenues from
maintenance and support services provided to network operators ratably over the
term of the agreement, generally one year, and recognize revenues from
consulting services provided to network operators as the services are
performed.
We recognize revenues from UP.Browser agreements with wireless telephone
manufacturers ratably over the period during which the services are performed,
generally one year.
Deferred revenue was $18.7 million as of March 31, 1999. We expect that
deferred revenue will decline in the long term as network operators deploy
services based on our products. In particular, license revenue was recognized
in the third quarter of fiscal 1999 in connection with the launch by
CEGETEL/SFR of commercial services based on our products and the acceptance of
our products by
21
<PAGE>
DDI Corporation. We recognized previously deferred license revenues of $135,000
in the quarter ended March 31, 1999, and will recognize approximately $400,000
in each of the quarters ending June 30, 1999, September 30, 1999, December 31,
1999 and March 31, 2000 relating to our sales to CEGETEL/SFR. With regard to
sales to DDI Corporation, we recognized previously deferred license revenues of
$364,000 in the quarter ended March 31, 1999, and will recognize approximately
$550,000 in each of the quarters ending June 30, 1999, September 30, 1999 and
December 31, 1999.
License revenue also was recognized in the third quarter of fiscal 1999
under an agreement with AT&T Wireless Services initially entered into in May
1996. Under that agreement, AT&T Wireless Services, prepaid $4.7 million for
the right to deploy up to a fixed number of licenses through December 1999. Due
to the early nature of the commercial deployments of our products by network
operators and because we believed we would assume additional obligations to
assist AT&T Wireless Services in deploying the software licenses if
difficulties were encountered during the deployment, the license portion of the
prepaid fee was recognized as licenses were deployed. Between August 1997 and
December 1998, $484,000 was recognized relating to this prepayment. In
connection with an amendment to the agreement entered into in March 1999, AT&T
Wireless Services agreed that we would not be further obligated to assist them
in the deployment of the prepaid licenses discussed above. Therefore, the
remaining deferred revenue of approximately $4.2 million as of December 31,
1998, relating to the prepayment is being recognized as revenue ratably over
the remaining contractual term of the prepaid arrangement. Accordingly, we
recognized revenue of $465,000 in the quarter ending March 31, 1999, and will
recognize approximately $1.25 million in each of the quarters ending June 30,
1999, September 30, 1999, and December 31, 1999, associated with the
prepayment.
To date, we have not recognized significant revenues derived from sales
through our indirect channels. We expect that our gross profit on revenues
derived from sales through indirect channel partners will be less than the
gross profit on revenues from direct sales. Our success, in particular in
international markets, depends in part on our ability to increase sales of our
products and services through value-added resellers and to expand our indirect
distribution channels. In addition, our agreements with our distribution
partners generally do not restrict the sale of products that are competitive
with our products and services, and each of our partners can cease marketing
our products and services at their option.
International sales of products and services accounted for 7% and 44% of our
total revenues in the years ended June 30, 1997 and 1998, respectively, and 64%
of our total revenues for the nine months ended March 31, 1999. We expect
international sales to continue to account for a significant portion of our
revenues, although the percentage of our total revenues derived from
international sales may vary. Risks inherent in our international business
activities, include:
. failure by us and/or third parties to develop localized content and
applications that are used with our products;
. costs of localizing our products for foreign markets;
. difficulties in staffing and managing foreign operations;
. longer accounts receivable collection time;
. political and economic instability;
. fluctuations in foreign currency exchange rates;
. reduced protection of intellectual property rights in some foreign
countries;
. contractual provisions governed by foreign laws;
. export restrictions on encryption and other technologies;
22
<PAGE>
. potentially adverse tax consequences; and
. the burden of complying with complex and changing regulatory
requirements.
Since early 1997, we have invested substantially in research and
development, marketing, domestic and international sales channels, professional
services and our general and administrative infrastructure. These investments
have significantly increased our operating expenses, contributing to net losses
in each fiscal quarter since our inception. Our limited operating history makes
it difficult to forecast future operating results. Although our revenues have
grown in recent quarters, our revenues may not increase at a rate sufficient to
achieve and maintain profitability, if at all. We anticipate that our operating
expenses will increase substantially in absolute dollars for the foreseeable
future as we expand our product development, sales and marketing, professional
services and administrative staff. Even if we were to achieve profitability in
any period, we may not sustain or increase profitability on a quarterly or
annual basis.
Nine Months Ended March 31, 1998 and 1999
License Revenues
License revenues increased from $289,000 for the nine months ended March 31,
1998 to $1.5 million for the nine months ended March 31, 1999. The increase in
license revenues was due primarily to the launch by CEGETEL/SFR of commercial
services based on our products, the acceptance of our products by DDI
Corporation and the satisfaction of our deployment obligations related to AT&T.
Revenues recognized during the nine months ended March 31, 1999 as a result of
these three customers were $135,000, $364,000 and $393,000, respectively.
Maintenance and Support Services Revenues
Maintenance and support services revenues increased from $635,000 for the
nine months ended March 31, 1998 to $3.8 million for the nine months ended
March 31, 1999. The increase in maintenance and support services revenues was
attributable primarily to increased demand for maintenance and engineering
support services by wireless telephone manufacturers, resulting in an increase
of approximately $2.3 million, and to revenues of $884,000 associated with
trials of our UP.Link Server Suite software by wireless network operators.
Consulting Services Revenues
Consulting services revenues were $1.4 million for the nine months ended
March 31, 1999. No consulting services were performed in the nine months ended
March 31, 1998.
Cost of License Revenues
Cost of license revenues consists primarily of third-party license and
support fees. Cost of license revenues increased from $59,000 for the nine
months ended March 31, 1998 to $172,000 for the nine months ended March 31,
1999. The growth in cost of license revenues was attributable primarily to the
increase in license revenues. As a percentage of license revenues, cost of
license revenues for the nine months ended March 31, 1998 and 1999 was 20% and
11%, respectively. The decrease as a percentage of license revenues was
attributable primarily to higher license revenues for the nine months ended
March 31, 1999 and to the amortization of fixed maintenance fees relating to
third party software licenses. We expect that cost of license revenues will
vary as a percentage of license revenues from period to period.
23
<PAGE>
Cost of Maintenance and Support Services Revenues
Cost of maintenance and support services revenues consists of compensation
and related overhead costs for personnel engaged in the delivery of
installation, training and support services to network operators, and
engineering and support services to wireless telephone manufacturers. The
engineering and support services performed for wireless telephone manufacturers
includes assistance relating to integrating our UP.Browser software into the
manufacturers' wireless telephones. Cost of maintenance and support services
revenues increased from $715,000 for the nine months ended March 31, 1998 to
$1.9 million for the nine months ended March 31, 1999. The growth in cost of
maintenance and support services revenues was attributable primarily to an
increase in personnel dedicated to support a larger number of wireless
telephone manufacturer customers, which increased costs by approximately
$500,000 from March 31, 1998 to March 31, 1999, and increased staffing in
anticipation of growth in the number of network operator customers, which
increased costs by approximately $650,000 during the same period. As a
percentage of maintenance and support service revenues, cost of maintenance and
support services revenues for the nine months ended March 31, 1998 and 1999 was
113% and 50%, respectively. Gross profit on maintenance and support services
increased between March 31, 1998 and March 31, 1999 due to the increase in the
number of browser integration assignments for wireless telephone manufacturers,
which had the effect of spreading our costs over a greater revenue base. In
addition, the number of trials in progress by network operators increased
during this period. We anticipate that the cost of maintenance and support
services revenues will increase in absolute dollars in future operating
periods.
Cost of Consulting Services Revenues
Cost of consulting services revenues consists of compensation and
independent consultant costs for personnel engaged in our consulting services
operations and related overhead. We commenced our consulting operations in
fiscal 1999. Cost of consulting services revenues for the nine months ended
March 31, 1999 was $646,000. No consulting services were performed in the nine
months ended March 31, 1998. As a percentage of consulting services revenues,
cost of consulting services revenues for the nine months ended March 31, 1999
was 46%. Gross profit on consulting services revenues is impacted by the mix of
company personnel and independent consultants assigned to projects. The gross
profit we achieve is also impacted by the contractual terms of the consulting
assignments we undertake, and the gross profit on fixed price contracts
typically is more susceptible to fluctuation than contracts performed on a
time-and-materials basis. We anticipate that the cost of consulting services
revenues will increase in absolute dollars as we continue to invest in the
growth of our consulting services operations.
Research and Development Expenses
Research and development expenses consist primarily of compensation and
related costs for research and development personnel. Research and development
expenses increased 117% from $3.9 million for the nine months ended March 31,
1998 to $8.4 million for the nine months ended March 31, 1999. This increase
was attributable primarily to the addition of personnel in our research and
development organization associated with product development. We expect to
continue to make substantial investments in research and development and
anticipate that research expenses will continue to increase in absolute
dollars.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of compensation and related
costs for sales and marketing personnel, sales commissions, marketing programs,
public relations, promotional materials,
24
<PAGE>
travel expenses and trade show exhibit expenses. Sales and marketing expenses
increased 97% from $3.3 million for the nine months ended March 31, 1998 to
$6.5 million for the nine months ended March 31, 1999. This increase resulted
from the addition of personnel in our sales and marketing organizations,
reflecting our increased selling effort to develop market awareness of our
products and services. We anticipate that sales and marketing expenses will
increase in absolute dollars as we increase our investment in these areas.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and
related expenses, accounting, legal and administrative expenses, professional
service fees and other general corporate expenses. General and administrative
expenses increased 130% from $1.2 million for the nine months ended March 31,
1998 to $2.7 million for the nine months ended March 31, 1999. This increase
consisted of approximately $900,000 related to the addition of personnel
performing general and administrative functions and, to a lesser extent, legal
expenses associated with increased product licensing and patent activity. We
expect general and administrative expenses to increase in absolute dollars as
we add personnel and incur additional expenses related to the anticipated
growth of our business and operation as a public company.
Stock-Based Compensation
Some stock options granted and restricted stock sold during the fiscal year
ended June 30, 1998 and during the nine months ended March 31, 1999 have been
deemed to be compensatory. Total deferred stock-based compensation associated
with these equity arrangements through March 31, 1999 amounted to $2.4 million
related to stock options granted and restricted stock issued from October 1997
through March 1999. These amounts are being amortized over the respective
vesting periods of these equity arrangements in a manner consistent with
Financial Accounting Standards Board Interpretation No. 28. Of the total
deferred stock-based compensation, $45,000 and $784,000 was amortized in the
nine months ended March 31, 1998 and 1999, respectively. We expect amortization
of approximately $227,000, $696,000, $375,000, $185,000 and $62,000 in the
fourth quarter of the fiscal year ending June 30, 1999, and in the fiscal years
ending June 30, 2000, 2001, 2002 and 2003, respectively.
Interest Income, Net
Net interest income is comprised primarily of interest earned on cash and
cash equivalents and short-term investments, offset by interest expense related
to obligations under capital leases and our
equipment loan. Net interest income was $528,000 and $1.1 million for the nine
months ended
March 31, 1998 and 1999, respectively. The increase was primarily attributable
to increased cash balances as a result of our private placement financing
consummated in February 1998, and to a lesser extent, to our private placement
financing consummated in March 1999.
Income Taxes
Income tax expense of $710,000 for the nine months ended March 31, 1999,
consisted of foreign taxes. Since inception, we have incurred net losses for
federal and state tax purposes and have not recognized any tax provision or
benefit. As of March 31, 1999, we had net operating loss carryforwards of
approximately $31.0 million for both federal and California income tax
purposes. These carryforwards, if not utilized, expire beginning in the year
2004 through 2019. We also have
25
<PAGE>
research and development credit carryforwards of approximately $367,000 and
$279,000 for federal and California income tax purposes, respectively. We also
have a foreign tax credit carryforward of $670,000, which expires in 2004.
Federal and California tax laws impose significant restrictions on the
utilization of net operating loss carryforwards in the event of a shift in our
ownership that constitutes an "ownership change," as defined in Section 382 of
the Internal Revenue Code. If we have an ownership change, the ability to
utilize the stated carryforwards could be significantly reduced. See Note 7 of
Notes to Consolidated Financial Statements.
As of March 31, 1999, we had deferred tax assets of $14.6 million, which
were fully offset by a valuation allowance. Deferred tax assets consist
principally of the federal and state net operating loss carryforwards,
capitalized start-up expenditures, accruals and reserves not currently
deductible for tax purposes, research and development credits, and foreign tax
credit carryforwards. We have provided a valuation allowance due to the
uncertainty of generating future profits that would allow for the realization
of these deferred tax assets. Accordingly, no tax benefit was recorded in the
accompanying consolidated statements of operations.
Fiscal Years Ended June 30, 1996, 1997 and 1998
License Revenues
License revenues increased from $80,000 in the fiscal year ended June 30,
1997 to $522,000 in the fiscal year ended June 30, 1998. No license revenues
were recognized in the fiscal year ended June 30, 1996. The increase in license
revenues was due primarily to the launch of wireless Internet-based services by
network operators.
Maintenance and Support Services Revenues
Maintenance and support services revenues increased from $212,000 in the
fiscal year ended June 30, 1997 to $1.7 million in the fiscal year ended June
30, 1998. The increase in maintenance and support services revenues was due
primarily to an increase in services provided to wireless telephone
manufacturers and increased installation and support fees from network
operators. No maintenance and support services were performed in the fiscal
year ended June 30, 1996.
Cost of License Revenues
Cost of license revenues increased from $87,000 in the fiscal year ended
June 30, 1997 to $95,000 in the fiscal year ended June 30, 1998. As a
percentage of license revenues, cost of license revenues in the fiscal years
ended June 30, 1997 and 1998 was 109% and 18%, respectively. Costs of license
revenues in the fiscal year ended June 30, 1997 included $74,000 attributable
to non-recurring third-party software license and software customization fees.
Cost of Maintenance and Support Services Revenues
Cost of maintenance and support services revenues increased from $266,000 in
the fiscal year ended June 30, 1997 to $1.1 million in the fiscal year ended
June 30, 1998. The growth in cost of maintenance and support services revenues
was attributable primarily to growth in the number of wireless telephone
manufacturing customers and costs associated with installation of our UP.Link
Server Suite software at network operators' facilities. As a percentage of
maintenance and support services revenues, cost of maintenance and support
services revenues in the fiscal years ended June 30, 1997 and 1998 was 125% and
63%, respectively.
26
<PAGE>
Research and Development Expenses
Research and development expenses increased 185% from $1.4 million in the
fiscal year ended June 30, 1996 to $4.0 million in the fiscal year ended June
30, 1997 and increased 45% to $5.7 million in the fiscal year ended June 30,
1998. The increases in the fiscal years ended June 30, 1997 and 1998 were
attributable primarily to the addition of personnel in our research and
development organization associated with product development and increased
patent prosecution activity.
Sales and Marketing Expenses
Sales and marketing expenses increased 322% from $757,000 in the fiscal year
ended June 30, 1996 to $3.2 million in the fiscal year ended June 30, 1997 and
increased 57% to $5.0 million in the fiscal year ended June 30, 1998. The
increases in the fiscal years ended June 30, 1997 and 1998 reflected the
addition of personnel in our sales and marketing organizations, as well as
costs associated with increased selling efforts to develop market awareness of
our products and services.
General and Administrative Expenses
General and administrative expenses increased 137% from $522,000 in the
fiscal year ended June 30, 1996 to $1.2 million in the fiscal year ended June
30, 1997 and increased 46% to $1.8 million in the fiscal year ended June 30,
1998. The increases in the fiscal years ended June 30, 1997 and 1998 were due
primarily to the addition of personnel performing general and administrative
functions and higher legal expenses associated with increased product licensing
activity.
Stock-Based Compensation
We recorded deferred stock-based compensation of $1.9 million through June
30, 1998, associated with stock options granted and restricted stock issued
from October 1997 through June 1998. Amortization of stock-based compensation
was $108,000 for the fiscal year ended June 30, 1998. We recorded no deferred
stock based compensation for the fiscal years ended June 30, 1996 and 1997.
Interest Income, Net
Net interest income was $196,000, $464,000 and $982,000 in the fiscal years
ended June 30, 1996, 1997 and 1998, respectively. The year-to-year increases
resulted primarily from earnings on rising cash, cash equivalent and short-term
investment balances as a result of our private placement financings, partially
offset in the fiscal year ended June 30, 1998 by interest expense related to
obligations under capital leases and our equipment loan.
Income Taxes
Since inception, we have incurred net losses for federal and state tax
purposes and have not recognized any tax provision or benefit. As of June 30,
1998, we had net operating loss carryforwards of approximately $19.0 million
for both federal and California income tax purposes. These carryforwards, if
not utilized, expire beginning in the year 2004 through 2019. We also had
research and development credit carryforwards of approximately $379,000 and
$287,000 for federal and California income tax purposes, respectively. See Note
7 of Notes to Consolidated Financial Statements.
27
<PAGE>
As of June 30, 1997 and 1998, we had deferred tax assets of $4.7 million and
$8.8 million, respectively, which were fully offset by a valuation allowance.
Deferred tax assets consist principally of the federal and state net operating
loss carryforwards, capitalized start-up expenditures, accruals and reserves
not currently deductible for tax purposes and research and development credits.
We have provided a valuation allowance due to the uncertainty of generating
future profits that would allow for the realization of these deferred tax
assets. Accordingly, no tax benefit was recorded in the accompanying
consolidated statements of operations.
28
<PAGE>
Quarterly Results of Operations
The following table sets forth our consolidated operating results for each
of the seven quarters ended March 31, 1999. This data has been derived from
unaudited consolidated financial statements that, in the opinion of our
management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of this information when read in
conjunction with our annual audited consolidated financial statements and notes
thereto appearing elsewhere in this prospectus. These operating results are not
necessarily indicative of results of any future period.
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------------------
Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31, March 31,
1997 1997 1998 1998 1998 1998 1999
--------- -------- --------- -------- --------- -------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
License................ $ 17 $ 158 $ 114 $ 233 $ 202 $ 64 $ 1,264
Maintenance and
support services...... 94 222 319 1,048 1,005 1,327 1,454
Consulting services.... -- -- -- -- 161 426 814
------- ------- ------- ------- ------- ------- -------
Total revenues....... 111 380 433 1,281 1,368 1,817 3,532
------- ------- ------- ------- ------- ------- -------
Cost of revenues:
License................ 5 25 29 36 62 26 84
Maintenance and
support services...... 175 245 295 348 433 676 767
Consulting services.... -- -- -- -- 58 77 511
------- ------- ------- ------- ------- ------- -------
Total cost of
revenues............ 180 270 324 384 553 779 1,362
------- ------- ------- ------- ------- ------- -------
Gross profit (loss).. (69) 110 109 897 815 1,038 2,170
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development........... 1,072 1,381 1,418 1,861 2,446 2,492 3,468
Sales and marketing.... 837 1,128 1,342 1,704 1,801 2,074 2,629
General and
administrative........ 341 403 441 616 684 955 1,092
Stock-based
compensation.......... -- 6 39 63 249 255 280
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............ 2,250 2,918 3,240 4,244 5,180 5,776 7,469
------- ------- ------- ------- ------- ------- -------
Operating loss....... (2,319) (2,808) (3,131) (3,347) (4,365) (4,738) (5,299)
Interest income, net.... 96 76 356 454 415 365 359
------- ------- ------- ------- ------- ------- -------
Loss before income
taxes............... (2,223) (2,732) (2,775) (2,893) (3,950) (4,373) (4,940)
Income taxes............ -- -- -- -- -- -- 710
------- ------- ------- ------- ------- ------- -------
Net loss............. $(2,223) $(2,732) $(2,775) $(2,893) $(3,950) $(4,373) $(5,650)
======= ======= ======= ======= ======= ======= =======
Basic and diluted net
loss per share......... $ (0.44) $ (0.53) $ (0.53) $ (0.53) $ (0.71) $ (0.78) $ (0.99)
======= ======= ======= ======= ======= ======= =======
Shares used in computing
basic and diluted net
loss per share......... 5,050 5,147 5,230 5,459 5,539 5,617 5,699
======= ======= ======= ======= ======= ======= =======
As a Percentage of Total
Revenues
Revenues:
License................ 15 % 42 % 26 % 18 % 15 % 4 % 36 %
Maintenance and
support services...... 85 58 74 82 73 73 41
Consulting services.... -- -- -- -- 12 23 23
------- ------- ------- ------- ------- ------- -------
Total revenues....... 100 100 100 100 100 100 100
------- ------- ------- ------- ------- ------- -------
Cost of revenues:
License................ 4 7 7 3 4 2 2
Maintenance and
support services...... 158 64 68 27 32 37 23
Consulting services.... -- -- -- -- 4 4 14
------- ------- ------- ------- ------- ------- -------
Total cost of
revenues............ 162 71 75 30 40 43 39
------- ------- ------- ------- ------- ------- -------
Gross profit (loss).. (62) 29 25 70 60 57 61
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development........... 966 363 327 145 179 137 98
Sales and marketing.... 754 297 310 133 132 114 74
General and
administrative........ 307 106 102 48 50 53 31
Stock-based
compensation.......... -- 2 9 5 18 14 8
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............ 2,027 768 748 331 379 318 211
------- ------- ------- ------- ------- ------- -------
Operating loss....... (2,089) (739) (723) (261) (319) (261) (150)
Interest income, net.... 86 20 82 35 30 20 10
------- ------- ------- ------- ------- ------- -------
Loss before income
taxes............... (2,003) (719) (641) (226) (289) (241) (140)
Income taxes............ -- -- -- -- -- -- 20
------- ------- ------- ------- ------- ------- -------
Net loss............. (2,003)% (719)% (641)% (226)% (289)% (241)% (160)%
======= ======= ======= ======= ======= ======= =======
As a Percentage of
Related Revenues
Cost of license
revenues............... 29% 16 % 25 % 15 % 31 % 41 % 7 %
Cost of maintenance and
support services
revenues............... 186% 110 % 92 % 33 % 43 % 51 % 53 %
Cost of consulting
services revenues...... -- -- -- -- 36 % 18 % 63 %
</TABLE>
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<PAGE>
During the six quarters ended December 31, 1998, our license revenues were
not significant and varied widely, as we continued to make substantial
investments in our business. In the quarter ended March 31, 1999, our license
revenues increased substantially to $1.3 million, as we recognized previously
deferred revenue of $964,000 under agreements with CEGETEL/SFR, DDI Corporation
and AT&T Wireless Services. During each of the next three calendar quarters of
1999, we will recognize license revenues of approximately $2.2 million under
these agreements.
Revenues from maintenance and support services were not significant through
the quarter ended March 31, 1998. Beginning in the quarter ended June 30, 1998,
our revenues from maintenance and support services increased substantially due
principally to increasing UP.Browser license activity with wireless telephone
manufacturers and UP.Link Server Suite trial agreements with network operators.
Cost of license revenues increased from $26,000 in the quarter ended
December 31, 1998 to $84,000 in the quarter ended March 31, 1999. As a
percentage of license revenues, cost of license revenues was 41% and 7% in the
quarters ended December 31, 1998 and March 31, 1999, respectively. The decrease
as a percentage of license revenues was attributable primarily to higher
license revenues in the quarter ended March 31, 1999 and to the amortization of
fixed maintenance fees relating to third party software licenses. Because this
fixed cost has been amortized over revenues that vary from quarter to quarter,
our cost of license revenues as a percentage of license revenues has fluctuated
historically. We expect that cost of license revenues will vary as a percentage
of license revenues from period to period.
Cost of maintenance and support services as a percentage of related revenues
declined from 186% for the quarter ended September 30, 1997 to 33% for the
quarter ended June 30, 1998 as increased efficiencies were realized as revenues
increased over the corresponding period. Cost of maintenance and support
services as a percentage of related revenues increased from 33% for the quarter
ended June 30, 1998 to 53% for the quarter ended March 31, 1999 as personnel
were added in anticipation of increased demand for maintenance and support
services.
Cost of consulting services revenues increased from $77,000 in the quarter
ended December 31, 1998 to $511,000 in the quarter ended March 31, 1999. As a
percentage of consulting services revenues, cost of consulting services
revenues was 18% and 63% in the quarters ended December 31, 1998 and March 31,
1999, respectively. The increase reflects a higher mix of consulting services
performed on a time and materials basis during the latter period, and we expect
that cost of consulting services revenues will vary as a percentage of
consulting services revenues from period to period.
The total number of our employees grew from 47 at September 30, 1997 to 135
at March 31, 1999. As a result of the growth in the number of employees in our
research and development, sales and marketing, and general and administrative
organizations, our research and development, sales and marketing, and general
and administrative expenses have increased on a quarter-to-quarter basis.
We believe that period-to-period comparisons of our operating results are
not necessarily meaningful. You should not rely on them to predict future
performance. The amount and timing of our operating expenses generally may
fluctuate significantly in the future as a result of a variety of factors. We
face a number of risks and uncertainties encountered by early stage companies,
particularly those in rapidly evolving markets such as the wireless
telecommunications and the
30
<PAGE>
Internet software industries. We may not be able to successfully address these
risks and difficulties. In addition, although we have experienced revenue
growth recently, our revenue growth may not continue, and we may not achieve or
maintain profitability in the future.
Our quarterly revenues and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter due to a number of factors,
some of which are outside of our control. These factors include, but are not
limited to:
. delays in market acceptance or implementation by our customers of our
products and services;
. changes in demand by our customers for additional products and services;
. our lengthy sales cycle, our concentrated target market and the
potentially substantial effect on total revenues that may result from
the gain or loss of business from each incremental network operator
customer;
. introduction of new products or services by us or our competitors;
. delays in developing and introducing new products and services;
. changes in our pricing policies or those of our competitors or
customers;
. changes in our mix of domestic and international sales;
. risks inherent in international operations;
. changes in our mix of license, consulting and maintenance and support
services revenues;
. changes in accounting standards, including standards relating to revenue
recognition, business combinations and stock-based compensation; and
. the impact of Year 2000 concerns on the timing of capital expenditures
by network operators and their launches of commercial services utilizing
our products and services.
Our sales cycle, which is lengthy--typically between nine and twelve
months--contributes to fluctuations in our quarterly operating results. Many
factors outside our control add to the lengthy education and customer approval
process for our products. For example, many of our prospective customers have
neither budgeted expenses for the provision of Internet-based services to
wireless subscribers nor specifically dedicated personnel for the procurement
and implementation of our products and services. Further, the emerging and
evolving nature of the market for Internet-based services via wireless
telephones may lead prospective customers to postpone their purchasing
decisions. In addition, general concerns regarding year 2000 compliance may
further delay purchase decisions by prospective customers.
Most of our expenses, such as employee compensation and lease payments for
facilities and equipment, are relatively fixed. In addition, our expense levels
are based, in part, on our expectations regarding future revenues. As a result,
any shortfall in revenues relative to our expectations could cause significant
changes in our operating results from quarter to quarter. Due to the foregoing
factors, we believe period to period comparisons of our revenue levels and
operating results are not meaningful. You should not rely on our quarterly
revenues and operating results to predict our future performance.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through private
sales of convertible preferred stock, which totaled $66.0 million in aggregate
net proceeds through March 31, 1999. We have also financed our operations
through an equipment loan and a capitalized lease, which totaled $1.0 million
in principal amount outstanding at March 31, 1999. As of March 31, 1999, we had
$20.2 million of cash and cash equivalents and $27.6 million of short-term
investments, and working capital of $29.4 million.
31
<PAGE>
Net cash used for operating activities was $2.3 million, $6.6 million and
$5.1 million for the fiscal years ended June 30, 1996, 1997 and 1998,
respectively, and $1.0 million for the nine months ended March 31, 1999. For
each of the fiscal years ended June 30, 1996, 1997 and 1998, and for the nine
months ended March 31, 1999, cash used for operating activities was
attributable primarily to net losses and an increase in accounts receivable
offset in part by depreciation and amortization, increases in accounts payable
and accrued liabilities, and increases in deferred revenue. For the nine months
ended March 31, 1999, accounts receivable increased by approximately $2.7
million. This increase was due to increased sales to both wireless telephone
manufacturers and network operators. To date, we have had no write-offs of
accounts receivable and we have not recorded any allowance for doubtful
accounts. Accrued liabilities increased by approximately $3.0 million during
the nine months ended March 31, 1999, which was primarily due to the accrual of
approximately $1.0 million of costs associated with the Series E convertible
preferred stock financing completed in March 1999 and an increase in accrued
consulting costs of approximately $650,000. Deferred revenue increased by
approximately $11.7 million during the nine months ended March 31, 1999, as a
result of increased license prepayments by network operators of approximately
$9.9 million and increased fees from wireless telephone manufacturers of
approximately $1.8 million.
Net cash used for investing activities was $852,000, $4.8 million and $18.0
million for the fiscal years ended June 30, 1996, 1997 and 1998, respectively,
and $7.9 million for the nine months ended March 31, 1999. For each of the
fiscal years, cash used in investing activities reflects purchases of property
and equipment, with increased purchases of short-term investments in the fiscal
years ended June 30, 1997 and 1998 and in the nine months ended March 31, 1999.
Net cash provided by financing activities was $6.7 million, $9.7 million and
$31.7 million for the fiscal years ended June 30, 1996, 1997 and 1998,
respectively.Cash provided by financing activities in each of these periods was
attributable to proceeds from the issuance of preferred stock, and for the
fiscal year ended June 30, 1998, cash provided by financing activities also was
attributable in part to proceeds from our equipment loan. In March 1999 we
completed the sale of 2,458,543 shares of Series E convertible preferred stock
at a purchase price of $7.24 per share, which resulted in net proceeds to us of
approximately $16.7 million. We intend to use the proceeds from the Series E
convertible preferred stock financing for general corporate purposes. All of
these shares will automatically convert into shares of common stock upon the
closing of this offering.
As of March 31, 1999, our principal commitments consisted of obligations
outstanding under operating leases, our equipment loan and capitalized lease
obligations. Although we have no material commitments for capital expenditures,
we expect to increase capital expenditures and lease commitments consistent
with our anticipated growth in operations, infrastructure and personnel. We
also may increase our capital expenditures as we expand into additional
international markets. See Notes 3, 4 and 6 of Notes to Consolidated Financial
Statements.
We believe that the net proceeds from this offering, together with our
current cash, cash equivalents and short-term investments, will be sufficient
to meet our anticipated cash needs for working capital and capital expenditures
for at least the next twelve months. If cash generated from operations is
insufficient to satisfy our liquidity requirements, we may seek to sell
additional equity or debt securities or to obtain a credit facility. If
additional funds are raised through the issuance of debt securities, these
securities could have rights, preferences and privileges senior to holders of
common stock, and the terms of any debt could impose restrictions on our
operations. The sale of additional equity or convertible debt securities could
result in additional dilution to our stockholders, and additional financing may
not be available in amounts or on terms acceptable to us, if at all. If we
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<PAGE>
are unable to obtain this additional financing, we may be required to reduce
the scope of our planned product development and marketing efforts, which could
harm our business, financial condition and operating results.
Year 2000 Readiness Disclosure
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These systems and
software products will need to accept four digit entries to distinguish 21st
century dates from 20th century dates. This problem may result in software
failures or the creation of erroneous results.
We have conducted a year 2000 readiness review for the current versions of
our products. The review includes assessment, implementation (including
remediation, upgrading and replacement of some product versions), validation
testing, and contingency planning.We have largely completed all phases of this
plan, except for contingency planning, for the current versions of our
products. As a result, we believe all current versions of our products are
capable of properly distinguishing between 20th and 21st century dates, when
configured and used in accordance with the related documentation, and provided
that the underlying operating system of the host machine and any other software
used with our products are also capable of properly distinguishing between 20th
and 21st century dates. We have not tested all noncurrent versions of our
products and do not intend to do so. However, we have delivered software
releases containing corrections to all identified year 2000 errors in our
UP.Link Server Suite software to our network operator customers with our
software in production and expect that those releases will be implemented by
our customers prior to December 31, 1999.
We are testing software obtained from third parties (licensed software,
shareware, and freeware) that is incorporated into our products, and we have
contacted our vendors to confirm that licensed software is capable of properly
distinguishing between 20th and 21st century dates. We have been informed by
many of our vendors that their products that we use are capable of properly
distinguishing between 20th and 21st century dates. Despite testing by us and
by current and potential customers, and assurances from developers of products
incorporated into our products, our products may contain undetected errors or
defects associated with year 2000 date functions. Known or unknown errors or
defects in our products could result in delay or loss of revenues, diversion of
development resources, damage to our reputation, or increased service and
warranty costs, any of which could materially and adversely affect our
business, operating results or financial condition. Some commentators have
predicted significant litigation regarding year 2000 compliance issues, and we
are aware of lawsuits against other software vendors. Because of the
unprecedented nature of this litigation, it is uncertain whether or to what
extent we may be affected by it.
Our internal systems include our information technology, or IT, non-IT
systems and embedded systems. We have completed an assessment of our material
internal IT, non-IT and embedded systems, including both our own software
products and third-party software and hardware technology. We expect to
complete validation testing of our IT systems and related contingency planning
by September 1999. To the extent that we are not able to test the technology
provided by third-party vendors, we are seeking assurances from vendors that
their systems are year 2000 compliant. We are not currently aware of any
material operational issues associated with preparing our internal IT, non-IT
and embedded systems for the year 2000. However, we may experience material
unanticipated problems or additional costs caused by undetected errors or
defects in the technology used in our internal IT, non-IT and embedded systems.
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<PAGE>
We do not currently have any information concerning the year 2000 compliance
status of our customers. Our network operator customers face implementation and
support challenges in introducing Internet-based services via wireless
telephones. Historically, network operators have been relatively slow to
implement new complex services, such as Internet-based services, and year 2000
compliance issues could slow adoption or implementation of our products. If our
current or future customers fail to achieve year 2000 compliance or if they
divert technology expenditures, especially technology expenditures that were
earmarked for our products, to address year 2000 compliance problems, our
business could suffer.
We have funded our year 2000 plan from available cash and have not
separately accounted for these expenses in the past. To date, these expenses
have not been material. Most of our expenses have related to, and are expected
to continue to relate to, the operating costs associated with time spent by
employees and management consultants in the evaluation process and year 2000
compliance matters generally. We expect to incur approximately $500,000 to
verify that our IT, non-IT and embedded systems are capable of properly
distinguishing between 20th century and 21st century dates. In addition, we may
experience material problems and expenses associated with year 2000 compliance
that could adversely affect our business, results of operations, and financial
condition. Finally, we are also subject to external forces that might generally
affect industry and commerce, such as year 2000 compliance failures by utility
or transportation companies and related service interruptions.
Quantitative and Qualitative Disclosures About Market Risk Derivatives and
Financial Instruments
Foreign Currency Hedging Instruments
We transact business in various foreign currencies and, accordingly, we are
subject to exposure from adverse movements in foreign currency exchange rates.
To date, the effect of changes in foreign currency exchange rates on revenues
and operating expenses have not been material. Substantially all of our
revenues are earned in U.S. dollars. Operating expenses incurred by our
European and Japanese subsidiaries are denominated primarily in U.K. pounds
sterling and Japanese yen, respectively.
We currently do not use financial instruments to hedge operating expenses in
the U.K. or Japan denominated in their respective local currency. We intend to
assess the need to utilize financial instruments to hedge currency exposures on
an ongoing basis.
We do not use derivative financial instruments for speculative trading
purposes, nor do we currently hedge our foreign currency exposure to offset the
effects of changes in foreign exchange rates.
Fixed Income Investments
Our exposure to market risks for changes in interest rates relates primarily
to corporate debt securities. We place our investments with high credit quality
issuers and, by policy, limit the amount of the credit exposure to any one
issuer.
Our general policy is to limit the risk of principal loss and ensure the
safety of invested funds by limiting market and credit risk. All highly liquid
investments with a maturity of less than three months at the date of purchase
are considered to be cash equivalents; all investments with maturities of three
months or greater are classified as available-for-sale and considered to be
short-term investments.
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<PAGE>
BUSINESS
Phone.com, Inc.
We are a leading provider of software that enables the delivery of Internet-
based services to mass-market wireless telephones. Using our software, network
operators can provide Internet-based services to their wireless subscribers,
and wireless telephone manufacturers can turn their mass-market wireless
telephones into mobile Internet appliances. Wireless subscribers thus have
access to Internet- and corporate intranet-based services, including email,
news, stocks, weather, travel and sports. In addition, subscribers have access
via their wireless telephones to network operators' intranet-based telephony
services, which may include over-the-air activation, call management, billing
history information, pricing plan subscription and voice message management.
Our software platform consists of the UP.Link Server Suite, which is installed
on network operators' systems, and UP.Browser, which is embedded in wireless
telephones. As of April 1999, 23 network operators have licensed our software
and have commenced or announced commercial service or are in market or
laboratory trials. In addition, 23 wireless telephone manufacturers have
licensed UP.Browser.
Industry Background
Growth of the Internet
The Internet has emerged as a global communications medium enabling millions
of people to share information and conduct business electronically.
International Data Corporation, or IDC, estimates that there were approximately
159 million users of the Internet worldwide at the end of 1998 and that the
number of users will grow to 410 million by the end of 2002. We cannot assure
you that this estimate will be achieved. The dramatic growth in the number of
business and consumer Internet users has led to a proliferation of useful
information and services on the Internet, including email, news, electronic
commerce, educational and entertainment applications and a multitude of other
value-added services. As a result, the Internet has become a primary and
ubiquitous daily resource for millions of people.
Growth of Wireless Telecommunications
Worldwide use of wireless telecommunications has grown rapidly as cellular
and other emerging wireless communications services have become more widely
available and affordable for the mass business and consumer markets. Advances
in technology, changes in telecommunications regulations and the allocation and
licensing of additional radio spectrum have contributed to this growth
worldwide. Dataquest estimates that there were approximately 187 million
digital wireless subscribers worldwide at the end of 1998 and that the number
of subscribers will grow to 590 million by the end of 2002. We cannot assure
you that this estimate will be achieved.
The Wireless Network Operator Environment
As a result of deregulation, new radio frequency spectrum licenses,
privatizations and rapid network expansion by new entrants, the competitive
environment among network operators in major markets worldwide has become
intense. Efforts to attract and retain subscribers have resulted in significant
price-based competition. Increased competition has in turn raised the costs
associated with acquiring new subscribers, has lowered average revenues per
subscriber, and has increased the propensity of subscribers to switch from one
network operator to another. For these reasons, network operators are looking
for new revenue sources in the form of value-added services they can deliver to
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<PAGE>
their wireless subscribers. They are also looking for ways to differentiate
their product offerings in an effort to retain customers. Finally, they are
focused on finding and deploying solutions that enable them to deliver and
support their services in a more cost-effective manner.
The Convergence of the Internet and Mobile Telephony
As people have become increasingly dependent on email services, remote
access to corporate intranets, and other Internet-based services, mass-market
wireless telephones that provide mobile access to these resources have become
increasingly useful tools. Phone.com was a pioneer in the convergence of the
Internet and mobile telephony. In 1995, Phone.com developed its initial
technology, which enables the delivery of Internet-based services to wireless
telephones. In 1996, Phone.com introduced and deployed its first products based
on this technology.
To provide a worldwide open standard enabling the delivery of Internet-based
services to mass-market wireless telephones, Phone.com, Ericsson, Motorola and
Nokia formed the Wireless Application Protocol Forum. In 1998, the WAP Forum
published technical specifications for application and content development and
product interoperability based on Internet technology and standards. By
complying with WAP specifications, wireless telephone manufacturers, network
operators, content providers and application developers can provide Internet-
based products and services that are interoperable.
In 1998, the WAP Forum published the Wireless Markup Language, or WML. WML
is compliant with the Extensible Markup Language, or XML, specification
published by the World Wide Web Consortium. XML is a programming language that
provides a means of describing and exchanging data in an open format. Content
providers and application developers use WML to optimize the display of, and
interaction with, Web-based data on wireless telephones. Based substantially on
technology that Unwired Planet contributed to the public domain, WML is
optimized for delivery of Internet content to mass-market wireless telephones,
which have numeric keypads instead of full keyboards, small screens, and
limited memory capacity, processing power, battery life and bandwidth. In the
same manner that the programming language known as Hypertext Markup Language,
or HTML, has provided an open standard that has fueled the development of
Internet applications and content for personal computers, WML is designed to be
an industry standard that will encourage the development of Internet
applications and content for wireless telephones.
Leading network operators, telecommunications device and equipment
manufacturers, and software companies worldwide have sanctioned the
specifications promulgated by the WAP Forum. The WAP Forum is currently chaired
by Charles Parrish, Executive Vice President of Phone.com, and, as of March
1999, has grown to over 90 members, including the following companies:
Board Members
<TABLE>
<S> <C>
Phone.com Motorola
Alcatel Nokia Mobile Phones
CEGETEL/SFR (Societe Francaise du NTT Mobile Communications Network
Radio Telephone) (NTT DoCoMo)
DDI Corporation SBC Communications
Ericsson Mobile Communications AB Sprint PCS
IBM Telstra Corporation
Matsushita Communication Industrial
</TABLE>
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<PAGE>
Network Operators
<TABLE>
<S> <C>
AT&T Wireless Services Rogers Cantel Mobile Communications
Bell Atlantic Mobile Sonera Corporation
BellSouth Cellular SWISSCOM LTD.
Bouygues Telecom Telefonica Servicios Moviles
Cellnet Communications Telia Mobile AB
Deutsche Telecom Mobilnet GmbH Tokyo Digital Phone
France Telecom Telecom Italia Mobile
Hongkong Telecom Mobile Services Telenor Mobil Group
IDO Corporation TU-KA Cellular Tokyo
Omnitel Vodafone
One 2 One
</TABLE>
Device and Equipment Manufacturers
<TABLE>
<S> <C>
Acer Peripherals ORGA Kartensysteme GmbH
Bosch Telecom Danmark A/S Philips Consumer Communications
CMG Telecommunications & Utilities Qualcomm
De La Rue Card Systems RTS Wireless
Gemplus Samsung Electronics
Hewlett-Packard Schlumberger Industries S.A.
ICO Global Communications Sema Group Telecom
Intel Corporation Siemens AG
LG Information & Communications Sony International (Europe) GmbH
Logica Aldiscon Tecnomen Oy
Lucent Technologies Telital S.p.A.
Mitsubishi Wireless Communications Toshiba
NEC Technologies (UK) Uniden
Nortel Unisys
Software Companies
APiON GSM Information Network
Bussan Systems Integration Company M.D. Communications
Certicom Oracle Corporation
Comverse Network Systems Puma Technology
CCL (Computer & Communications RSA Data Security
Research Laboratories, ITRI) Sendit AB
CTC (Itochu Techno-Science Corporation) Scandinavian Softline Technology Oy
Dr. Materna GmbH Spyglass
Dolphin Telecommunications Symbian
Fujitsu Software Corporation Systems Engineering Consultants
Geoworks Corporation Tegic Communications
Glenayre Technologies VTT Information Technology
</TABLE>
The Market Opportunity
In response to an increasingly competitive environment, network operators
are seeking to deliver Internet-based services to their wireless subscribers as
a means to generate revenues from new sources, differentiate their service
offerings and reduce operating costs. To do this, network operators require a
scalable turnkey software solution to deliver Internet-based services and
content to their wireless subscribers.
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The Phone.com Solution
We provide a leading software communications platform that enables the
delivery of Internet-based services to mass-market wireless telephones. Using
our scalable platform, network operators can provide Internet-based services to
their wireless subscribers, and wireless telephone manufacturers can turn their
mass-market wireless telephones into mobile Internet appliances. Wireless
subscribers thus have access to Internet- and corporate intranet-based
services, including email, news, stocks, weather, travel and sports.
[GRAPHIC APPEARS HERE]
Our platform consists of the UP.Link Server Suite and UP.Browser software
products. The UP.Link Server Suite includes:
. a means of exchanging data between the Internet and mass-market wireless
telephones, commonly referred to as a gateway;
. a service platform that performs subscriber management and service
provisioning functions, as well as communicating with the network
operator's customer care and billing systems; and
. Internet-based applications such as email and personal information
management software.
The UP.Browser is a browser and messaging software product that is designed and
optimized for mass-market wireless telephones. In addition, approximately 4,500
third-party developers have registered to use our UP.SDK software development
kit, and a variety of third-party content is currently available for wireless
telephones equipped with UP.Browser, including information from ABCNews.com,
Bloomberg, Reuters, Quote.com and ESPN Sportszone.
With the introduction of the next version of our software solution,
currently expected to be commercially available in the second half of 1999, our
products will provide an open, interoperable, WAP-compliant platform for the
delivery of Internet-based services. Our software solution supports all major
digital wireless telephony standards in use around the world:
<TABLE>
<C> <S>
. CDMA (Code Division Multiple Access) . GSM (Global System for Mobile
. TDMA (Time Division Multiple Access) Communication)
. iDEN (Integrated Digital Enhanced Network) . CDPD (Cellular Digital Packet Data)
. PHS (Personal Handyphone System) . PDC (Personal Digital Cellular)
</TABLE>
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<PAGE>
Key benefits of our platform for network operators include the following:
. Opportunity to generate incremental revenues. Network operators can
generate additional revenues by offering value-added Internet-based
services. They can also charge for the increased data and voice airtime
that these applications encourage. For example, a user can access an
email message via UP.Mail and initiate a voice call to any phone number
appearing in the message with the press of one button.
. Ability to differentiate services and improve subscriber retention. Using
our products, network operators can offer new Internet-based services to
wireless subscribers. In addition, by enabling wireless subscribers to
store personal contact information in their networks and to personalize
the selection and presentation of Internet content such as stock quotes,
sports scores and news, network operators can enhance subscriber
retention.
. Opportunity to reduce operating costs. Our UP.Link Server Suite can also
be used by network operators to reduce operating costs. For example,
network operators' call centers are burdened by high rates of calls from
subscribers inquiring about billing, service availability, usage and
other service-related matters. Our software platform enables network
operators to leverage standards-based Internet technology to allow
subscribers to make many of these inquiries using their wireless
telephones without assistance by customer care representatives. By
bypassing the call center infrastructure for these activities, network
operators can reduce their operating costs.
The Phone.com Strategy
Our objective is to be the leading supplier to network operators of software
and services that enable the convergence of the Internet and mobile telephony.
Key elements of our strategy include:
. Focus on Providing Products and Services to Network Operators. We focus
on providing comprehensive solutions that enable network operators to
deliver Internet-based services to their wireless subscribers. Our close
working relationships with network operators provide us with a valuable
understanding of our customers' technology and operations, which we
intend to leverage to accelerate time to market of our products and
identify new sales opportunities. In order to drive revenues from our
UP.Link Server software and related services, we utilize direct and
indirect sales channels. Our direct sales force focuses on selling
products and consulting services and assists our indirect channel
partners in selling our products and services. Our indirect sales channel
partners are currently Alcatel, Itochu Techno-Science Corporation, Sema
Group and Siemens. These partners sell our products and services as an
integral part of their product and service offerings to network operators
primarily in international markets. We intend to add new partners to our
indirect sales channel to serve customers in key markets and expect that
sales through our indirect sales channel partners will represent an
increasing portion of our revenues.
. Continue to Invest in our Technology. Network operators have stringent
requirements for server software performance, scalability and
reliability. Extensive technical expertise is required to integrate these
solutions with the network operators' complex systems. We also expect
that network operators will demand regular upgrades that include new
functions and features. Consequently, we intend to continue to invest
heavily in research and product development. We also intend to maintain
our technology leadership by leveraging our role in prominent industry
standard-setting organizations such as the WAP Forum and the World Wide
Web Consortium.
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<PAGE>
. Drive the Sale and Development of Internet-Based Applications. Network
operators that offer Internet-based services by using our UP.Link Server
Suite generally seek new value-added applications to offer to their
subscribers. We currently offer the following Internet-based
applications:
. UP.Mail, which delivers email to wireless telephones,
. UP.Organizer, a personal information management application, and
. UP.Web, which enables subscribers to access, manage and update
their personal information and configuration for UP.Mail and
UP.Organizer from their personal computers.
We are continuously enhancing our existing products and developing new
applications to provide additional functionality for network operators
and wireless subscribers.
. Propagate Widespread Use of UP.Browser in Mass-Market Wireless
Telephones. We believe that increasing the number of wireless telephone
manufacturers that incorporate UP.Browser into their mass-market wireless
telephones enhances the attractiveness of our UP.Link server software to
network operators. Therefore, in order to drive widespread adoption, we
license UP.Browser to wireless telephone manufacturers, free of per-unit
royalties. As of April 1999, we have licensed UP.Browser to 23 wireless
telephone manufacturers.
. Promote the Development of Internet-Based Services Over Mass-Market
Wireless Telephones. To encourage the growth of our business, we actively
encourage Internet content and application developers to create WML
applications. In connection with this activity, we provide our UP.SDK
software development kit and support to Internet content and application
developers free of charge. To date, there are over 4,500 registered
developers in our Developer Program. Internet content providers that
currently deliver content for wireless telephones equipped with
UP.Browser include ABCNews.com, BizTravel.com, Bloomberg, Data
Broadcasting Corporation, ESPN Sportszone, InfoSpace.com, Quote.com,
Reuters and Sportsfeed.
Products and Services
Products
Our software products enable the delivery of Internet-based services to
mass-market wireless telephones. Our software products include:
. UP.Link Server Suite--a product that network operators use to connect
their subscribers' mass-market wireless telephones to Internet services
. UP.Browser--a browser that is embedded in mass-market wireless telephones
and enables wireless subscribers to access Internet services
. UP.Smart--a suite of software applications that delivers personal digital
assistant features to smartphones
. UP.SDK--a software development kit that Internet content providers and
third-party developers use to create WML-compliant applications
UP.Link Server Suite
UP.Link Server Suite is a turnkey software solution with features and
applications that enable network operators to offer Internet-based services to
their wireless subscribers. UP.Link Server Suite connects data-enabled wireless
telephones to applications and content hosted by Web servers on the
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<PAGE>
Internet or private intranets. UP.Link Server Suite also provides network
operators with subscriber provisioning and network management functions on a
robust and scalable software platform. The UP.Link Server Suite consists of the
following components:
<TABLE>
<CAPTION>
Components Description
<C> <S>
Gateway UP.Link Gateway provides the network-layer functions of the
UP.Link Server Suite, and connects Internet- and intranet-
based services to wireless networks and wireless telephones.
UP.Link Gateway connects the multiple protocols for wireless
data communications to the open standards of the Internet,
thereby enabling Web servers to recognize a wireless telephone
as an Internet standards-compliant client.
- -------------------------------------------------------------------------------
Administration The UP.Link administration component provides a Web-based
administration control system to keep the network operator's
Internet-based network components up and running, assess
system status and provision new subscribers.
The UP.Link Provisioning Application Programming Interface, or
PAPI, enables integration of UP.Link with the network
operator's existing customer care, help desk and billing
systems.
- -------------------------------------------------------------------------------
Services The services component provides an open application
programming framework with interfaces, or APIs, that
standardize the way that the services component interacts with
applications. These services include:
. Push Server--allows applications to push information to
wireless subscribers. For example, an email application can
use the Push Server to notify a wireless subscriber of new
messages.
. Fax Server--enables the forwarding of email attachments and
other data content to fax machines for printing.
. Identity Server--maintains a subscriber registry that
retains wireless subscribers' service settings and allows
network operators to track their subscribers' service usage.
. Content Translation Framework--provides forward and backward
compatibility of content formats between different
generations of browsers and wireless telephones. Translates
between international character sets in real-time. Also
translates standard HTML Web pages into WML pages for
viewing on wireless telephones.
. Application Registry--provides a structure for the
interoperability of different applications. For example,
third-party applications can retrieve and store contact
records in the UP.Organizer's address book or pass an email
address to UP.Mail.
- -------------------------------------------------------------------------------
Applications UP.Applications is a suite of wireless Internet-based
applications, including:
. UP.Mail--provides access to the same email account through
both wireless telephones and personal computers.
. UP.Organizer--provides a suite of synchronized Internet-
based personal information management applications,
including an address book, calendar and to-do list.
. UP.Web--a Web-based user interface that allows subscribers
to use their personal computers to perform many of the same
tasks they perform on their wireless telephones with
UP.Organizer.
</TABLE>
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<PAGE>
UP.Browser
UP.Browser is a browser and messaging software product that is designed and
optimized for mass-market wireless telephones. Using UP.Browser, subscribers
can access Web-based information and services that are hosted on network
operators' or third-party Web servers. Due to its open and highly portable
architecture, UP.Browser can be embedded into different types of wireless
telephones and utilize each telephone's specific display and input
characteristics, such as graphical displays and programmable keys. Key features
of UP.Browser include:
<TABLE>
<CAPTION>
Features Description
<C> <S>
Browsing UP.Browser displays WML-designed pages from any
Web or intranet site. In addition, UP.Browser
incorporates text-input software from Tegic
Communications.
- -------------------------------------------------------------------------------
Universal Inbox Notifies subscribers with a visual or audible
indication when a Web page or other data has
been proactively "pushed" to their wireless
telephones. Universal Inbox also integrates in
a single local mailbox diverse alert types,
including email and voice mail, as well as Web-
based content such as stock quotes, traffic
alerts and flight information.
- -------------------------------------------------------------------------------
Local Application Environment Allows access to important information when out
of network coverage. Increases efficiency of
applications and minimizes perceived delay when
used over bandwidth-constrained networks.
- -------------------------------------------------------------------------------
Security UP.Browser employs the same encryption
technology used by many commercial Web sites.
Consequently, all interaction between the
wireless telephone and a Web site can be
authenticated and encrypted.
</TABLE>
UP.Smart
UP.Smart is a suite of software applications that augments UP.Browser with a
set of popular functions commonly found on personal digital assistants.
UP.Smart includes address book, calendar, to-do list and memo functions.
UP.Smart also utilizes Puma Technology's synchronization software to enable a
user to synchronize UP.Smart with PC-based personal information management
applications by connecting the UP.Smart-equipped wireless telephone to a
personal computer through a serial cable. The information is stored both on the
wireless telephone and personal computer, making it accessible even when the
wireless telephone is not connected to the network.
UP.SDK
Our software development kit, known as UP.SDK, provides tools and
documentation for Internet content providers and developers to create and
maintain WML-based Internet services. UP.SDK consists of the following
components:
. The UP.Simulator, a Windows-based application that simulates the behavior
of UP.Browser-equipped wireless telephones, allowing developers to more
easily test WML services.
. Specialized functions and libraries that simplify the process of
generating WML applications.
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<PAGE>
. Tools for establishing secure communications between WML applications and
UP.Link Servers.
. Sample WML files and application source code.
Services
We offer consulting services to network operators and wireless telephone
manufacturers. Our consulting services help us to shorten our software license
sales cycle, accelerate deployment of our technology and deepen our
understanding of our customers' networks. We also provide both customer support
and custom software development services for network operators, as well as
software consulting services to wireless telephone manufacturers that license
UP.Browser.
Customers
Wireless Network Operators
We sell our UP.Link Server Suite and related technical support to network
operators worldwide to enable them to offer a variety of wireless Internet
services to their subscribers. These network operators have licensed our
software and have either announced a commercial service launch or are in a
market or laboratory trial phase.
As of April 1999, 23 network operators, including the following companies,
have licensed our software:
<TABLE>
<CAPTION>
Name Stage Technology Country
<S> <C> <C> <C>
AT&T Wireless Services Deployed in July 1996 CDPD USA
- -----------------------------------------------------------------------------------------
Bell Atlantic Mobile Deployed in September 1996 CDPD USA
- -----------------------------------------------------------------------------------------
GTE Wireless Deployed in May 1997 CDPD USA
- -----------------------------------------------------------------------------------------
SFR/CEGETEL Deployed in March 1999 GSM France
- -----------------------------------------------------------------------------------------
DDI Corporation Deployed in April 1999 CDMA Japan
- -----------------------------------------------------------------------------------------
IDO Corporation Deployed in April 1999 CDMA Japan
- -----------------------------------------------------------------------------------------
Bell Mobility Announced Commercial Launch CDMA Canada
(expected May 1999)
- -----------------------------------------------------------------------------------------
LG TeleCom Commercial Launch expected CDMA South Korea
June 1999
- -----------------------------------------------------------------------------------------
Nextel Communications Announced Commercial Launch iDEN USA
(expected third quarter calendar 1999)
- -----------------------------------------------------------------------------------------
France Telecom Mobile Trial GSM France
- -----------------------------------------------------------------------------------------
Omnitel Trial GSM Italy
- -----------------------------------------------------------------------------------------
Orange Trial GSM U.K.
- -----------------------------------------------------------------------------------------
Deutsche Telekom Trial GSM Germany
Mobilnet GmbH (T-Mobil)
- -----------------------------------------------------------------------------------------
Telecom Italia Mobile Trial GSM Italy
- -----------------------------------------------------------------------------------------
Telstra Trial GSM Australia
- -----------------------------------------------------------------------------------------
Telenor Trial GSM Norway
</TABLE>
43
<PAGE>
We also provide our network operator customers with consulting services that
enable them to rapidly adopt our technology and bring wireless Internet-based
services to market. Our consulting services focus on those areas where our
products interface with the network operators' internal systems such as
billing, provisioning and customer care. We also provide our network operator
customers with assistance in choosing the appropriate content and applications
for their subscribers and creating the promotion and pricing strategies for
their service.
Our agreements with network operators provide these customers with a non-
exclusive license to use our UP.Link Server Suite software in connection with
providing Internet-based services to their subscribers. Pricing and payment
terms for these licenses are negotiated with the customer based on the number
of subscriber licenses purchased by the network operator, and the licenses can
be purchased on an as-deployed basis or on a prepaid basis. While these
agreements do not provide for a right of return, these agreements typically
provide for a six-month warranty, indemnification against intellectual property
infringement claims and a source code escrow. In addition, we typically provide
fee-based maintenance and support services to these customers, under which they
receive error corrections and remote support. They can also elect to receive
new releases of UP.Link Server Suite for an additional fee.
Wireless Telephone Manufacturers
We license our UP.Browser software to wireless telephone manufacturers, who
embed UP.Browser into their products. In order to encourage these manufacturers
to include UP.Browser in their wireless telephone models, no per-unit royalty
is charged. In addition, we provide engineering and support services to
accelerate the introduction of new wireless telephone models that contain
UP.Browser. These services are provided to manufacturers on an annual flat-fee
basis per digital wireless telephony standard.
As of April 1999, 23 wireless telephone manufacturers have licensed
UP.Browser, and the following manufacturers have publicly announced products
that will include UP.Browser:
<TABLE>
<S> <C>
. Alcatel . Panasonic (Matsushita)
. Casio . Qualcomm
. Hitachi . Sagem
. Hyundai Electronics . Samsung Electronics
. IGS . Sharp
. Kyocera . Siemens
. LG Information & Communications . Sony
. Mitsubishi . Toshiba
. Motorola
</TABLE>
Additionally, Nokia and Ericsson have announced that they will introduce
wireless telephones that will be compatible with our UP.Link Server Suite. As
of April 1999, four wireless telephone manufacturer customers had made
commercial shipments of telephones with the UP.Browser
44
<PAGE>
embedded. In addition, we are currently providing engineering support services
in connection with 45 browser integration projects.
Our agreements with wireless telephone manufacturers generally provide these
customers with a non-exclusive, royalty-free license to sell wireless
telephones containing UP.Browser. These agreements typically provide for a 90-
day warranty, indemnification against intellectual property infringement claims
and a source code escrow. In addition, customers can elect to receive varying
levels of maintenance and support services for a fee.
During the year ended June 30, 1998, AT&T Wireless Services and Matsushita
Communication Industrial accounted for approximately 22% and 18%, respectively,
of our total revenues. For the nine months ended March 31, 1999, AT&T Wireless
Services, DDI Corporation and a wireless telephone manufacturer accounted for
approximately 14%, 11% and 13%, respectively, of our total revenues.
Research and Product Development
We continue to enhance the features and performance of our existing products
and introduce new products. For example, in the second half of 1999, we expect
to release the fourth generation of our UP.Link Server Suite and UP.Browser
products. These products are expected to be compliant with version 1.1 of the
specifications promulgated by the WAP Forum. We are currently developing other
applications, including a secure provisioning server, which enables network
operators to automate customer provisioning, and compatibility with two-way
short messaging service systems. In addition, our Carrier Services Group
provides outsourced application development and services to our network
operator customers.
Our success depends on a number of factors, which include our ability to
identify and respond to emerging technological trends in our target markets,
develop and maintain competitive products, enhance our existing products by
adding features and functionality that differentiate them from those of our
competitors and bring products to market on a timely basis and at competitive
prices. As a result, we have made, and we intend to continue to make,
significant investments in research and product development. Our research and
development expenses were $4.0 million and $5.7 million for the years ended
June 30, 1997 and 1998, respectively, and $8.4 million for the nine months
ended March 31, 1999. As of March 31, 1999, we had 74 employees engaged in
research and product development activities. We are recruiting additional
skilled engineers for research and product development, and our business could
be adversely affected if we are unable to hire these engineers on a timely
basis.
Technology
Our technology has contributed both to driving open standards for the
delivery of Internet-based services to mass-market wireless telephones and to
providing network operators and wireless telephone manufacturers with software
solutions that are robust and scalable, and take into account the specific
characteristics of wireless telephony networks and telephones.
Wireless Application Protocol and Wireless Markup Language
Phone.com, along with Ericsson, Motorola and Nokia, founded the WAP Forum in
1997, and published open standards-based technical specifications for
application and content development, as well as product interoperability based
on Internet technology and standards. Leading network
45
<PAGE>
operators, telecommunications device and equipment manufacturers, and software
companies worldwide have joined the WAP Forum, which has grown to over 90
members as of March 1999.
The WAP specifications consist of the following components:
. A Transport Specification, which defines the way in which data is
exchanged between the network operator's server and the wireless
telephone. The WAP Transport Specification mirrors the Internet-standard
secure HTTP protocol, but is optimized for wireless telephone networks.
For example, on a typical PC-based Internet connection, all functions
such as security provisioning and application downloading and interaction
are performed on the PC. In the WAP Transport Specification, functions
are divided between the wireless telephone and the network operator's
server because of the bandwidth constraints over the wireless network and
the wireless telephone's limited processing power.
. A Wireless Markup Language (WML), which optimizes the display of and
interaction with Web-based content on wireless telephones and allows
Internet applications to take advantage of the voice capabilities of the
wireless telephony network. WML is compliant with the Extensible Markup
Language, or XML, specification published by the World Wide Web
Consortium.
. WML Script, which enables a developer to add procedural logic to WML
pages.
In order to implement interoperability with Internet-based content, the WAP
Transport Specification and WML use the open standards-based Internet model of
interaction, in which content and applications reside on Web servers that are
physically distributed, and requests for the data on these servers are sent via
open-standard Internet addresses, commonly known as URLs.
On standard Internet Web servers, content typically resides in databases,
but is provided to users via a number of content formats, including HTML and
Java. WML and WML Script function as standard content formats, so Internet
content providers can add WML and WML Script access to their servers without
having to change the underlying data. WML and WML Script applications deliver
content in a format that is optimized for wireless telephone interfaces.
Components of UP.Link Technology
Our UP.Link Server Suite is designed to be modular, expandable, flexible,
scalable and reliable. Using an architecture based on scalable, object-oriented
technology, the UP.Link Server Suite typically runs on a large, distributed set
of servers. The UP.Link Server Suite, which runs on Sun Microsystems' Solaris
operating system, is designed to meet the stringent performance, scalability
and reliability requirements of network operators.
Server Side Agents. Since wireless networks have limited bandwidth and
wireless telephones have limited processing power and memory, programs called
agents that reside on the server are used to provide processing power and other
computing resources to UP.Browser-enabled wireless telephones. These agents
allow some operations to be offloaded from the wireless telephone to the
UP.Link server. This means that the duties that are typically performed by the
Web browser on standard personal computers can be divided between the browser
on the wireless telephone and a "proxy" running in the agent. The exact split
of functionality can vary depending on the particular capabilities of the
wireless telephone. The agent can perform many functions, including translating
wireline Internet protocols such as HTTP to wireless Internet protocols such as
WAP, as well as
46
<PAGE>
compiling Internet content so that it is more compact to transmit and easier to
display on the wireless telephone.
Dispatcher. At the core of our scalable server architecture is a dispatcher
that dynamically load balances user proxies between a number of agents. The
dispatcher is much like the line at a bank that funnels a queue of customers to
the next available teller. The dispatcher also provides a basic level of
protection against faults by automatically rerouting subscriber requests if a
proxy server malfunctions.
Messenger. The UP.Link messenger server provides store-and-forward messaging
capabilities from Web servers to UP.Browser-enabled wireless telephones over a
wide range of wireless protocols such as Short Message Service and Cellular
Digital Packet Data. Store-and-forward means that if a wireless telephone is
turned off or out of its coverage area, the message will be stored and
delivered once the wireless telephone is connected to the network. The
messenger accepts data through standard Web interfaces such as HTTP and
converts the data for transmittal over the wireless network without requiring
modifications to the Web server.
Narrow Band Router. The Narrow Band Router provides a common interface to a
wide range of narrow band, or low-bandwidth, wireless networks. This feature
makes the protocol-specific components of message addressing, routing and
delivery transparent to Internet applications, enabling developers to easily
create applications for wireless networks without customizing their
applications to work with each individual protocol. Thus the same application
can work across a number of wireless data networks and protocols in a
transparent manner.
Translation Framework. Wireless telephones are different than personal
computers in that they are mass-market consumer devices with software that is
embedded in the wireless telephone at the factory and very difficult and costly
to modify in the field. The WML specification, however, is regularly evolving
as features and functionality are introduced and refined. To address this
issue, the translation framework enables the translation of content in real-
time. Software translators can be implemented that transparently translate
content based on newer versions of WML to make it compatible with wireless
telephones that contain older versions of UP.Browser, or vice versa.
Sales and Marketing
We sell our products through both a direct sales force and third-party
resellers, currently Alcatel, CTC, Sema Group and Siemens. In addition, we have
a joint sales and marketing relationship with Lucent Technologies. As of March
31, 1999, we had 28 persons in sales and marketing serving the United States
market, and 12 persons in sales and marketing outside the United States. We
plan to significantly expand this group over the next 12 months. In addition,
we have offices in London and Tokyo. Our direct sales force focuses on selling
products and consulting services and assists our indirect channel partners in
selling our products and services. International sales of products and services
accounted for 7% and 44% of our total revenues in the years ended June 30, 1997
and 1998, respectively, and 64% of our total revenues for the nine months ended
March 31, 1999. We expect international revenues to continue to account for a
significant portion of our revenues, although the percentage of our total
revenues derived from international sales may vary. Our international sales
strategy is to partner with leading distributors and systems integrators that
have strong industry backgrounds and market presence in their respective
markets and geographic regions.
Our success depends in part on our ability to increase sales of our products
and services through value-added resellers and to expand our indirect
distribution channels. Under the arrangements that
47
<PAGE>
we make with our value-added resellers, a value-added reseller sells, installs
and services our products to wireless network operators. These agreements are
not exclusive and do not have territorial restrictions. Our value-added
resellers generally are not restricted from selling products that are
competitive with our products, and each of our partners can cease marketing our
products and services at their option.
We believe that customer service and ongoing technical support is an
essential part of the sales process in the wireless communications industry. In
order to provide high levels of customer service, senior management and
assigned account managers play a role in ongoing account management and
relationships. We believe these customer relationships enables us to improve
customer satisfaction and develop products to meet specific customer needs. Our
agreements with our network operator customers provide for 24 hour per day
support seven days per week.
We actively recruit content and application developers to our platform and
provide to them free of charge our software developer's kit, UP.SDK. We also
provide them with free membership in our Developer Program, free email-based
support and the opportunity to participate in our Alliances Program. To date,
there are over 4,500 registered developers in our Developer Program who have
downloaded UP.SDK, including:
<TABLE>
<S> <C>
. 724 Solutions . Lotus
. biztravel.com . Mapquest.com
. BroadVision . NewsAlert
. CableData . Reuters
. Comverse Network Systems . SmartServOnline
. Data Broadcasting Corporation . Sportsfeed.com
. eDispatch.com . StockTips
. InfoSpace.com . Vantive
. Internet Travel Network . The Weather Underground
. KLELine . Webraska Mobile Technologies
. Lightbridge
</TABLE>
Our Alliances Program is comprised of a select group of our content and
application developers. We screen applications to our Alliances Program based
on the availability and quality of the content or applications produced by the
partner. We perform joint marketing activities with the partner, as well as
provide introductions between our wireless network operators and our Alliances
Program members.
Competition
The market for our products and services is becoming increasingly
competitive. The widespread adoption of open industry standards such as the WAP
specifications may make it easier for new market entrants and existing
competitors to introduce products that compete with our software products. We
expect that we will compete primarily on the basis of price, time-to-market,
functionality, quality and breadth of product and service offerings. Our
current and potential competitors include the following:
. Wireless equipment manufacturers, such as Ericsson and Nokia, which are
developing and marketing competitive server, browser and application
software products. These companies already sell billions of dollars of
wireless telephones and other telecommunications products to network
operators which are our existing and potential customers.
48
<PAGE>
. Microsoft and Wireless Knowledge, a joint venture of Microsoft and
Qualcomm, which have announced their intention to introduce products and
services that may compete directly with our UP.Link and UP.Browser
products, as well as our UP.Applications. In addition, Microsoft has
announced that it intends to enable its Windows CE operating system to
run on wireless handheld devices, including wireless telephones, and to
develop and market its own browser for these devices.
. Systems integrators, such as CMG and APiON, and software companies, such
as Oracle Corporation and Sendit, which are developing and marketing
server software that is compliant with the specifications promulgated by
the WAP Forum.
. Providers of Internet software applications and content, electronic
messaging applications and personal information management software
solutions, any of whom could offer products and services that compete
with ours.
Many of our existing competitors as well as potential competitors have
substantially greater financial, technical, marketing and distribution
resources than we do. Several of these companies also have greater name
recognition and more well-established relationships with our target customers.
Furthermore, these competitors may be able to adopt more aggressive pricing
policies and offer more attractive terms to customers than we can. We may face
increasing price pressure from our network operator customers. In addition,
current and potential competitors have established or may establish cooperative
relationships among themselves or with third parties to compete more
effectively. Finally, existing and potential competitors may develop
enhancements to, or future generations of, competitive products that will have
better performance features than our products.
Intellectual Property Rights
Our performance depends significantly on our ability to protect our
proprietary rights to the technologies used in our products. If we are not
adequately protected, our competitors could use the intellectual property that
we have developed to enhance their products and services, which could harm our
business. As of April 1999, we had two issued United States patents. The first
patent relates to two-way communications between browser-enabled wireless
devices and wirless networks and expires in 2015. Our second patent relates to
the storage of frequently used links to internet-based URLs, or bookmarks, on a
remote server. This patent expires in 2017. We also had one United States
patent application with allowed claims and 56 pending United States patent
applications, as well as foreign counterparts with respect to many of these
applications. In addition, we rely on a combination of copyright and trademark
laws, trade secrets, confidentiality provisions and other contractual
provisions to protect our proprietary rights, but these legal means afford only
limited protection. Despite any measures taken to protect our intellectual
property, unauthorized parties may attempt to copy aspects of our products or
to obtain and use information that we regard as proprietary. In addition, the
laws of some foreign countries may not protect our proprietary rights as fully
as do the laws of the United States. Thus, the measures we are taking to
protect our proprietary rights in the United States and abroad may not be
adequate. Finally, our competitors may independently develop similar
technologies.
The telecommunications and Internet software industries are characterized by
the existence of a large number of patents and frequent litigation based on
allegations of patent infringement. As the number of entrants into our market
increases, the possibility of an infringement claim against us grows. For
example, we may be inadvertently infringing a patent of which we are unaware.
In addition, because patent applications can take many years to issue, there
may be a patent application
49
<PAGE>
now pending of which we are unaware, which will cause us to be infringing when
it issues in the future. To address any patent infringement claims, we may have
to enter into royalty or licensing agreements on disadvantageous commercial
terms. A successful claim of product infringement against us, and our failure
to license the infringed or similar technology, would harm our business. In
addition, any infringement claims, with or without merit, would be time-
consuming and expensive to litigate or settle and could divert management
attention from administering our core business. In connection with our
application to register the "Unwired Planet" mark, a third party filed a notice
of opposition with the United States Patent and Trademark Office. We are
currently in negotiations with this third party to obtain its consent to our
registration. If we are not able to obtain registration of the "Unwired Planet"
mark, we would have to rely solely on common law protection for this mark.
We rely on a license of encryption technology from RSA Data Security, Inc.
The license from RSA is perpetual unless terminated by either party as the
result of a material breach or insolvency or, at our election, for convenience.
As a member of the WAP Forum, we have agreed to license our intellectual
property to other WAP members on fair and reasonable terms to the extent that
the license is required to develop noninfringing products under the
specifications promulgated by the WAP Forum. Each other member of the WAP Forum
has entered into a reciprocal agreement.
Employees
As of March 31, 1999, we had a total of 135 employees. None of our employees
is covered by any collective bargaining agreements. We believe that our
relations with our employees are good.
Facilities
Our principal offices are located in Redwood City, California in a 41,000
square foot facility under a lease expiring in June 2005, with a renewal option
for an additional five-year term. We also lease space for our offices in London
and Tokyo.
Legal Proceedings
We are not currently subject to any material legal proceedings; however, we
may from time to time become a party to various legal proceedings arising in
the ordinary course of our business.
50
<PAGE>
MANAGEMENT
Executive Officers and Directors
Our executive officers and directors and their ages as of April 30, 1999 are
as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Alain Rossmann....... 43 Chairman and Chief Executive Officer
Charles Parrish...... 52 Executive Vice President and Director
Alan Black........... 38 Vice President, Finance and Administration, Chief
Financial Officer and Treasurer
Andrew Laursen....... 40 Vice President, Product Development and Engineering
Benjamin Linder...... 33 Vice President, Marketing
Maurice Jeffery...... 35 Vice President, North America Sales
Tony Miranzadeh...... 36 Vice President of Sales and Business Development,
Asia Pacific and Latin America
Malcolm Bird......... 43 Managing Director, Phone.com (Europe) Ltd.
Roger Evans(1)(2).... 53 Director
Reed Hundt........... 50 Director
David Kronfeld(1).... 51 Director
Andrew Verhalen(2)... 42 Director
</TABLE>
- ---------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Alain Rossmann. Mr. Rossmann is the founder, Chairman and Chief Executive
Officer of Phone.com. Prior to founding Phone.com in December 1994, he was
Chief Executive Officer of EO Corporation, a pioneer in personal digital
assistant devices, from 1991 to 1993, when it was sold to AT&T. Prior to his
involvement with EO, he was Vice President of Operations for C-Cube
Microsystems Inc., a semiconductor design company, from 1989 to 1991. From 1986
to 1989, Mr. Rossmann co-founded and served as Vice President of Marketing and
Sales at Radius, Inc., a developer of digital video products. From 1983 to
1986, Mr. Rossmann was manager of the third-party developer group at Apple
Computer, Inc. Mr. Rossmann holds an M.S. degree in Mathematics from the Ecole
Polytechnique, an M.S. degree in Civil Engineering from Ecole Nationale des
Ponts et Chaussees and an M.B.A. degree from Stanford University.
Charles Parrish. Mr. Parrish joined Phone.com as President and a director in
June 1995, and was appointed Executive Vice President in June 1997. Mr. Parrish
was General Manager of the Mobile Data Division of GTE Mobile Communications, a
telecommunications company, from 1994 to June 1995, and Vice President of
Marketing for GTE, from 1991 to 1994. Prior to working for GTE, Mr. Parrish was
Senior Vice President of Operations for Contel Cellular, a telecommunications
company, from July 1990 to 1991, when Contel was acquired by GTE. Prior to
serving at Contel, he was the co-Founder, President and Chief Executive Officer
of AmeriCom Corporation, a telecommunications equipment company, from 1984 to
June 1990. Mr. Parrish served as Executive Assistant to the Secretary of the
United States Department of the Interior under the Carter Administration. Mr.
Parrish holds a B.S. degree in Industrial Management from the Georgia Institute
of Technology.
51
<PAGE>
Alan Black. Mr. Black joined Phone.com as Vice President of Finance and
Administration and Chief Financial Officer in August 1997 and was appointed to
the additional office of Treasurer in September 1997. Mr. Black was Chief
Financial Officer of Vicor, Inc., a provider of Internet information capture
and delivery systems for financial services firms, from August 1992 to August
1997. Prior to his tenure at Vicor, Mr. Black was with KPMG LLP between 1982
and 1992, most recently with the firm's High Technology practice. Mr. Black
holds a Bachelor of Commerce and a graduate diploma in Public Accountancy from
McGill University. Mr. Black is a member of the California Society of Certified
Public Accountants and the Canadian Institute of Chartered Accountants.
Andrew Laursen. Mr. Laursen joined Phone.com as Vice President of Product
Development and Engineering in June 1996, after working from August 1986 to
June 1996 at Oracle Corporation, most recently as the Vice President and
general manager of the Network Computer Division. Prior to this position, he
pioneered Oracle's efforts in the area of digital video and worked in various
management and development roles in the database server division. Before
working at Oracle, Mr. Laursen was employed with Tolerant Systems, a computer
systems company, where he was responsible for the development of their fault-
tolerant UNIX file system. Mr. Laursen began his career at AT&T Bell
Laboratories. He holds a B.S. degree in Computer Science from Michigan State
University and an M.S. degree in Computer Science from the University of
Illinois.
Benjamin Linder. Mr. Linder joined Phone.com in January 1996 as Vice
President of Product Management and was appointed as Vice President of
Marketing in October 1996. From July 1987 to December 1995 Mr. Linder worked at
Oracle Corporation, where he most recently served as Vice President of
Marketing, co-founding Oracle's New Media Division in 1992. Prior to working in
the New Media division of Oracle, Mr. Linder was Director of Technical Services
for the massively parallel processing technology at Oracle. He holds B.S.
degrees in Electrical Engineering and Computer Science from the Massachusetts
Institute of Technology.
Maurice Jeffery. Mr. Jeffery joined Phone.com in August 1996 as Director of
Business Development and was promoted to Vice President of North American Sales
in August 1997. Prior to joining Phone.com, Mr. Jeffery held various management
positions, including European Managing Director, at General Magic, Inc., a
telecommunications software and services infrastructure company, from September
1994 to August 1996. Prior to working at General Magic, he held various
management positions in technical support, business development and marketing
at Hewlett-Packard Company from September 1984 to September 1994. Mr. Jeffery
holds a B.S. degree in Computer Science and Commercial Studies from GCAT,
England.
Tony Miranzadeh. Tony Miranzadeh joined Phone.com as Vice President of Sales
and Business Development, Asia Pacific and Latin America in March 1999. From
April 1984 to February 1999, Mr. Miranzadeh held various management positions
with Lucent Technologies, including Director of Business Development and
Strategy in the United Kingdom, where he was responsible for the
commercialization and introduction of third generation wireless technologies.
Mr. Miranzadeh also held the position of Director of Sales and Business
Development for GSM and CDMA network technologies for the Asia Pacific region.
Mr. Miranzadeh holds a B.S. degree in Electrical Engineering from the
University of Illinois and an M.S. degree in Electrical and Computer
Engineering from the Illinois Institute of Technology.
Malcolm Bird. Prior to joining Phone.com as Vice President of Europe in
September 1997, Mr. Bird worked at Acorn Computer Group, Plc., a computer
company, from November 1989 to
52
<PAGE>
April 1997, serving most recently as divisional chief executive for the network
computing and online media divisions. While at Acorn, Mr. Bird directed the
design of Oracle's Network Computer, launched Acorn's entry into the emerging
interactive television market and co-founded Advanced RISC Machines, Ltd.
(ARM), a joint venture between Acorn, Apple Computer and VLSI Technology.
Before working at Acorn, Mr. Bird worked with the PA Consulting Group, a
consulting company. Mr. Bird holds a B.S. degree in Mechanical Engineering from
Imperial College, London University.
Roger Evans. Mr. Evans has been a director of Phone.com since September
1995. Mr. Evans has been associated with Greylock Management Corporation, a
Boston-based venture capital firm, since 1989, serving as a general partner
since January 1991. From 1985 to 1988, he served as President and Chief
Executive Officer of Micom Systems, Inc., a data communications equipment
manufacturer, which he co-founded in 1976. He also serves as a director of
Ascend Communications, Inc., a wide area networking company, Copper Mountain
Networks, a communications equipment company, Maker Communications, Inc., a
communications semiconductor company, and several other privately-held
companies. Mr. Evans holds a Master of Arts degree in Economics from Cambridge
University, England.
Reed Hundt. Mr. Hundt has been a director of Phone.com since April 1999.
Since November 1998, Mr. Hundt has been a senior advisor on information
industries to McKinsey & Company, a worldwide management consulting firm. He
has also been a principal of Charles Ross Partners, LLC, a Bethesda, Maryland
firm that provides consulting and investment advice on telecommunications,
since November 1997. From November 1993 to November 1997, Mr. Hundt was
Chairman of the Federal Communications Commission. Prior to joining the FCC,
Mr. Hundt was a partner at the law firm of Latham & Watkins. Mr. Hundt serves
on the boards of directors of Allegiance Telecom, Inc., Ascend Communications,
Inc., NorthPoint Communications, Inc., and Novell, Inc.
David Kronfeld. Mr. Kronfeld has been a director of Phone.com since February
1998. Mr. Kronfeld founded JK&B Capital in January 1996 and is the managing
member. Mr. Kronfeld is also a general partner at Boston Capital Ventures,
where he specializes in the telecommunications and software industries. Before
joining Boston Capital Ventures in October 1989, Mr. Kronfeld was the Vice
President of Acquisitions and Venture Investments at Ameritech, a
telecommunications company, from October 1984 to October 1989. Prior to working
for Ameritech, Mr. Kronfeld was a Senior Manager at Booz Allen & Hamilton, an
international management consulting firm, from 1977 to 1981. Mr. Kronfeld is a
director of SCC Communications, Inc., a 911 service provider, MGC
Communications, Inc., a local exchange carrier, and 21st Century Telecom Group,
a telecommunications company. He holds a B.S. degree in Electrical Engineering
and an M.S. degree in Computer Science from Stevens Institute of Technology and
an M.B.A. degree from The Wharton School of Business.
Andrew Verhalen. Mr. Verhalen has been a director of Phone.com since
September 1995. Mr. Verhalen is a general partner of Matrix Partners, a venture
capital firm, which he joined in 1992. From 1986 to 1991, Mr. Verhalen worked
at 3Com Corporation, a network manufacturer, initially as a Vice President of
Marketing, then as Vice President and General Manager of the Network Adapter
Division. Prior to joining 3Com, he worked for five years in the Microprocessor
Group at Intel Corporation, in various marketing, management and strategic
planning roles. He currently is a director of Copper Mountain Networks,
WatchGuard Technologies, a network security company, and several private
technology companies. Mr. Verhalen holds a B.S. degree in Electrical
Engineering, an M.S. Eng. degree in Electrical Engineering and an M.B.A. degree
from Cornell University.
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<PAGE>
Board Composition
Our bylaws currently provide for a board of directors consisting of six
members. The term of each of our current directors will expire at the next
annual meeting of stockholders. Commencing at the first annual meeting of
stockholders following the annual meeting of stockholders when we shall have
had at least 800 stockholders, the board of directors will be divided into
three classes, each serving staggered three-year terms: Class I, whose term
will expire at the first annual meeting of stockholders following the annual
meeting of stockholders when we shall have had at least 800 stockholders; Class
II, whose term will expire at the second annual meeting of stockholders
following the annual meeting of stockholders when we shall have had at least
800 stockholders; and Class III, whose term will expire at the third annual
meeting of stockholders following the annual meeting of stockholders when we
shall have had at least 800 stockholders. As a result, only one class of
directors will be elected at each annual meeting of stockholders of Phone.com,
with the other classes continuing for the remainder of their respective terms.
Messrs. Rossmann, Parrish, Evans, Verhalen and Kronfeld were elected to the
board of directors pursuant to a voting agreement by and among Phone.com and
some of its principal stockholders. This voting agreement will terminate upon
completion of this offering. Each of our current directors will continue to
serve on the board of directors upon completion of this offering.
Board Compensation
Except for reimbursement for reasonable travel expenses relating to
attendance at board meetings and the grant of stock options, directors are not
compensated for their services as directors. Directors who are employees of
Phone.com are eligible to participate in our 1995 and 1996 stock plans and will
be eligible to participate in our employee stock purchase plan. Directors who
are not employees of Phone.com are eligible to participate in our 1996 stock
plan and will be eligible to participate in our directors' stock option plan.
1999 Directors' Stock Option Plan. The directors' stock option plan was
adopted by the board of directors in March 1999 and will be submitted for
approval by our stockholders prior to completion of this offering. A total of
600,000 shares of common stock has been reserved for issuance under the
directors' stock option plan, all of which remain available for future grants.
The directors' stock option plan provides for the grant of nonstatutory stock
options to nonemployee directors of Phone.com. The directors' stock option plan
is designed to work automatically without administration; however, to the
extent administration is necessary, it will be performed by the board of
directors. To the extent they arise, it is expected that conflicts of interest
will be addressed by abstention of any interested director from both
deliberations and voting regarding matters in which a director has a personal
interest.
The directors' stock option plan provides that each person who becomes a
nonemployee director of Phone.com after the completion of this offering will be
granted a nonstatutory stock option to purchase 33,333 shares of common stock
on the date on which the individual first becomes a nonemployee director of
Phone.com. Thereafter, on the first board of directors meeting date of each
calendar quarter beginning on or after October 1, 2000, each nonemployee
director who was a member of the board of directors prior to the completion of
the offering will be granted an option to purchase 2,500 shares of common
stock. In addition, on the first board of directors meeting date of each
calendar quarter that begins at least one year following the initial option
grant to a nonemployee director who becomes a director after the completion of
this offering, but in no event earlier than October 1, 2000, the director will
be granted an option to purchase 2,500 shares of common stock.
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<PAGE>
The directors' stock option plan sets neither a maximum nor a minimum
number of shares for which options may be granted to any one nonemployee
director, but does specify the number of shares that may be included in any
grant and the method of making a grant. No option granted under the directors'
stock option plan is transferable by the optionee other than by will or the
laws of descent or distribution or pursuant to a qualified domestic relations
order, and each option is exercisable, during the lifetime of the optionee,
only by the optionee. All options granted under the directors' stock option
plan shall vest in full immediately upon grant of the option. If a nonemployee
director ceases to serve as a director for any reason other than death or
disability, he or she may, but only within 90 days after the date he or she
ceases to be a director of Phone.com, exercise options granted under the
directors' stock option plan. If he or she does not exercise the option within
the 90-day period, the option shall terminate. The exercise price of all stock
options granted under the directors' stock option plan shall be equal to the
fair market value of a share of our common stock on the date of grant of the
option. Options granted under the directors' stock option plan have a term of
five years.
In the event of a sale of all or substantially all of our assets, our
merger with or into another corporation or any other reorganization of
Phone.com in which more than 50% of the shares of Phone.com entitled to vote
are exchanged, each nonemployee director shall have either (i) a reasonable
time within which to exercise the option prior to the effectiveness of the
dissolution, liquidation, sale, merger or reorganization, at the end of which
time the option shall terminate, or (ii) the right to exercise the option or
receive a substitute option with comparable terms, as to an equivalent number
of shares of stock of the corporation succeeding Phone.com or acquiring its
business. Our board of directors may amend or terminate the directors' stock
option plan as long as this action does not adversely affect any outstanding
option and we shall obtain stockholder approval for any amendment to the
extent required by applicable law.
Board Committees
The compensation committee currently consists of Messrs. Evans and
Verhalen. The compensation committee:
. reviews and approves the compensation and benefits for our executive
officers and grants stock options under our stock option plans; and
. makes recommendations to the board of directors regarding executive
compensation matters.
The audit committee currently consists of Messrs. Kronfeld and Evans. The
audit committee:
. makes recommendations to the board of directors regarding the selection
of independent auditors.
. reviews the results and scope of the audit and other services provided by
our independent auditors; and
. reviews and evaluates our audit and control functions.
Compensation Committee Interlocks and Insider Participation
The members of the compensation committee of Phone.com's board of directors
are currently Messrs. Evans and Verhalen, neither of whom has at any time been
an officer or employee of Phone.com. We have issued and sold in private
placement transactions shares of preferred stock to Greylock Equity Limited
Partnership and to Matrix Partners IV, L.P. and Matrix IV Entrepreneurs
55
<PAGE>
Fund. Mr. Evans is a general partner of Greylock Equity GP Limited Partnership,
the general partner of Greylock Equity Limited Partnership, and Mr. Verhalen is
a general partner of Matrix Partners, the general partner of Matrix Partners
IV, L.P. and of Matrix IV Entrepreneurs Fund. The following summarizes these
transactions:
Greylock Equity Limited Partnership
. June 1995: 1,999,999 shares of Series A preferred stock at $0.50 per
share.
. January 1996: 786,566 shares of Series B preferred stock at $1.68 per
share.
. October 1996: 78,718 shares of Series C preferred stock at $3.81 per
share.
. January 1998: 78,716 shares of Series D preferred stock at $5.08 per
share.
Entities affiliated with Matrix Partners
. June 1995: 1,999,998 shares of Series A preferred stock at $0.50 per
share.
. January 1996: 786,565 shares of Series B preferred stock at $1.68 per
share.
. October 1996: 78,718 shares of Series C preferred stock at $3.81 per
share.
. January 1998: 78,715 shares of Series D preferred stock at $5.08 per
share.
Each of the share and per share amounts assume our two-for-three reverse stock
split and the automatic conversion of our outstanding preferred stock into
common stock upon the completion of this offering.
Executive Compensation
Summary Compensation. The following table sets forth compensation awarded
to, earned by, or paid to our Chief Executive Officer and the four other most
highly compensated executive officers whose total cash compensation exceeded
$100,000 during the year ended June 30, 1998 (collectively, the "named
executive officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
--------------------- ------------
Securities
Name and Principal Underlying All Other
Position Salary($) Bonus($) Options(#) Compensation($)
- ------------------ --------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Alain Rossmann
Chairman and Chief
Executive Officer...... $ 157,500 $ -- -- $ 806(1)
Charles Parrish
Executive Vice
President.............. 167,500 107,352(2) 106,667 935(1)
Maurice Jeffery
Vice President, North
America Sales.......... 118,508 56,667(3) 55,000 600(1)
Malcolm Bird
Managing Director,
Phone.com (Europe)
Ltd.................... 103,000(4) 137,224(3) 120,000 15,000(5)
Michael Matthys
former Vice President,
Asia Sales(6).......... 84,615 69,444 -- 497(1)
</TABLE>
- ---------------------
(1) Consists of life insurance premiums paid by Phone.com.
(2) Consists of sales commissions, payments for moving and relocation costs and
monthly payments for housing expenses pursuant to relocation agreement.
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<PAGE>
(3) Consists of sales commissions.
(4) Includes auto allowance of approximately $3,000.
(5) Consists of contribution to pension plan.
(6) Mr. Matthys resigned from Phone.com in February 1999.
Option Grants. The following table shows information regarding stock options
granted to the Named Executive Officers during the fiscal year ended June 30,
1998. No stock appreciation rights were granted to these individuals during the
year.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates Of
Number of Percentage Stock Price
Shares of Total Appreciation for
Underlying Options Exercise Option Term(1)
Options Granted to Price per Expiration --------------------
Name Granted Employees Share Date 5% 10%
- ---- ---------- ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Alain Rossmann.......... -- -- -- -- -- --
Charles Parrish......... 106,667 8.6% $2.48 6/24/2008 $1,647,252 2,779,333
Maurice Jeffery......... 35,000(2) 2.8 0.60 2/18/2008 606,124 977,591
20,000(3) 1.6 2.48 6/24/2008 308,857 521,123
Malcolm Bird............ 100,000(2) 8.1 0.39 9/24/2007 1,752,784 2,814,117
20,000(3) 1.6 2.48 6/24/2008 308,857 521,123
Michael Matthys(4)...... -- -- -- -- -- --
</TABLE>
- ---------------------
(1) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the Securities and Exchange Commission and are based on the
assumption that the assumed initial public offering price of $11.00 per
share was the fair market value of the common stock on the date of grant.
There is no assurance provided to any executive officer or any other holder
of our securities that the actual stock price appreciation over the 10-year
option term will be at the assumed 5% and 10% levels or at any other
defined level.
(2) These stock options, which were granted under the 1996 stock plan, become
exercisable at a rate of 1/4 of the total number of shares of common stock
subject to the option on the first anniversary of the date of grant, and
1/48 of the total number of shares monthly thereafter, as long as the
optionee remains an employee with, consultant to, or director of Phone.com.
(3) These options, which were granted under the 1996 Stock Plan, become
exercisable at a rate of 1/10 of the total number of shares of common stock
subject to the option on the second anniversary of the date of grant, 2/10
on the third anniversary, 3/10 on the fourth anniversary and 4/10 on the
fourth anniversary, as long as the optionee remains an employee with,
consultant to, or director of Phone.com.
(4) Mr. Matthys resigned from Phone.com in February 1999.
Aggregate Option Exercises and Holdings. The following table provides
certain summary information concerning the shares of common stock represented
by outstanding stock options held by each of the Named Executive Officers as of
June 30, 1998.
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<PAGE>
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Number of Options at June 30, In-the-Money Options at
Shares 1998(#) June 30, 1998($)(1)
Acquired on Value ------------------------- -------------------------
Name Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alain Rossmann.......... -- -- -- -- -- --
Charles Parrish......... -- -- -- 106,667 -- $ 909,336
Maurice Jeffrey......... 14,581 $157,037 731 74,687 $7,873 746,529
Malcolm Bird............ -- -- -- 120,000 -- 1,231,489
Michael Matthys(2)...... -- -- -- -- -- --
</TABLE>
- ---------------------
(1) The amount set forth represents the difference between the fair market
value of the underlying common stock at June 30, 1998 (using an assumed
initial public offering price of $11.00 per share as the fair market value)
and the exercise price of the option.
(2) Mr. Matthys resigned from Phone.com in February 1999.
We have entered into agreements with each of our executive officers which
provide that if the officer's employment is terminated involuntarily other than
for cause within 18 months following a change of control transaction, then
subject to limitations, the vesting of any stock option or restricted stock
held by the officer shall be automatically accelerated so that the option or
restricted stock becomes completely vested.
Stock Plans
1995 Stock Plan. Our 1995 stock plan provides for the grant of incentive
stock options to employees and nonstatutory stock options and stock purchase
rights to employees, directors and consultants. The purposes of the 1995 stock
plan are to attract and retain the best available personnel, to provide
additional incentives to our employees and consultants and to promote the
success of our business. The 1995 stock plan was originally adopted by our
board of directors in October 1995 and approved by our stockholders in October
1995. Unless terminated earlier by the board of directors, the 1995 stock plan
shall terminate in October 2005. A total of 1,649,462 shares of common stock
have been reserved for issuance under the 1995 stock plan. As of March 31,
1999, options to purchase 445,166 shares of common stock were outstanding at a
weighted average exercise price of $0.16, 1,204,296 shares had been issued upon
exercise of outstanding options or pursuant to restricted stock purchase
agreements, and no shares remained available for future grant.
The administrator of the 1995 stock plan may be either the board of
directors or a committee of the board. The administrator determines the terms
of options granted under the 1995 stock plan, including the number of shares
subject to the option, exercise price, term and exercisability. Incentive stock
options granted under the 1995 stock plan must have an exercise price of at
least 100% of the fair market value of the common stock on the date of grant
and at least 110% of the fair market value in the case of an optionee who holds
more than 10% of the total voting power of all classes of our stock.
Nonstatutory stock options granted under the 1995 stock plan must have an
exercise price of at least 85% of the fair market value of the common stock on
the date of grant (or at least 110% of the fair market value in the case of an
optionee who holds more than 10% of the total voting power of all classes of
our stock). Payment of the exercise price may be made in cash or other
consideration as determined by the administrator.
The administrator determines the term of options, which may not exceed 10
years (or five years in the case of an option granted to a holder of more than
10% of the total voting power of all classes
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<PAGE>
of our stock). No option may be transferred by the optionee other than by will
or the laws of descent or distribution. Each option may be exercised during the
lifetime of the optionee only by the optionee. The administrator determines
when options become exercisable. Options granted under the 1995 stock plan
generally must be exercised within 60 days after the termination of the
optionee's status as an employee, director or consultant of Phone.com, or
within 12 months if termination is due to the death or disability of the
optionee, but in no event later than the expiration of the option's term.
Options granted under the 1995 stock plan generally vest at the rate of 1/4 of
the total number of shares subject to the option 12 months after the date of
grant, and 1/48 of the total number of shares subject to the option each month
thereafter.
In the event of our merger with or into another corporation, each option may
be assumed or an equivalent option substituted by the successor corporation.
The administrator has the authority to amend or terminate the 1995 stock plan
provided that no action that impairs the rights of any holder of an outstanding
option may be taken without the holder's consent. In addition, stockholder
approval will be obtained for any amendment to the extent required by
applicable law.
In addition to stock options, the administrator may issue stock purchase
rights under the 1995 stock plan to employees, directors and consultants. The
administrator determines the number of shares, price, terms, conditions and
restrictions related to a grant of stock purchase rights. The purchase price of
a stock purchase right granted under the 1995 stock plan must be at least 85%
of the fair market value of the shares as of the date of the offer. The period
during which the stock purchase right is held open is determined by the
administrator, but in no case shall this period exceed 30 days. Unless the
administrator determines otherwise, the recipient of a stock purchase right
must execute a restricted stock purchase agreement granting Phone.com an option
to repurchase unvested shares at cost upon termination of the recipient's
relationship with us.
1996 Stock Plan. Our 1996 stock plan provides for the grant of incentive
stock options to employees and nonstatutory stock options and stock purchase
rights to employees, directors and consultants. The purposes of the 1996 stock
plan are to attract and retain the best available personnel, to provide
additional incentives to our employees and consultants and to promote the
success of our business. The 1996 stock plan was originally adopted by our
board of directors in September 1996 and approved by our stockholders in
October 1996. The 1996 stock plan was amended by our board of directors in
March 1999 to increase the total number of shares reserved for issuance by
4,250,000 shares and to incorporate other changes. This amendment to the 1996
stock plan will be submitted for approval by our stockholders prior to the
completion of this offering. Unless terminated earlier by the board of
directors, the 1996 stock plan shall terminate in September 2006. A total of
7,734,425 shares of common stock have been reserved for issuance under the 1996
stock plan. In addition, the number of shares reserved under the plan will
automatically be increased each year, beginning on July 1, 2000 in an amount
equal to the lesser of (a) 1,500,000 shares, (b) four percent of the shares
outstanding on the last day of the preceding fiscal year or (c) a lesser number
of shares as is determined by the board of directors. As of March 31, 1999,
options to purchase 2,876,180 shares of common stock were outstanding at a
weighted average exercise price of $2.13, 385,438 shares had been issued upon
exercise of outstanding options or pursuant to restricted stock purchase
agreements, and 4,472,807 shares remained available for future grant.
The administrator of the 1996 stock plan may be either the board of
directors or a committee of the board. The administrator determines the terms
of options granted under the 1996 stock plan, including the number of shares
subject to the option, exercise price, term and exercisability. In no event,
however, may an individual receive option grants for more than 1,000,000 shares
under the
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<PAGE>
1996 plan in any fiscal year. Incentive stock options granted under the 1996
stock plan must have an exercise price of at least 100% of the fair market
value of the common stock on the date of grant and at least 110% of the fair
market value in the case of an optionee who holds more than 10% of the total
voting power of all classes of our stock. Nonstatutory stock options granted
under the 1996 stock plan must have an exercise price of at least 85% of the
fair market value of the common stock on the date of grant. Payment of the
exercise price may be made in cash or other consideration as determined by the
administrator.
The administrator determines the term of options, which may not exceed 10
years (or five years in the case of an option granted to a holder of more than
10% of the total voting power of all classes of our stock). No option may be
transferred by the optionee other than by will or the laws of descent or
distribution provided, however, that the administrator may in its discretion
provide for the transferability of nonstatutory stock options granted under the
1996 stock plan. Each option may be exercised during the lifetime of the
optionee only by the optionee or permitted transferee. The administrator
determines when options become exercisable. Options granted under the 1996
stock plan generally must be exercised within 30 to 90 days, as determined by
the administrator, after the termination of the optionee's status as an
employee, director or consultant of Phone.com, or within 12 months if
termination is due to the death or disability of the optionee, but in no event
later than the expiration of the option's term. Options granted under the 1996
stock plan generally vest over a period of four or five years.
In the event of our merger with or into another corporation, each option may
be assumed or an equivalent option substituted by the successor corporation.
However, if the successor corporation does not agree to assume or substitute
the option, the option will terminate. The administrator has the authority to
amend or terminate the 1996 stock plan provided that no action that impairs the
rights of any holder of an outstanding option may be taken without the holder's
consent. In addition, stockholder approval is required to increase the number
of shares subject to the 1996 stock plan, to change the designation of the
class of persons eligible to be granted options or to increase the individual
grant limitation.
In addition to stock options, the administrator may issue stock purchase
rights under the 1996 stock plan to employees, directors and consultants. The
administrator determines the number of shares, price, terms, conditions and
restrictions related to a grant of stock purchase rights. The purchase price of
a stock purchase right granted under the 1996 stock plan must be at least 85%
of the fair market value of the shares as of the date of the offer. The period
during which the stock purchase right is held open is determined by the
administrator, but in no case shall this period exceed 30 days. Unless the
administrator determines otherwise, the recipient of a stock purchase right
must execute a restricted stock purchase agreement granting Phone.com an option
to repurchase the unvested shares at cost upon termination of the recipient's
relationship with us.
1999 Employee Stock Purchase Plan. Our employee stock purchase plan was
adopted by the board of directors in March 1999 and will be submitted for
approval by our stockholders prior to completion of this offering. A total of
600,000 shares of common stock has been reserved for issuance under the
employee stock purchase plan, plus an automatic annual increase on the first
day of each of our fiscal years beginning in 2000, 2001, 2002, 2003 and 2004
equal to the lesser of 500,000 shares or 1% of our outstanding common stock on
the last day of the immediately preceding fiscal year. The employee stock
purchase plan becomes effective upon the date of this offering. Unless
terminated earlier by the board of directors, the employee stock purchase plan
shall terminate in March 2019.
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The employee stock purchase plan, which is intended to qualify under Section
423 of the Code, will be implemented by a series of overlapping offering
periods of approximately 24 months' duration, with new offering periods (other
than the first offering period) commencing on May 1 and November 1 of each
year. Each offering period will generally consist of four consecutive purchase
periods of six months' duration, at the end of which an automatic purchase will
be made for participants. The initial offering period is expected to commence
on the date of this offering and end on April 30, 2001; the initial purchase
period is expected to begin on the date of this offering and end on January 31,
2000, with subsequent purchase periods ending on April 30, 2000, October 31,
2000 and April 30, 2001. The employee stock purchase plan will be administered
by the board of directors or by a committee appointed by the board. Our
employees (including officers and employee directors), or of any majority-owned
subsidiary designated by the board, are eligible to participate in the employee
stock purchase plan if they are employed by us or a subsidiary of ours for at
least 20 hours per week and more than five months per year. The employee stock
purchase plan permits eligible employees to purchase common stock through
payroll deductions, which in any event may not exceed 20% of an employee's base
salary. The purchase price is equal to the lower of 85% of the fair market
value of the common stock at the beginning of each offering period or at the
end of each purchase period. Employees may end their participation in the
employee stock purchase plan at any time during an offering period, and
participation ends automatically on termination of employment.
An employee cannot be granted an option under the employee stock purchase
plan if immediately after the grant the employee would own stock and/or hold
outstanding options to purchase stock equaling 5% or more of the total voting
power or value of all classes of our stock or stock of our subsidiaries, or if
the option would permit an employee to purchase stock under the employee stock
purchase plan at a rate that exceeds $25,000 of fair market value of stock for
each calendar year in which the option is outstanding. In addition, no employee
may purchase more than 2,500 shares of common stock under the employee stock
purchase plan in any one purchase period. If the fair market value of the
common stock on a purchase date is less than the fair market value at the
beginning of the offering period, each participant in that offering period
shall automatically be withdrawn from the offering period as of the end of the
purchase date and re-enrolled in the new twenty-four month offering period
beginning on the first business day following the purchase date.
If we merge or consolidate with or into another corporation or sell all or
substantially all of our assets, each right to purchase stock under the
employee stock purchase plan will be assumed or an equivalent right substituted
by the successor corporation. However, the board of directors will shorten any
ongoing offering period so that employees' rights to purchase stock under the
employee stock purchase plan are exercised prior to the transaction in the
event that the successor corporation refuses to assume each purchase right or
to substitute an equivalent right of the acquiring corporation. The board of
directors has the power to amend or terminate the employee stock purchase plan
and to change or terminate offering periods as long as this action does not
adversely affect any outstanding rights to purchase stock thereunder. However,
the board of directors may amend or terminate the employee stock purchase plan
or an offering period even if it would adversely affect outstanding options in
order to avoid our incurring adverse accounting charges.
Limitation of Liability and Indemnification Matters
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that a director
of a corporation will not be personally liable for monetary damages for breach
of an individual's fiduciary duties as a director except for liability:
. for any breach of a director's duty of loyalty to Phone.com or to its
stockholders,
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<PAGE>
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law,
. for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law or
. for any transaction from which a director derives an improper personal
benefit.
Our bylaws provide that Phone.com shall indemnify its directors and
executive officers and may indemnify its officers, employees and other agents
to the full extent permitted by law. We believe that indemnification under our
bylaws covers at least negligence and gross negligence on the part of an
indemnified party. Our bylaws also permit us to advance expenses incurred by an
indemnified party in connection with the defense of any action or proceeding
arising out of a party's status or service as a director, officer, employee or
other agent of Phone.com upon an undertaking by the party to repay the advances
if it is ultimately determined that he or she is not entitled to
indemnification.
We have entered into separate indemnification agreements with each of our
directors and officers. These agreements require us to, among other things,
indemnify the director or officer against expenses (including attorney's fees),
judgments, fines and settlements paid by the individual in connection with any
action, suit or proceeding arising out of the individual's status or service as
a director or officer of Phone.com (other than liabilities arising from willful
misconduct or conduct that is knowingly fraudulent or deliberately dishonest)
and to advance expenses incurred by the individual in connection with any
proceeding against the individual with respect to which he or she may be
entitled to indemnification by us. We believe that our certificate of
incorporation and bylaw provisions and indemnification agreements are necessary
to attract and retain qualified persons as directors and officers. Following
completion of this offering, we also will maintain directors' and officers'
liability insurance.
At present we are not aware of any pending litigation or proceeding
involving any director, officer, employee or agent of Phone.com where
indemnification will be required or permitted. Furthermore, we are not aware of
any threatened litigation or proceeding that might result in a claim for
indemnification.
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CERTAIN TRANSACTIONS
Some stock option grants to directors and executive officers of Phone.com
are described herein under the caption "Management--Executive Compensation."
Since our inception, we have issued, in private placement transactions,
shares of preferred stock as follows: an aggregate of 4,731,997 shares of
Series A Preferred Stock at $0.50 per share in June 1995, an aggregate of
3,999,987 shares of Series B Preferred Stock at $1.68 per share in December
1995, January 1996 and February 1996, an aggregate of 2,538,766 shares of
Series C Preferred Stock at $3.81 per share in October 1996, an aggregate of
6,444,877 shares of Series D Preferred Stock at $5.08 per share in January and
February 1998 and an aggregate of 2,458,543 shares of Series E Preferred Stock
at $7.24 per share in March 1999. The share and per share data set forth herein
and in the table below assume our two-for-three reverse split and the automatic
conversion of our outstanding preferred stock into common stock upon the
completion of this offering. The following table summarizes the shares of
preferred stock purchased by named executive officers, directors and 5%
stockholders of Phone.com and persons and entities associated with them in the
private placement transactions:
<TABLE>
<CAPTION>
Series A Series B Series C Series D
Preferred Preferred Preferred Preferred
Investor Stock Stock Stock Stock
- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Alain Rossmann........................ 132,000 -- -- --
Greylock Equity Limited Partnership
(Roger Evans)........................ 1,999,999 786,566 78,718 78,716
Entities Affiliated with Matrix
Partners (Andrew Verhalen)........... 1,999,998 786,565 78,718 78,715
Entities Affiliated with JK&B Capital,
L.P. (David Kronfeld)................ -- -- -- 590,370
</TABLE>
Shares held by affiliated persons and entities have been aggregated. See
"Principal Stockholders."
The following officers and one director issued full recourse promissory
notes to Phone.com to purchase restricted stock under the 1995 stock plan and
the 1996 stock plan. The full principal amount and accrued interest under each
note remain outstanding. The terms of the notes are summarized below:
<TABLE>
<CAPTION>
Principal
Name Date of Note Amount Date Due Interest Rate
---- ---------------- --------- ---------------- -------------
<S> <C> <C> <C> <C>
Alan Black.............. October 31, 1997 $ 52,000 October 31, 2001 6.24%
July 20, 1998 $123,750 July 20, 2002 5.49%
Andrew Laursen.......... July 11, 1996 $ 85,000 July 11, 2000 6.48%
Benjamin Linder......... July 11, 1996 $ 23,800 July 11, 2000 6.48%
Reed Hundt.............. April 16, 1999 $200,000 April 16, 2004 5.28%
</TABLE>
We have entered into indemnification agreements with our officers and
directors containing provisions requiring us to, among other things, indemnify
our officers and directors against liabilities that may arise by reason of our
status or service as officers or directors (other than liabilities arising from
willful misconduct of a culpable nature) and to advance their expenses incurred
as a result of any proceeding against them as to which they could be
indemnified.
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We have entered into agreements with each of our executive officers which
provide that if the officer's employment is terminated involuntarily other than
for cause within 18 months following a change of control transaction, then
subject to limitations, the vesting of any stock option or restricted stock
held by the officer shall be automatically accelerated so that the option or
restricted stock becomes completely vested.
We entered into a relocation agreement with Charles Parrish on December 23,
1996 pursuant to which we have agreed to pay Mr. Parrish a housing allowance of
$3,570 per month starting in September 1996 through the earlier of August 2003
or the date that Mr. Parrish's terminates employment with Phone.com. We have
also entered into a loan agreement with Mr. Parrish on December 23, 1996, under
which we have agreed to lend Mr. Parrish $300,000 less the aggregate amount of
all payments made to him under the relocation agreement upon Mr. Parrish's
request before August 1, 2003 in order to assist him in purchasing a residence.
In addition, we have agreed to pay Mr. Parrish a severance payment equal to six
months of his base salary if Mr. Parrish's employment with us is involuntarily
terminated. We have entered into a letter agreement with Malcolm Bird on August
18, 1997, which provides that if Mr. Bird's employment with us is involuntarily
terminated by us other than for cause, he will receive a severance payment
equal to six months of his base salary and continue to receive his medical
insurance benefits for a period of six months following his termination.
In connection with Mr. Hundt's appointment as a director in April 1999, he
received a stock option to purchase 33,333 shares of common stock at an
exercise price of $12.00 per share under our 1996 stock plan. This option is
fully exercisable as of the date of grant. In addition, in April 1999, we
issued and sold 16,667 shares of common stock to Mr. Hundt at a purchase price
of $12.00 shares under our 1996 stock plan. The aggregate purchase price of
$200,000 was paid by Mr. Hundt through the issuance of a full recourse
promissory note, which bears interest at the rate of 5.28% per annum. The
principal and interest under this note become due and payable on the earlier of
April 16, 2004 or the date of termination of Mr. Hundt's employment or
consulting relationship with Phone.com.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of our common stock as of April 16, 1999, and as adjusted
to reflect the sale of 4,000,000 shares of common stock offered in this
offering, as to:
. each person (or group of affiliated persons) known by us to own
beneficially more than 5% of our outstanding common stock,
. each of our directors,
. each of the executive officers named in the summary compensation table,
and
. all directors and executive officers of Phone.com as a group.
Except as indicated in the footnotes to this table and under applicable
community property laws, to our knowledge, the persons named in the table have
sole voting and investment power with respect to all shares of common stock.
Options exercisable on or before May 30, 1999, are included as shares
beneficially owned. For the purposes of calculating percent ownership, as of
March 31, 1999, 26,506,858 shares were issued and outstanding, and, for any
individual who beneficially owns shares represented by options exercisable on
or before May 30, 1999, these shares are treated as if outstanding for that
person, but not for any other person. Unless otherwise indicated, the address
of each of the individuals named below is: c/o Phone.com, Inc., 800 Chesapeake
Drive, Redwood City, California 94063.
<TABLE>
<CAPTION>
Percent
Beneficially
Owned Options
----------------- Exercisable
Number of Before After On or Before
Name and Address Shares Offering Offering May 30, 1999
- ---------------- ---------- -------- -------- ------------
<S> <C> <C> <C> <C>
Alain Rossmann(1).................... 3,737,832 14.1% 12.3% --
Roger Evans(2)....................... 3,037,475 11.4% 10.0% 33,333
c/o Greylock Management
One Federal Street
Boston, MA 02110
Andrew Verhalen(3)................... 3,037,471 11.4% 10.0% 33,333
c/o Matrix Partners
Bay Colony Corporate Center
1000 Winter Street, Suite 4500
Waltham, MA 02154
Greylock Equity Limited Partnership.. 3,004,142 11.3% 9.8% --
c/o Greylock Management
One Federal Street
Boston, MA 02110
Entities affiliated with Matrix 3,004,138 11.3% 9.8% --
Partners(4).........................
Bay Colony Corporate Center
1000 Winter Street, Suite 4500
Waltham, MA 02154
Charles Parrish...................... 752,822 2.8% 2.5%
David Kronfeld(5).................... 635,763 2.4% 2.1% 33,333
c/o JK&B Capital
205 North Michigan Avenue, Suite 808
Chicago, IL 60601
Reed Hundt(6)........................ 50,000 * * 33,333
Malcolm Bird(7)...................... 41,667 * * 41,667
Maurice Jeffery(8)................... 34,270 * * 19,689
Michael Matthys(9)................... 29,166 * *
All directors and executive officers
as a group (13 persons)............. 12,371,879 46.1% 40.1% 350,580
</TABLE>
- --------
* Less than 1%.
65
<PAGE>
(1) Includes 74,832 shares held by Platane Fund. Mr. Rossmann is the manager
of Platane Fund, and disclaims beneficial ownership of these shares except
to the extent of his pecuniary interest therein.
(2) Consists of 33,333 shares issuable upon exercise of outstanding options
exercisable on or before May 30, 1999 and 3,004,142 shares held by
Greylock Equity Limited Partnership. Mr. Evans is a director of Phone.com
and a general partner of Greylock Equity GP Limited Partnership, the
general partner of Greylock Equity Limited Partnership. Mr. Evans
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest therein. The other general partners of Greylock Equity
GP Limited Partnership with whom Mr. Evans shares voting and dispositive
powers over these shares are Henry F. McCance, Howard E. Cox, Jr., David
N. Strohm, William W. Helman and William S. Kaiser.
(3) Consists of 33,333 shares issuable upon exercise of outstanding options
exercisable on or before May 30, 1999, 2,853,934 shares held by Matrix
Partners IV, L.P. and 150,204 shares held by Matrix IV Entrepreneurs Fund.
Mr. Verhalen is a director of Phone.com and a general partner of Matrix
Partners, the general partner of each of Matrix Partners IV, L.P. and
Matrix IV Entrepreneurs Fund. Mr. Verhalen disclaims beneficial ownership
of these shares except to the extent of his pecuniary interest therein.
The other general partners of Matrix Partners with whom Mr. Verhalen
shares voting and dispositive powers over these shares are Paul J. Ferri,
W. Michael Humphreys, Timothy A. Barrows, Andrew Marcuvitz, David E.
Schantz, Mark Vershal, Frederick K. Fluegel and Joseph D. Rizzi.
(4) Consists of 2,853,934 shares held by Matrix Partners IV, L.P. and 150,204
shares held by Matrix IV Entrepreneurs Fund. Mr. Verhalen is a director of
Phone.com and a general partner of Matrix Partners, the general partner of
each of Matrix Partners IV, L.P. and Matrix IV Entrepreneurs Fund.
Mr. Verhalen disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest therein. The other general partners of
Matrix Partners with whom Mr. Verhalen shares voting and dispositive
powers over these shares are Paul J. Ferri, W. Michael Humphreys, Timothy
A. Barrows, Andrew Marcuvitz, David E. Schantz, Mark Vershal, Frederick K.
Fluegel and Joseph D. Rizzi.
(5) Consists of 33,333 shares issuable upon exercise of outstanding options
exercisable on or before May 30, 1999, 401,620 shares held by JK&B
Capital, L.P. and 200,810 shares held by JK&B Capital II, L.P. Mr.
Kronfeld is a director of Phone.com and general partner of JK&B Capital,
the general partner of JK&B Capital, L.P. and JK&B Capital II, L.P. Mr.
Kronfeld disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest therein. The other general partners of
JK&B Capital with whom Mr. Kronfeld shares voting and dispositive powers
over these shares are George Spencer and Eileen Richardson.
(6) Includes 33,333 shares issuable upon exercise of outstanding options
exercisable on or before May 30, 1999.
(7) Consists of 41,667 shares issuable upon exercise of outstanding options
exercisable on or before May 30, 1999.
(8) Includes 19,689 shares issuable upon exercise of outstanding options
exercisable on or before May 30, 1999.
(9) Mr. Matthys resigned from Phone.com in February 1999.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Following the closing of the sale of the shares offered hereby, our
authorized capital stock will consist of 100,000,000 shares of common stock,
$0.001 par value, and 5,000,000 shares of preferred stock, $0.001 par value.
Common Stock
As of March 31, 1999, there were 26,506,858 shares of common stock
outstanding that were held of record by approximately 96 stockholders after
giving effect to the conversion of our preferred stock into common stock at a
one-to-one ratio and assuming no exercise or conversion of outstanding
convertible securities after March 31, 1999. There will be shares of common
stock outstanding (assuming no exercise of the underwriters' over-allotment
option and no exercise or conversion of outstanding convertible securities
after March 31, 1999) after giving effect to the sale of the shares of common
stock offered hereby.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of common stock
are entitled to receive ratably any dividends that may be declared from time to
time by the board of directors out of funds legally available therefor. In the
event of a liquidation, dissolution or winding up of Phone.com, the holders of
common stock are entitled to share ratably in all assets remaining after
payment of liabilities, subject to prior rights of preferred stock, if any,
then outstanding. The common stock has no preemptive or conversion rights or
other subscription rights. There are no redemption or sinking fund provisions
available to the common stock. All outstanding shares of common stock are fully
paid and non-assessable.
Preferred Stock
Effective upon the closing of this offering, Phone.com will be authorized to
issue 5,000,000 shares of undesignated preferred stock. The board of directors
will have the authority to issue the undesignated preferred stock in one or
more series and to determine the powers, preferences and rights and the
qualifications, limitations or restrictions granted to or imposed upon any
wholly unissued series of undesignated preferred stock and to fix the number of
shares constituting any series and the designation of a series, without any
further vote or action by the stockholders. The issuance of preferred stock may
have the effect of delaying, deferring or preventing a change in control of
Phone.com without further action by the stockholders and may adversely affect
the voting and other rights of the holders of common stock. At present, we have
no plans to issue any shares of preferred stock.
Registration Rights of Stockholders
The holders of 20,174,170 shares of common stock or their transferees are
entitled to rights to register these shares, called "registrable securities,"
under the Securities Act. These rights are provided under the terms of an
agreement between Phone.com and the holders of registrable securities. Subject
to limitations in this agreement, the holders of the registrable securities may
require, on two occasions at any time after six months from the effective date
of this offering, that Phone.com use its best efforts to register the
registrable securities for public resale, provided that the proposed aggregate
offering price is in excess of $15,000,000. If we register any of our common
stock either for our own account or for the account of other security holders,
the holders of
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<PAGE>
registrable securities are entitled to include their shares of common stock in
the registration. A holder's right to include shares in an underwritten
registration is subject to the ability of the underwriters to limit the number
of shares included in this offering. All fees, costs and expenses of these
registrations must be borne by Phone.com and all selling expenses (including
underwriting discounts, selling commissions and stock transfer taxes) relating
to registrable securities must be borne by the holders of the securities being
registered.
Anti-Takeover Provisions of Delaware Law and Charter Provisions
We are subject to the provisions of Section 203 of the Delaware Law. In
general, the statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date that the person became an interested
stockholder unless (with exceptions) the business combination or the
transaction in which the person became an interested stockholder is approved in
a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale or other transaction resulting in a financial benefit to
the stockholder, and an "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years prior, did own) 15% or
more of the corporation's outstanding voting stock. This provision may have the
effect of delaying, deferring or preventing a change in control of Phone.com
without further action by the stockholders. In addition, upon completion of
this offering, provisions of our charter documents, including a provision
eliminating the ability of stockholders to take actions by written consent, may
have the effect of delaying or preventing changes in control or management of
Phone.com, which could have an adverse effect on the market price of our common
stock. Our stock option and purchase plans generally provide for assumption of
our plans or substitution of an equivalent option of a successor corporation
or, alternatively, at the discretion of the board of directors, exercise of
some or all of the options stock, including non-vested shares, or acceleration
of vesting of shares issued pursuant to stock grants, upon a change of control
or similar event. The board of directors has authority to issue up to 5,000,000
shares of preferred stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of these shares without any further vote
or action by the stockholders. The rights of the holders of the common stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. The issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of our
outstanding voting stock, thereby delaying, deferring or preventing a change in
control of Phone.com. Furthermore, this preferred stock may have other rights,
including economic rights senior to the common stock, and, as a result, the
issuance of preferred stock could have a material adverse effect on the market
value of the common stock. We have no present plan to issue shares of preferred
stock.
Commencing at the first annual meeting of stockholders following the date on
which we shall have had at least 800 stockholders, the board of directors will
be divided into three classes, each serving staggered three-year terms: Class
I, whose term will expire at the first annual meeting of stockholders following
the annual meeting of stockholders when we shall have had at least 800
stockholders; Class II, whose term will expire at the second annual meeting of
stockholders following the annual meeting of stockholders when we shall have at
least 800 stockholders; and Class III, whose term will expire at the third
annual meeting of stockholders following the annual meeting of stockholders
when we shall have had at least 800 stockholders. As a result, only one class
of directors will be elected at each annual meeting of stockholders of
Phone.com, with the other
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<PAGE>
classes continuing for the remainder of their respective terms. These
provisions in our amended and restated certificate of incorporation may have
the effect of delaying or preventing changes in control or management of
Phone.com.
Warrants
As of March 31, 1999, warrants were outstanding to purchase an aggregate of
31,486 shares of common stock at a weighted average exercise price of $3.81 per
share.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is U.S. Stock Transfer
Corporation.
Listing
We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the trading symbol "PHCM."
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our common stock.
A significant public market for the common stock may not develop or be
sustained after this offering. Future sales of substantial amounts of our
common stock in the public market, or the possibility of these sales occurring,
could adversely affect prevailing market prices for our common stock or our
future ability to raise capital through an offering of equity securities.
Upon completion of this offering, we will have outstanding 30,506,858 shares
of common stock. Of these shares, the 4,000,000 shares to be sold in this
offering (4,600,000 shares if the underwriters' over-allotment option is
exercised in full) will be freely tradable in the public market without
restriction under the Securities Act, unless the shares are held by
"affiliates" of Phone.com, as that term is defined in Rule 144 under the
Securities Act.
The remaining 26,506,858 shares outstanding upon completion of this offering
will be "restricted securities" as that term is defined under Rule 144. We
issued and sold these restricted securities in private transactions in reliance
on exemptions from registration under the Securities Act. Restricted securities
may be sold in the public market only if they are registered or if they qualify
for an exemption from registration under Rule 144 or Rule 701 under the
Securities Act, as summarized below.
Pursuant to "lock-up" agreements, all the executive officers, directors and
stockholders of Phone.com, who collectively hold an aggregate of 26,506,858
these restricted securities, have agreed not to offer, sell, contract to sell,
grant any option to purchase or otherwise dispose of any of these shares for a
period of 180 days from the date of this prospectus. We also have entered into
an agreement with the underwriters that we will not offer, sell or otherwise
dispose of common stock for a period of 180 days from the date of this
prospectus. However, Credit Suisse First Boston Corporation may in its sole
discretion, at any time without notice, release all or any portion of the
shares subject to lock-up agreements.
Taking into account the lock-up agreements, and assuming Credit Suisse First
Boston does not release stockholders from these agreements, the following
shares will be eligible for sale in the public market at the following times:
. On the date of this prospectus, the 4,000,000 shares sold in the offering
will be immediately available for sale in the public market.
. 180 days after the effective date, approximately 18,144,062 shares will
be eligible for sale, 11,768,289 of which will be subject to volume,
manner of sale and other limitations under Rule 144.
. The remaining 8,362,796 shares will be eligible for sale under Rule 144
upon the expiration of various one-year holding periods after the
expiration of the lock-up period.
Following the expiration of the lock-up period, shares issued upon exercise
of options we granted prior to the date of this prospectus will also be
available for sale in the public market pursuant to Rule 701 under the
Securities Act. Rule 701 permits resales of these shares beginning 90 days
after the date of this prospectus. In general, under Rule 144, after the
expiration of the lock-up period, a person who has beneficially owned
restricted securities for at least one year would be entitled to sell, within
any three-month period, a number of shares that does not exceed the greater of:
. 1% of the then-outstanding shares of common stock, or
. the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.
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<PAGE>
Sales under Rule 144 are also subject to manner of sale and notice
requirements and to the availability of current public information about
Phone.com. Under Rule 144(k), a person who has not been our affiliate at any
time during the three months before a sale and who has beneficially owned the
shares proposed to be sold for at least two years can sell these shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.
We intend to file, after the effective date of this offering, a registration
statement on Form S-8 to register approximately 8,994,153 shares of common
stock reserved for issuance under the 1995 stock plan, the 1996 stock plan, the
employee stock purchase plan and the directors' stock option plan. The
registration statement will become effective automatically upon filing. Shares
issued under the foregoing stock and option plans, after the filing of a
registration statement on Form S-8, may be sold in the open market, subject, in
the case of some holders, to the Rule 144 limitations applicable to affiliates,
the lock-up agreements and vesting restrictions imposed by us.
In addition, following this offering, the holders of 20,174,170 shares of
outstanding common stock will, under some circumstances, have rights to require
us to register their shares for future sale. See "Description of Capital
Stock--Registration Rights of Stockholders."
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<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation, BancBoston Robertson
Stephens Inc., Hambrecht & Quist LLC and U.S. Bancorp Piper Jaffray Inc., are
acting as representatives, the following respective numbers of shares of common
stock:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation...........................
BancBoston Robertson Stephens Inc. ..............................
Hambrecht & Quist LLC............................................
U.S. Bancorp Piper Jaffray Inc. ................................
---------
Total.......................................................... 4,000,000
=========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 600,000 additional shares from us at the initial public
offering price less the underwriting discounts and commissions. The option may
be exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to dealers may be changed by the
representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
Total
-----------------------------
Per Without With
Share Over-Allotment Over-Allotment
----- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions
payable by Phone.com ................
Expenses payable by Phone.com.........
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We, our officers and directors and our stockholders have agreed that we and
they will not offer, sell, contract to sell, announce an intention to sell,
pledge or otherwise dispose of, directly or
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<PAGE>
indirectly, or file with the Commission a registration statement under the
Securities Act relating to, any additional shares of our common stock or
securities convertible into or exchangeable or exercisable for any of our
common stock without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus, except
in the case of issuances pursuant to the exercise of employee stock options
outstanding on the date hereof.
The underwriters have reserved for sale, at the initial public offering
price up to shares of the common stock for employees, directors and other
persons associated with us who have expressed an interest in purchasing common
stock in the offering. The number of shares available for sale to the general
public in the offering will be reduced to the extent these persons purchase
these reserved shares. Any reserved shares not so purchased will be offered by
the underwriters to the general public on the same terms as the other shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act or contribute to payments which the underwriters may be
required to make in that respect.
We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "PHCM."
Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiation
between us and the underwriters. The principal factors to be considered in
determining the public offering price include: the information set forth in
this prospectus and otherwise available to the underwriters; the history and
the prospects for the industry in which we will compete; the ability of our
management; the prospects for our future earnings; the present state of our
development and our current financial condition; the general condition of the
securities markets at the time of this offering; and the recent market prices
of, and the demand for, publicly traded common stock of generally comparable
companies.
The representatives on behalf of the underwriters may engage in over-
allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934. Over-allotment involves syndicate sales in excess of the offering
size, which creates a syndicate short position. Stabilizing transactions
permit bids to purchase the underlying security so long as the stabilizing
bids do not exceed a specified maximum. Syndicate covering transactions
involve purchases of the common stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the representatives to reclaim a selling concession from a
syndicate member when the common stock originally sold by the syndicate member
are purchased in a syndicate covering transaction to cover syndicate short
positions. These stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the common stock to be higher than it
would otherwise be in the absence of these transactions. These transactions
may be effected on The Nasdaq Stock Market's National Market or otherwise and,
if commenced, may be discontinued at any time.
Credit Suisse First Boston Corporation acted as the placement agent for the
private placement of our Series E preferred stock in March 1999, for which it
received a customary fee for its services.
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<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.
Representations of Purchasers
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (i) the purchaser is entitled under
applicable provincial securities laws to purchase the common stock without the
benefit of a prospectus qualified under these securities laws, (ii) where
required by law, that the purchaser is purchasing as principal and not as
agent, and (iii) the purchaser has reviewed the text above under "Resale
Restrictions."
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission of rights of action under the civil liability provisions
of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or these persons. All or a substantial portion of the assets of
the issuer and these persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or these
persons in Canada or to enforce a judgment obtained in Canadian courts against
the issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that a purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser in this offering. This report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one report must be filed
in respect of common stock acquired on the same date and under the same
prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
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<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Phone.com by Venture Law Group, A Professional Corporation, Menlo Park,
California. Some legal matters in connection with this offering will be passed
upon for the underwriters by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California. Venture Law Group attorneys and an entity
affiliated with Venture Law Group hold an aggregate of 8,954 shares of our
common stock.
EXPERTS
The consolidated balance sheets as of June 30, 1997 and 1998, and March 31,
1999, and the consolidated statements of operations, stockholders' equity and
cash flows for each of the years in the three-year period ended June 30, 1998,
and the nine months ended March 31, 1999, have been included in the
Registration Statement in reliance upon the report of KPMG LLP, independent
auditors, and upon the authority of said firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement (which term shall include any amendments thereto) on Form S-1 under
the Securities Act with respect to the common stock offered hereby. This
prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, some
items of which are contained in exhibits to the Registration Statement as
permitted by the rules and regulations of the Commission. For further
information with respect to Phone.com and the common stock offered hereby,
reference is made to the Registration Statement, including the exhibits
thereto, and the financial statements and notes filed as a part thereof.
Statements made in this prospectus concerning the contents of any document
referred to herein are not necessarily complete. With respect to each document
filed with the Commission as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved. The Registration Statement, including exhibits thereto and the
financial statements and notes filed as a part thereof, as well as reports and
other information filed with the Commission, may be inspected without charge at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, NY 10048,
and the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of all or any part thereof may be obtained from
the Commission upon payment of fees prescribed by the Commission. These reports
and other information may also be inspected without charge at a Web site
maintained by the Commission. The address of the site is http://www.sec.gov.
75
<PAGE>
PHONE.COM, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Form of Independent Auditors' Report...................................... F-2
Consolidated Balance Sheets as of June 30, 1997 and 1998, and March 31,
1999..................................................................... F-3
Consolidated Statements of Operations for the years ended June 30, 1996,
1997, and 1998, and for the nine months ended March 31, 1998 (unaudited)
and 1999................................................................. F-4
Consolidated Statements of Stockholders' Equity for the years ended June
30, 1996, 1997, and 1998, and for the nine months ended March 31, 1999... F-5
Consolidated Statements of Cash Flows for the years ended June 30, 1996,
1997, and 1998, and for the nine months ended March 31, 1998 (unaudited)
and 1999................................................................. F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
When the reverse stock split referred to in Note 5(b) to the Consolidated
Financial Statements has been consummated, we will be in a position to render
the following report.
/s/ KPMG LLP
FORM OF INDEPENDENT AUDITORS' REPORT
The Board of Directors
Phone.com, Inc.:
We have audited the accompanying consolidated balance sheets of Phone.com,
Inc. (formerly Unwired Planet, Inc.) and subsidiaries (the Company) as of June
30, 1997 and 1998, and March 31, 1999, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the years in
the three-year period ended June 30, 1998, and for the nine months ended March
31, 1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Phone.com,
Inc. and subsidiaries as of June 30, 1997 and 1998, and March 31, 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 30, 1998, and for the nine months ended March 31,
1999, in conformity with generally accepted accounting principles.
Mountain View, California
April 12, 1999
F-2
<PAGE>
PHONE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
June 30, March 31, 1999
------------------ ---------------------
1997 1998 Actual Pro Forma
-------- -------- -------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 4,090 $ 12,677 $ 20,230 $ 20,230
Short-term investments............. 3,924 20,787 27,601 27,601
Accounts receivable................ 126 2,724 5,461 5,461
Prepaid expenses and other current
assets............................ 128 352 833 833
-------- -------- -------- --------
Total current assets............. 8,268 36,540 54,125 54,125
Property and equipment, net.......... 1,226 1,336 1,710 1,710
Deposits and other assets............ 265 1,268 1,485 1,485
-------- -------- -------- --------
$ 9,759 $ 39,144 $ 57,320 $ 57,320
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of equipment loan
and capital lease obligations..... $ -- $ 424 $ 424 $ 424
Accounts payable................... 213 532 685 685
Accrued liabilities................ 565 1,877 4,857 4,857
Deferred revenue................... 856 7,003 18,749 18,749
-------- -------- -------- --------
Total current liabilities........ 1,634 9,836 24,715 24,715
Equipment loan and capital lease
obligations, less current portion... -- 915 607 607
-------- -------- -------- --------
Total liabilities................ 1,634 10,751 25,322 25,322
-------- -------- -------- --------
Commitments
Stockholders' equity:
Convertible preferred stock, $0.001
par value; actual-- 11,398,664,
17,843,550 and 20,329,720 shares
authorized as of June 30, 1997 and
1998, and March 31, 1999,
respectively; 11,270,750,
17,715,627 and 20,174,170 shares
issued and outstanding as of June
30, 1997 and 1998, and March 31,
1999, respectively; aggregate
liquidation preference of $18,759,
$51,299, and $69,299 as of June
30, 1997 and 1998, and March 31,
1999, respectively; pro forma--
5,000,000 shares authorized; no
shares issued and outstanding..... 12 18 20 --
Common stock, $0.001 par value;
32,000,000 shares authorized;
actual--5,712,250, 6,192,398 and
6,332,688 shares issued and
outstanding as of June 30, 1997
and 1998, and March 31, 1999,
respectively; pro forma--
100,000,000 shares authorized;
26,506,858 shares issued and
outstanding....................... 6 6 6 26
Additional paid-in capital......... 18,864 51,611 69,158 69,158
Deferred stock-based compensation.. -- (1,786) (1,545) (1,545)
Treasury stock..................... (46) (72) (196) (196)
Notes receivable from
stockholders...................... (147) (197) (285) (285)
Accumulated deficit................ (10,564) (21,187) (35,160) (35,160)
-------- -------- -------- --------
Total stockholders' equity....... 8,125 28,393 31,998 31,998
-------- -------- -------- --------
$ 9,759 $ 39,144 $ 57,320 $ 57,320
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PHONE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine months ended
Year ended June 30, March 31,
-------------------------- --------------------
1996 1997 1998 1998 1999
------- ------- -------- ----------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
License................... $ -- $ 80 $ 522 $ 289 $ 1,530
Maintenance and support
services................. -- 212 1,683 635 3,786
Consulting services....... -- -- -- -- 1,401
------- ------- -------- ------- --------
Total revenues.......... -- 292 2,205 924 6,717
------- ------- -------- ------- --------
Cost of revenues:
License................... -- 87 95 59 172
Maintenance and support
services................. -- 266 1,063 715 1,876
Consulting services....... -- -- -- -- 646
------- ------- -------- ------- --------
Total cost of revenues.. -- 353 1,158 774 2,694
------- ------- -------- ------- --------
Gross profit (loss)..... -- (61) 1,047 150 4,023
------- ------- -------- ------- --------
Operating expenses:
Research and development.. 1,387 3,959 5,732 3,871 8,406
Sales and marketing....... 757 3,198 5,011 3,307 6,504
General and
administrative........... 522 1,237 1,801 1,185 2,731
Stock-based compensation.. -- -- 108 45 784
------- ------- -------- ------- --------
Total operating
expenses............... 2,666 8,394 12,652 8,408 18,425
------- ------- -------- ------- --------
Operating loss.......... (2,666) (8,455) (11,605) (8,258) (14,402)
Interest income, net........ 196 464 982 528 1,139
------- ------- -------- ------- --------
Loss before income
taxes.................. (2,470) (7,991) (10,623) (7,730) (13,263)
Income taxes................ -- -- -- -- 710
------- ------- -------- ------- --------
Net loss................ $(2,470) $(7,991) $(10,623) $(7,730) $(13,973)
------- ------- -------- ------- --------
Basic and diluted net loss
per share.................. $ (0.53) $ (1.67) $ (2.03) $ (1.50) $ (2.49)
======= ======= ======== ======= ========
Shares used in computing
basic and diluted net loss
per share.................. 4,704 4,776 5,221 5,142 5,618
======= ======= ======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PHONE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
Convertible Notes
preferred stock Common stock Additional Deferred receivable Total
----------------- ----------------- paid-in stock-based Treasury from Accumulated stockholders'
Shares Amount Shares Amount capital compensation stock stockholders deficit equity
---------- ------ --------- ------ ---------- ------------ -------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances as of
June 30, 1995... 4,731,997 $ 5 4,671,000 $ 5 $ 2,340 $ -- $ -- $ (4) $ (103) $ 2,243
Issuance of
common stock to
employees for
cash........... -- -- 72,806 -- 3 -- -- -- -- 3
Issuance of
Series B
convertible
preferred
stock, net of
$36 of issuance
costs.......... 3,999,987 4 -- -- 6,680 -- -- -- -- 6,684
Payment on notes
receivable from
stockholders... -- -- -- -- -- -- -- 4 -- 4
Net loss........ -- -- -- -- -- -- -- -- (2,470) (2,470)
---------- --- --------- --- ------- ------- ----- ----- -------- -------
Balances as of
June 30, 1996... 8,731,984 9 4,743,806 5 9,023 -- -- -- (2,573) 6,464
Issuance of
common stock to
officers and
employees for
notes
receivable..... -- -- 1,065,000 1 192 -- -- (193) -- --
Issuance of
common stock to
consultant..... -- -- 10,360 -- 2 -- -- -- -- 2
Stock options
exercised...... -- -- 93,084 -- 9 -- -- -- -- 9
Issuance of
Series C
convertible
preferred
stock, net of
$32 issuance
costs.......... 2,538,766 3 -- -- 9,638 -- -- -- -- 9,641
Repurchase of
common stock in
settlement of
notes
receivable from
stockholders... -- -- (200,000) -- -- -- (46) 46 -- --
Net loss........ -- -- -- -- -- -- -- -- (7,991) (7,991)
---------- --- --------- --- ------- ------- ----- ----- -------- -------
Balances as of
June 30, 1997... 11,270,750 12 5,712,250 6 18,864 -- (46) (147) (10,564) 8,125
Issuance of
common stock to
officers and
employees for
notes
receivable..... -- -- 226,667 -- 88 -- -- (88) -- --
Repayment of
notes
receivable from
stockholders... -- -- -- -- -- -- -- 12 -- 12
Stock options
exercised...... -- -- 403,481 -- 87 -- -- -- -- 87
Issuance of
Series D
convertible
preferred
stock, net of
$2,056 issuance
costs.......... 6,444,877 6 -- -- 30,678 -- -- -- -- 30,684
Repurchase of
common stock in
settlement of
notes
receivable from
stockholders... -- -- (150,000) -- -- -- (26) 26 -- --
Deferred
compensation
related to
stock option
grants......... -- -- -- -- 1,894 (1,894) -- -- -- --
Amortization of
stock-based
compensation... -- -- -- -- -- 108 -- -- -- 108
Net loss........ -- -- -- -- -- -- -- -- (10,623) (10,623)
---------- --- --------- --- ------- ------- ----- ----- -------- -------
Balances as of
June 30, 1998... 17,715,627 18 6,192,398 6 51,611 (1,786) (72) (197) (21,187) 28,393
Issuance of
common stock to
officers and
employees for
notes
receivables.... -- -- 90,000 -- 223 -- -- (223) -- --
Stock options
exercised...... -- -- 154,457 -- 83 -- -- -- -- 83
Issuance of
Series E
convertible
preferred
stock, net of
$1,100 issuance
costs.......... 2,458,543 2 -- -- 16,698 -- -- -- -- 16,700
Repurchase of
common stock in
settlement of
notes
receivable from
stockholders... -- -- (104,167) -- -- -- (124) 124 -- --
Repayment of
notes
receivable from
stockholders... -- -- -- -- -- -- -- 11 -- 11
Deferred
compensation
related to
stock option
grants......... -- -- -- -- 543 (543) -- -- -- --
Amortization of
stock-based
compensation... -- -- -- -- -- 784 -- -- -- 784
Net loss........ -- -- -- -- -- -- -- -- (13,973) (13,973)
---------- --- --------- --- ------- ------- ----- ----- -------- -------
Balances as of
March 31, 1999.. 20,174,170 $20 6,332,688 $ 6 $69,158 $(1,545) $(196) $(285) $(35,160) $31,998
========== === ========= === ======= ======= ===== ===== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PHONE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
Year ended June 30, March 31,
-------------------------- --------------------
1996 1997 1998 1998 1999
------- ------- -------- ----------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss.................... $(2,470) $(7,991) $(10,623) $ (7,730) $(13,973)
Adjustments to reconcile net
loss to net cash used for
operating activities:
Depreciation and
amortization.............. 108 447 630 442 699
Amortization of deferred
stock-based compensation.. -- -- 108 45 784
Changes in operating assets
and liabilities:
Accounts receivable....... -- (126) (2,598) (988) (2,737)
Prepaid expenses and other
assets................... (156) (233) (427) (107) (698)
Accounts payable.......... 175 38 319 166 153
Accrued liabilities....... 31 462 1,312 798 2,980
Deferred revenue.......... 25 831 6,147 5,050 11,746
------- ------- -------- -------- --------
Net cash used for
operating activities.... (2,287) (6,572) (5,132) (2,324) (1,046)
------- ------- -------- -------- --------
Cash flows from investing
activities:
Purchases of property and
equipment, net............. (852) (914) (367) (41) (1,073)
Purchases of short-term
investments................ -- (3,924) (32,338) (21,912) (30,735)
Proceeds from sales and
maturities of short-term
investments................ -- -- 15,475 7,552 23,921
Other assets................ -- -- (800) -- --
------- ------- -------- -------- --------
Net cash used for
investing activities..... (852) (4,838) (18,030) (14,401) (7,887)
------- ------- -------- -------- --------
Cash flows from financing
activities:
Net proceeds from sale of
convertible preferred
stock...................... 6,680 9,641 30,684 30,684 16,700
Issuance of common stock.... 3 11 87 48 83
Repayment of notes
receivable from
stockholders............... 4 -- 12 12 11
Proceeds from equipment
loan....................... -- -- 1,300 1,300 --
Repayment of equipment loan
and capital lease
obligations................ -- -- (334) (239) (308)
------- ------- -------- -------- --------
Net cash provided by
financing activities..... 6,687 9,652 31,749 31,805 16,486
------- ------- -------- -------- --------
Net increase (decrease) in
cash and cash equivalents... 3,548 (1,758) 8,587 15,080 7,553
Cash and cash equivalents at
beginning of period......... 2,300 5,848 4,090 4,090 12,677
------- ------- -------- -------- --------
Cash and cash equivalents at
end of period............... $ 5,848 $ 4,090 $ 12,677 $ 19,170 $ 20,230
======= ======= ======== ======== ========
Supplemental disclosures of
cash flow information:
Property and equipment
acquired under capital
lease obligations.......... $ -- $ -- $ 373 $ 162 $ --
======= ======= ======== ======== ========
Common stock issued to
officers and employees for
notes receivable........... $ -- $ 193 $ 88 $ 88 $ 223
======= ======= ======== ======== ========
Repurchase of common stock
in settlement of notes
receivable from
stockholders............... $ -- $ 46 $ 26 $ 26 $ 124
======= ======= ======== ======== ========
Deferred stock-based
compensation............... $ -- $ -- $ 1,894 $ 431 $ 543
======= ======= ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
PHONE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, 1997, and 1998, and March 31, 1999
(Information for the nine months ended
March 31, 1998, is unaudited.)
1.Organization and Significant Accounting Policies
(a) Organization
Phone.com, Inc. (the Company) was incorporated in Delaware in 1994 to
develop and market software that enables the delivery of Internet-based
services to mass-market wireless telephones. The Company was formerly known as
Unwired Planet, Inc., but changed its name to Phone.com, Inc. effective April
1999.
(b) Basis of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, Nihon Unwired Planet, K.K. and
Unwired Planet (Europe) Limited. All significant intercompany accounts and
transactions have been eliminated in consolidation.
(c) Revenue Recognition
For agreements entered into prior to July 1, 1998, the Company recognized
revenues in accordance with the provisions of the American Institute of
Certified Public Accountants' Statement of Position ("SOP") No. 91-1, Software
Revenue Recognition. Effective July 1, 1998, the Company adopted SOP 97-2,
Software Revenue Recognition, as amended by SOP 98-4 and SOP 98-9. SOP 97-2, as
amended, generally requires revenue earned on software arrangements involving
multiple elements to be allocated to each element based on the relative fair
value of the elements. The adoption of SOP 97-2, as amended, did not have a
significant impact on the Company's accounting for revenues.
The Company licenses its UP.Link Server Suite products to network operators
through its direct sales force and indirectly through its channel partners. The
Company's license agreements do not provide for a right of return. Licenses can
be purchased on an as-deployed basis or on a prepaid basis. For licenses
purchased on an as-deployed basis, revenue is recognized as the licenses are
deployed by the network operators. For licenses purchased on a prepaid basis,
prepaid license fees are recognized under subscription accounting due to the
Company's commitment to provide standards-compliant products for each license
covered by the prepaid arrangement. This subscription revenue is recognized
ratably over the contractual term of the prepaid arrangement (i.e., the date
the prepaid licenses expire if not used), beginning upon the earlier of
acceptance or commercial launch by the network operator. The Company recognizes
revenues from maintenance and support services provided to network operators
ratably over the term of the agreement, generally one year, and recognizes
revenues from consulting services provided to network operators as the services
are performed.
The Company recognizes revenues from UP.Browser agreements with wireless
telephone manufacturers ratably over the period during which the services are
performed, generally one year.
(d) Initial Public Offering and Unaudited Pro Forma Balance Sheet
In March 1999, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission ("SEC") that
would permit the Company to sell shares of the Company's common stock in
connection with a proposed initial public offering ("IPO"). Following the
closing of the Company's
F-7
<PAGE>
PHONE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
IPO, the number of authorized shares of convertible preferred stock and common
stock will be 5,000,000 and 100,000,000, respectively. If the offering is
consummated under the terms presently anticipated, all the then outstanding
shares of the Company's convertible preferred stock will automatically convert
into shares of common stock on a one-for-one basis upon the closing of the
proposed IPO. The conversion of all of the convertible preferred stock has been
reflected in the accompanying unaudited pro forma consolidated balance sheet as
if it had occurred on March 31, 1999.
(e) Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid investments with
remaining maturities of less than 90 days at the date of purchase. The Company
is exposed to credit risk in the event of default by the financial institutions
or the issuers of these investments to the extent of the amounts recorded on
the balance sheet in excess of amounts that are insured by the FDIC. As of June
30, 1997 and 1998, and March 31, 1999 cash equivalents consisted principally of
money market funds and commercial paper.
(f) Accounting for Certain Investments in Debt and Equity Securities
The Company classifies its investments in debt securities as available-for-
sale. Available-for-sale securities are carried at fair market value, which
approximates amortized cost.
(g) Financial Instruments and Concentration of Credit Risk
The carrying value of the Company's financial instruments, including cash
and cash equivalents, short-term investments, accounts receivable, and
equipment loans approximates fair market value. Financial instruments that
subject the Company to concentrations of credit risk consist primarily of cash
and cash equivalents and trade accounts receivable.
The Company sells its products and services principally to leading wireless
network operators and prominent wireless telephone manufacturers. Credit risk
is concentrated in North America and Japan. The Company performs ongoing credit
evaluations of its customers' financial condition and, generally, requires no
collateral from its customers. The Company has had no write-offs of accounts
receivable and has recorded no allowance for doubtful accounts receivable to
date.
(h) Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation
and amortization. Depreciation is calculated using the straight-line method
over the estimated useful lives of the respective assets, generally three to
five years. Leasehold improvements are amortized over the shorter of the
estimated useful lives of the assets or the lease term.
(i) Impairment of Long-Lived Assets
The Company evaluates its long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of such assets
may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of any asset to future net cash
flows expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell.
F-8
<PAGE>
PHONE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(j) Research and Development
Research and development costs are expensed as incurred until technological
feasibility has been established. To date, the Company's software has been
available for general release concurrent with the establishment of
technological feasibility and, accordingly, no development costs have been
capitalized.
(k) Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
(l) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts to be recovered.
(m) Accounting for Stock-Based Compensation Plans
The Company uses the intrinsic-value method to account for all of its
employee stock-based compensation plans. Expense associated with stock-based
compensation is being amortized on an accelerated basis over the vesting
period of the individual award consistent with the method described in
Financial Accounting Standards Board ("FASB") Interpretation No. 28.
(n) Foreign Currency Transactions
The functional currency for the Company's foreign subsidiaries is the U.S.
dollar. Accordingly, such entities remeasure monetary assets and liabilities
at exchange rates in effect as of each reporting date while nonmonetary items
are remeasured at historical rates. Income and expense accounts are remeasured
at the average rates in effect during each such period, except for
depreciation which is remeasured at historical rates. Remeasurement
adjustments and transaction gains and losses are recognized in income in the
period of occurrence and have not been significant to date.
(o) Comprehensive Income
The Company has no material components of other comprehensive income (loss)
for all periods presented.
(p) Unaudited Interim Consolidated Financial Statements
The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. In the opinion of management, the accompanying
unaudited consolidated financial statements have been prepared on the same
basis as the audited consolidated financial statements and include all
adjustments, consisting only of normal recurring
F-9
<PAGE>
PHONE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
adjustments, necessary for the fair statement of the Company's results of
operations and its cash flows for the nine months ended March 31, 1998.
(q) Net Loss Per Share
Basic net loss per share is computed using the weighted-average number of
outstanding shares of common stock excluding shares of restricted stock subject
to repurchase summarized below. Diluted net loss per share is computed using
the weighted-average number of shares of common stock outstanding and, when
dilutive, potential common shares from options and warrants to purchase common
stock using the treasury stock method and from convertible securities using the
if-converted basis. The following potential common shares have been excluded
from the computation of diluted net loss per share for all periods presented
because the effect would have been antidilutive (in thousands):
<TABLE>
<CAPTION>
Nine months ended
Year ended June 30, March 31,
------------------- -----------------
1996 1997 1998 1998 1999
----- ------ ------ -------- --------
<S> <C> <C> <C> <C> <C>
Shares issuable under stock options.. 646 2,071 2,877 2,224 3,321
Shares of restricted stock subject to
repurchase.......................... -- 715 670 680 547
Shares issuable pursuant to warrants
to purchase convertible preferred
stock............................... -- -- 31 31 31
Shares of convertible preferred stock
on an "as if converted basis........ 8,732 11,271 17,716 17,716 20,174
</TABLE>
The weighted-average exercise price of stock options was $0.11, $0.28 and
$1.00 for the years ended June 30, 1996, 1997 and 1998, respectively, and
$0.34 and $1.87 for the nine months ended March 31, 1998 and 1999,
respectively. The weighted-average purchase price of restricted stock was $0.26
and $0.30 for the years ended June 30, 1997 and 1998, respectively, and $0.30
and $0.48 for the nine months ended March 31, 1998 and 1999, respectively. The
weighted-average exercise price of warrants was $3.81 for both the fiscal year
ended June 30, 1998 and the nine months ended March 31, 1999.
(r) Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative financial instruments and hedging activities
related to those instruments, as well as other hedging activities. Because the
Company does not currently hold any derivative instruments and does not engage
in hedging activities, the Company expects that the adoption of SFAS No. 133
will not have a material impact on its consolidated financial position, results
of operations, or cash flows. The Company will be required to adopt SFAS No.
133 in fiscal 2000.
2. Balance Sheet Components
(a) Short-Term Investments
All of the Company's investments are considered available-for-sale
securities and consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30,
-------------- March 31,
1997 1998 1999
------ ------- ---------
<S> <C> <C> <C>
Commercial paper.................................. $3,148 $13,594 $16,304
Corporate bonds................................... 3,006 9,213 22,380
Certificates of deposit........................... -- 7,238 --
------ ------- -------
$6,154 $30,045 $38,684
====== ======= =======
</TABLE>
F-10
<PAGE>
PHONE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of June 30, 1997 and 1998 and March 31, 1999, $2,230,000, $9,258,000,
and $11,083,000, respectively, of the Company's investments are included in
cash and cash equivalents.
The contractual maturity for short-term investments as of March 31, 1999,
is as follows (in thousands):
<TABLE>
<S> <C>
Due within one year.............................................. $28,120
Due between one and two years.................................... 10,564
-------
$38,684
=======
</TABLE>
(b) Property and Equipment
Property and equipment, consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30
-------------- March 31,
1997 1998 1999
------ ------ ---------
<S> <C> <C> <C>
Computer equipment and software................. $1,615 $2,214 $ 3,244
Furniture and equipment......................... 90 213 253
Leasehold improvements.......................... 77 95 98
------ ------ -------
1,782 2,522 3,595
Accumulated depreciation and amortization....... (556) (1,186) (1,885)
------ ------ -------
$1,226 $1,336 $ 1,710
====== ====== =======
</TABLE>
Equipment under capital leases aggregated $373,000 as of June 30, 1998 and
March 31, 1999. Accumulated amortization on the assets under capital leases
aggregated $42,000 and $136,000 as of June 30, 1998 and March 31, 1999,
respectively.
(c) Accrued Liabilities
Accrued liabilities as of March 31, 1999, include approximately $1,000,000
related to the Company's issuance of its Series E convertible preferred stock.
This was payable to one of the Company's underwriters for its IPO and was paid
on April 12, 1999.
4. Equipment Loan and Capital Lease Obligations
In May 1997, the Company entered into a $2,000,000 credit facility with a
business credit corporation that consisted of a $1,300,000 equipment term loan
and a $700,000 lease line of credit. The equipment loan bears interest at
7.5%, is collateralized by equipment, and is payable in 42 monthly
installments of $35,000 through January 2001. As of June 30, 1998 and March
31, 1999, $1,000,000 and $795,000 was outstanding under the term loan,
respectively. During fiscal 1998, the Company borrowed approximately $400,000
under the lease line of credit with $339,000 and $236,000 outstanding as of
June 30, 1998 and March 31, 1999, respectively, bearing interest at an
effective interest rate of 11.8%, and payable in 42 monthly installments of
$11,000 through December 2001. The unused portion of the lease line of credit
expired in July 1998.
As of March 31, 1999, aggregate maturities for the equipment loan and
capital lease obligations for the remainder of fiscal 1999 and fiscal 2000,
2001, and 2002 are $116,000, $450,000, $455,000 and $10,000, respectively.
In conjunction with the equipment loan and lease line of credit, the
Company issued warrants to purchase 20,466 and 11,020 shares, respectively, of
the Company's Series C preferred stock at an exercise price of $3.81
F-11
<PAGE>
PHONE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
per share. These warrants expire the earlier of May 2007, or five years after
an initial public offering of the Company's common stock. The fair value of the
warrants issued, calculated using the Black-Scholes option pricing model, using
the following assumptions: no dividends; contractual life of 10 years; risk-
free interest rate of 6.33%; expected volatility of 60%, was not material.
5. Stockholders' Equity
(a) Convertible Preferred Stock
Convertible preferred stock outstanding as of March 31, 1999, is as follows:
<TABLE>
<CAPTION>
Shares Designated Issued and Outstanding Carrying Value
----------------- ---------------------- --------------
<S> <C> <C> <C>
Series:
Series A........... 4,731,997 4,731,997 $ 2,334,000
Series B........... 4,000,000 3,999,987 6,684,000
Series C........... 2,666,667 2,538,766 9,641,000
Series D........... 6,444,886 6,444,877 30,684,000
Series E........... 2,486,170 2,458,543 16,700,000
---------- ---------- -----------
20,329,720 20,174,170 $66,043,000
========== ========== ===========
</TABLE>
The rights, preferences, and privileges of the holders of Series A, B, C, D,
and E convertible preferred stock are as follows:
. Dividends are noncumulative and payable only upon declaration by the
Company's Board of Directors at a rate of $0.05, $0.17, $0.38, $0.51,
and $0.72 per share for Series A, B, C, D, and E convertible preferred
stock, respectively.
. Holders of Series A, B, C, D, and E convertible preferred stock have a
liquidation preference of $0.50, $1.68, $3.81, $5.08, and $7.24 per
share, respectively, plus any declared but unpaid dividends over holders
of common stock.
. Each share of Series A, B, C, D, and E convertible preferred stock is
convertible at any time into one share of common stock subject to
certain antidilution provisions.
. Each holder of convertible preferred stock has voting rights equal to
the number of shares of common stock into which such shares could be
converted.
(b) Reverse Stock Split
On March 26, 1999, the Board of Directors approved a two-for-three reverse
stock split of the Company's convertible preferred stock and common stock to be
completed prior to the effectiveness of the Company's IPO. The accompanying
consolidated financial statements have been retroactively restated to give
effect to the reverse stock split.
(c) Stock Plans
The Company is authorized to issue up to 9,383,887 shares of common stock in
connection with its 1995 and 1996 stock option plans (the Plans) to directors,
employees, and consultants. The Plans provide for the issuance of stock
purchase rights, incentive stock options, or nonstatutory stock options.
The stock purchase rights are subject to a restricted stock purchase
agreement whereby the Company has the right to repurchase the stock upon the
voluntary or involuntary termination of the purchaser's employment
F-12
<PAGE>
PHONE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
with the Company at the original issuance cost. The Company's repurchase right
lapses at a rate determined by the stock plan administrator, but at a minimum
rate of 20% per year. Through March 31, 1999, the Company has issued 1,381,667
shares under restricted stock purchase agreements, of which 454,167 shares have
been repurchased and 546,665 are subject to repurchase at a weighted-average
price of $0.48 per share. Certain of these restricted shares were issued to
officers of the Company for full recourse promissory notes with interest rates
ranging from 5.49% to 6.48% and terms of four to five years.
Under the Plans, the exercise price for incentive stock options is at least
100% of the stock's fair market value on the date of grant for employees owning
less than 10% of the voting power of all classes of stock, and at least 110% of
the fair market value on the date of grant for employees owning more than 10%
of the voting power of all classes of stock. For nonstatutory stock options,
the exercise price is also at least 110% of the fair market value on the date
of grant for employees owning more than 10% of the voting power of all classes
of stock and no less than 85% for employees owning less than 10% of the voting
power of all classes of stock.
Under the Plans, options generally expire in 10 years. However, the term of
the options may be limited to 5 years if the optionee owns stock representing
more than 10% of the voting power of all classes of stock. Vesting periods are
determined by the Company's Board of Directors and generally provide for shares
to vest ratably over a 4- to 5-year period.
As of March 31, 1999, there were -0- and 4,472,807 additional shares
available for grant under the 1995 and 1996 stock option plans, respectively.
On March 26, 1999, the Company adopted the 1999 Employee Stock Purchase Plan
(the "Purchase Plan") and reserved a total of 600,000 shares of the Company's
common stock for issuance thereunder plus an automatic annual increase for
fiscal year 2000 through 2004 equal to the lesser of 500,000 shares or 1% of
the Company's outstanding common stock on the last day of the immediately
preceding fiscal year. The Purchase Plan permits eligible employees to purchase
common stock through payroll deductions at a purchase price of 85% of the lower
of the fair market value of the common stock at the beginning or end of each
offering period, generally 24 months in length.
On March 26, 1999, the Company adopted the 1999 Directors Stock Option Plan
(the "Directors Plan") and reserved a total of 600,000 shares of the Company's
common stock for issuance thereunder. Each non-employee director who becomes a
member of the Board of Directors will initially be granted an option for 33,333
shares of the Company's common stock and, thereafter, an option to purchase an
additional 2,500 shares of the Company's common stock quarterly commencing in
the fiscal quarter ending September 30, 2000. Options granted under the
Directors Plan vest immediately. The exercise price of the options granted
under the Directors Plan will be at the fair value of the Company's common
stock on the date of grant.
(d) Stock-Based Compensation
The Company uses the intrinsic-value method in accounting for its employee
stock-based compensation plans. Accordingly, no compensation cost has been
recognized for any of its stock options granted or restricted stock sold
because the exercise price of each option or purchase price of each share of
restricted stock equaled or exceeded the fair value of the underlying common
stock as of the grant date for each stock option or purchase date of each
restricted stock share, except for stock options granted and restricted stock
sold from October 1997 through March 1999. With respect to the stock options
granted and restricted stock sold from October 1997 to March 1999, the Company
recorded deferred stock compensation of $2,437,000 for the difference at the
grant or issuance date between the exercise price of each stock option granted
or purchase price of each restricted share sold and the fair value of the
underlying common stock. This amount is being
F-13
<PAGE>
PHONE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
amortized on an accelerated basis over the vesting period, generally four to
five years, consistent with the method described in FASB Interpretation No. 28.
Had compensation costs been determined in accordance with SFAS No. 123 for all
of the Company's stock-based compensation plans, net loss and basic and diluted
net loss per share would have been as follows:
<TABLE>
<CAPTION>
Year ended June 31, Nine months
-------------------------- ended March
1996 1997 1998 31, 1999
------- ------- -------- -----------
<S> <C> <C> <C> <C>
Net loss:
As reported...................... $(2,470) $(7,991) $(10,623) $(13,973)
======= ======= ======== ========
Pro forma........................ $(2,471) $(8,003) $(10,656) $(14,133)
======= ======= ======== ========
Basic and diluted net loss per
share:
As reported...................... $ (0.53) $ (1.67) $ (2.03) $ (2.49)
======= ======= ======== ========
Pro forma........................ $ (0.53) $ (1.68) $ (2.04) $ (2.52)
======= ======= ======== ========
</TABLE>
The fair value of each option was estimated on the date of grant using the
minimum value method with the following weighted-average assumptions: no
dividends; risk-free interest rate of 5.75%, 6.50%, 5.55% and 4.78% for the
year ended June 30, 1996, 1997 and 1998, and the nine months ended March 31,
1999, respectively; and expected life of 4.40, 3.84, 3.23 and 2.49 years for
the year ended June 30, 1996, 1997 and 1998, and the nine months ended March
31, 1999, respectively.
A summary of the status of the Company's options under the Plans, is as
follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Year ended June 30, Nine months
---------------------------------------------------- ended
1996 1997 1998 March 31, 1999
---------------- ----------------- ----------------- -----------------
Weighted- Weighted- Weighted- Weighted-
average average average average
exercise exercise exercise exercise
Shares price Shares price Shares price Shares price
------ --------- ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. -- $ -- 646 $0.11 2,071 $0.28 2,877 $1.00
Granted................. 684 0.11 1,630 0.34 1,422 1.73 762 4.72
Forfeited............... (38) 0.17 (112) 0.26 (213) 0.30 (164) 0.28
Exercised............... -- -- (93) 0.13 (403) 0.22 (154) 1.35
--- ----- ----- -----
Outstanding at end of
period................. 646 $0.11 2,071 $0.28 2,877 $1.00 3,321 $1.86
=== ===== ===== =====
Options exercisable at
end of period.......... 11 $0.11 235 $0.15 385 $0.28 885 $1.24
=== ===== ===== =====
Weighted-average fair
value of options
granted during the
period with exercise
prices equal to fair
value at date of
grant.................. $0.03 $0.07 $0.06 $0.87
Weighted-average fair
value of options
granted during the
period with exercise
prices less than fair
value at date of
grant.................. -- -- $1.82 $1.55
</TABLE>
F-14
<PAGE>
PHONE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of March 31, 1999, the range of exercise prices and weighted-average
remaining contractual life of outstanding options were as follows (number of
options in thousands):
<TABLE>
<CAPTION>
Options outstanding Options exercisable
--------------------------------- ---------------------
Weighted-
average
remaining Weighted- Weighted-
contractual average average
Range of exercise Number life exercise Number exercise
prices outstanding (years) price exercisable price
----------------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.05 -- $0.39........ 1,666 7.91 $0.32 713 $0.31
$2.30 -- $3.38........ 1,373 9.35 2.51 72 2.07
$7.25................. 247 9.93 7.25 100 7.25
$12.00................ 35 9.99 12.00 -- --
----- ---
3,321 8.68 1.86 885 1.24
===== ===
</TABLE>
6. Leases
In fiscal 1998, the Company entered into a new noncancelable operating lease
for its facilities expiring in June 2005. As of March 31, 1999, the Company has
a letter of credit collateralized by a certificate of deposit in the amount of
$800,000, included in deposits and other assets in the accompanying
consolidated balance sheet as of March 31, 1999, related to the new facility
lease. The Company has an additional noncancelable operating lease for its
previous facility, which expires in April 2001. However, the Company has
entered into a sublease for this facility, which also expires in April 2001.
Future minimum lease payments under noncancelable operating leases, net of
sublease payments, as of March 31, 1999, are as follows (in thousands):
<TABLE>
<CAPTION>
Net
Minimum Minimum minimum
lease sublease lease
Year ending June 30, payments payments payments
-------------------- -------- -------- --------
<S> <C> <C> <C>
1999 (three months).............................. $ 542 $ (261) $ 281
2000............................................. 2,062 (722) 1,340
2001............................................. 2,014 (402) 1,612
2002............................................. 1,678 -- 1,678
2003............................................. 1,727 -- 1,727
Thereafter....................................... 3,445 -- 3,445
------- ------- -------
$11,468 $(1,385) $10,083
======= ======= =======
</TABLE>
Rent expense for the years ended June 30, 1996, 1997 and 1998, and for the
nine months ended March 31, 1998 and 1999, was approximately $105,000,
$451,000, $307,000, $246,000, and $1,328,000, respectively.
F-15
<PAGE>
PHONE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Income Taxes
The differences between the income tax expense (benefit) computed at the
federal statutory rate and the Company's tax provision for all periods
presented primarily relate to net operating losses not benefited. Income tax
expense for the nine months ended March 31, 1999 relates to foreign taxes.
The individual components of the Company's deferred tax assets are as
follows (in thousands):
<TABLE>
<CAPTION>
June 30,
---------------- March 31,
1997 1998 1999
------- ------- ---------
<S> <C> <C> <C>
Accruals and reserves not deductible for tax
purposes...................................... $ 83 $ 146 $ 352
Property and equipment......................... 58 15 91
Capitalized start-up expenditures.............. 583 406 307
Net operating loss carryovers.................. 3,761 7,600 12,565
Research and development credit carryforwards.. 169 666 646
Foreign tax credit carryforward................ -- -- 670
------- ------- --------
Total deferred tax assets.................... 4,654 8,833 14,631
Valuation allowance............................ (4,654) (8,833) (14,631)
------- ------- --------
Net deferred tax assets...................... $ -- $ -- $ --
======= ======= ========
</TABLE>
In light of the Company's recent history of operating losses, the Company
has provided a valuation allowance for all of its deferred tax assets as it is
presently unable to conclude that it is more likely than not that the deferred
tax assets will be realized.
As of March 31, 1999, the Company has a net operating loss carryover for
federal and California income tax purposes of approximately $31,000,000. In
addition, the Company had federal and California research and development
credit carryforwards of approximately $367,000 and $279,000, respectively. The
Company's federal net operating loss and research and development credit
carryforwards will expire in the year 2011 through 2019 if not utilized. The
Company's California net operating loss carryforwards will expire in the year
2004. The state research and development credit can be carried forward
indefinitely. The Company also has a foreign tax credit carryforward of
$670,000 which expires in the year 2004.
Federal and California tax laws impose substantial restrictions on the
utilization of net operating loss and tax credit carryforwards in the event of
an "ownership change" as defined in Internal Revenue Code Section 382. If the
Company has an ownership change, the Company's ability to utilize the above
mentioned carryforwards could be significantly reduced.
8. Geographic, Segment and Significant Customer Information
During 1999 the Company adopted the provision of SFAS No. 131, Disclosure
about Segments of an Enterprise and Related Information. SFAS No. 131
establishes standards for the reporting by public business enterprises of
information about operating segments, products and services, geographic areas,
and major customers. The method for determining what information to report is
based on the way that management organizes the operating segments within the
Company for making operational decisions and assessments of financial
performance.
The Company's chief operating decision maker is considered to be the
Company's Chief Executive Officer ("CEO"). The CEO reviews financial
information presented on a consolidated basis accompanied by disaggregated
information about revenues by geographic region and by product for purposes of
making
F-16
<PAGE>
PHONE.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
operating decisions and assessing financial performance. Therefore, the Company
operates in a single operating segment: Software that enables the delivery of
Internet-based services to mass-market wireless telephones and related
services. The disaggregated information reviewed on a product basis by the CEO
is as follows (in thousands):
<TABLE>
<CAPTION>
Nine months
Year ended June ended
30, March 31,
----------------- -----------
1996 1997 1998 1998 1999
----- ---- ------ ---- ------
<S> <C> <C> <C> <C> <C>
Revenue:
UP.Link Server Suite........................... $ -- $187 $1,335 $718 $2,382
UP.Browser..................................... -- 105 870 206 2,934
Consulting services............................ -- -- -- -- 1,401
----- ---- ------ ---- ------
$ -- $292 $2,205 $924 $6,717
===== ==== ====== ==== ======
</TABLE>
The Company markets its products primarily from its operations in the United
States. International sales are primarily to customers in Asia Pacific and
Europe. Information regarding the Company's revenues in different geographic
regions is as follows (in thousands):
<TABLE>
<CAPTION>
Nine months
Year Ended June Ended
30, March 31,
----------------- -----------
1996 1997 1998 1998 1999
----- ---- ------ ---- ------
<S> <C> <C> <C> <C> <C>
North America.................................. $ -- $272 $1,220 $811 $2,425
Europe......................................... -- 20 513 80 2,221
Asia Pacific................................... -- -- 472 33 2,071
----- ---- ------ ---- ------
$ -- $292 $2,205 $924 $6,717
===== ==== ====== ==== ======
</TABLE>
Significant customer information is as follows:
<TABLE>
<CAPTION>
% of Total
Accounts
% of Total Revenue Receivable
----------------------------- --------------
Nine months
Year ended ended
June 30, March 31,
------------- -------------
1997 1998 1998 1999 March 31, 1999
----- ----- ----- ----- --------------
<S> <C> <C> <C> <C> <C>
Customer A......................... 20% 22% 44% 14% 7%
Customer B......................... -- 18% 1% 8% 12%
Customer C......................... 30% -- -- -- --
Customer D......................... 19% 1% 3% -- --
Customer E......................... 10% 2% -- -- --
Customer F......................... -- 2% -- 11% 3%
Customer G......................... -- -- -- 13% --
</TABLE>
Revenues aggregating 41%, 37%, 64%, and 32% of total revenues for the years
ended June 30, 1997 and 1998, and the nine months ended March 31, 1998 and
1999, respectively, were generated from customers who are also stockholders of
the Company, and whose ownership percentages ranged from 0.3% to 3.9% as of
March 31, 1999.
F-17
<PAGE>
[Description of graphics and text on inside back cover page:]
Unwired Planet works with technology providers, wireless telephone
manufacturers, Internet content providers, corporate application developers and
value added resellers.
[Unwired Planet logo in the center of concentric circles. The concentric circles
are labeled "Value Added Resellers," "Technology Providers," "Wireless Telephone
Manufacturers," "Internet Content Providers" and "Corporate Application
Developers." Each circle contains the logos of companies in the labeled
category.]
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of common stock being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fee and the Nasdaq National Market listing
fee.
<TABLE>
<CAPTION>
Amount to
be Paid
----------
<S> <C>
SEC registration fee........................................... $ 15,346
NASD filing fee................................................ 6,020
Nasdaq National Market listing fee............................. 95,000
Printing and engraving expenses................................ 200,000
Legal fees and expenses........................................ 375,000
Accounting fees and expenses................................... 350,000
Blue Sky qualification fees and expenses....................... 5,000
Transfer Agent and Registrar fees.............................. 15,000
Miscellaneous fees and expenses................................ 38,634
----------
Total........................................................ $1,100,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities, including reimbursement for expenses
incurred, arising under the Securities Act of 1933, as amended. Our amended and
restated certificate of incorporation provides for indemnification of its
directors and officers to the maximum extent permitted by the Delaware General
Corporation Law, and our bylaws provide for indemnification of our directors,
officers, employees and other agents to the maximum extent permitted by the
Delaware General Corporation Law. In addition, we have entered into
indemnification agreements with our directors and officers containing
provisions which are in some respects broader than the specific indemnification
provisions contained in the Delaware General Corporation Law. The
indemnification agreements may require us, among other things, to indemnify our
directors against certain liabilities that may arise by reason of their status
or service as directors, other than liabilities arising from willful misconduct
of culpable nature, to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' insurance if available on reasonable terms. Reference is also made
to Section 7 of the underwriting agreement contained in Exhibit 1.1 hereto,
indemnifying our officers and directors against certain liabilities.
Item 15. Recent Sales of Unregistered Securities
(a) Since January 1, 1996, we have issued and sold, without payment of any
selling commission to any person, except as noted below, the following
unregistered securities:
(1) Prior to completion of this offering, we intend to effect a two-for-
three stock split of our outstanding common stock in which each three
outstanding shares of common stock will be split into two shares of
common stock.
(2) In October 1996, we issued and sold shares of Series C preferred stock
convertible into an aggregate of 2,538,766 shares of common stock to
six venture capital funds and three strategic partners for an aggregate
purchase price of $9,674,983.
II-1
<PAGE>
(3) In January and February 1998, we issued and sold shares of Series D
preferred stock convertible into an aggregate of 6,444,877 shares of
common stock to 19 venture capital funds, five strategic partners and
two individuals for an aggregate purchase price of $32,748,354.
Deutsche Morgan Grenfell acted as placement agent in connection with
this sale, for which it received usual and customary placement agent
fees.
(4) In March 1999, we issued and sold shares of Series E preferred stock
convertible into an aggregate of 2,458,543 shares of common stock to a
total of one venture capital fund, five strategic partners and one
individual investor for an aggregate purchase price of $17,799,114.
Credit Suisse First Boston Corporation acted as placement agent in
connection with this sale, for which it received usual and customary
placement agent fees.
(5) As of March 15, 1999, 1,589,734 shares of common stock had been issued
to our employees and consultants upon exercise of options or pursuant
to restricted stock purchase agreements and 3,321,346 shares of common
stock were issuable upon exercise of outstanding options under our 1995
and 1996 stock plans.
(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
The issuance described in Item 15(a)(1) was or will be exempt from
registration under Section 2(3) of the Securities Act on the basis that such
transaction did not involve a "sale" of securities. The issuances described in
Items 15(a)(2) through 15(a)(4) were deemed to be exempt from registration
under the Securities Act in reliance upon Section 4(2) thereof as transactions
by an issuer not involving any public offering. The issuances described in
Items 15(a)(5) were deemed to be exempt from registration under the Securities
Act in reliance upon Rule 701 promulgated thereunder in that they were offered
and sold either pursuant to written compensatory benefit plans or pursuant to a
written contract relating to compensation, as provided by Rule 701. In
addition, such issuances were deemed to be exempt from registration under
Section 4(2) of the Securities Act as transactions by an issuer not involving
any public offering. The recipients of securities in each such transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends where affixed to the securities issued in such
transactions. All recipients had adequate access, through their relationships
with us, to information about Phone.com.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Number Exhibit Title
------ -------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1+ Amended and Restated Certificate of Incorporation of the Registrant.
3.2++ Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be filed and effective upon completion of this offering.
3.3+ Amended and Restated Bylaws of the Registrant.
Certificate of Amendment of Certification of Incorporation of
3.4 Registrant.
3.5 Form of Amended and Restated Certificate of Incorporation of Registrant
to be filed prior to the completion of this offering.
4.1* Form of the Registrant's Common Stock Certificate.
5.1+ Opinion of Venture Law Group, a Professional Corporation.
10.1+ Form of Indemnification Agreement.
10.2+ 1995 Stock Plan, as amended, and form of stock option agreement and
restricted stock purchase agreement.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Number Exhibit Title
------ -------------
<C> <S>
1996 Stock Plan and form of stock option agreement and restricted
10.3+ stock purchase agreement.
1999 Employee Stock Purchase Plan and form of subscription
10.4+ agreement.
1999 Directors' Stock Option Plan and form of stock option
10.5+ agreement.
Fourth Amended and Restated Investor Rights Agreement dated March
10.6+ 12, 1999.
10.7+ Voting Agreement dated January 23, 1998 and amendment thereto.
10.8+ Lease Agreement dated March 10, 1998 for offices at 800 Chesapeake
by and between Registrant and Seaport Centre Associates, LLC.
10.9+ Form of Change of Control Severance Agreement between the Registrant
and the Registrant's Named Executive Officers.
10.10++ Relocation Agreement dated December 23, 1996 between the Registrant
and Charles Parrish.
10.11+ Warrant Agreements to Purchase Series C Preferred Stock dated May
29, 1997 and July 17, 1997 by and between the Registrant and
Comdisco, Inc.
10.12+ Letter Agreement dated August 18, 1997 with Malcolm Bird.
10.13+ Incentive Compensation Plan for Malcolm Bird dated January 27, 1999.
10.14**++ OEM Master License Agreement with RSA Data Security dated December
2, 1996.
10.15+ Incentive Compensation Plan for Maurice Jeffery dated March 19,
1999.
10.16** Software License and Support Agreement dated as of May 1, 1996, with
AT&T Wireless Services, Inc., as amended.
10.17** Client License Agreement dated as of January 1, 1999, with
Matsushita Communication Industrial Co., Ltd.
21+ Subsidiaries of the Registrant.
23.1 Consent of Independent Accountants.
23.2+ Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-6).
27.1+ Financial Data Schedule.
99.1 Letter dated April 30, 1999 from Dataquest, a division of Gartner
Group, Inc.
99.2 Letter dated May 3, 1999 from International Data Corporation.
</TABLE>
- ---------------------
+ Previously filed.
++ Supersedes previously filed exhibit.
* To be supplied by amendment.
** Confidential treatment has been requested with respect to this exhibit.
(b) Financial Statement Schedules
Financial statement schedules are omitted because the information called for
is not required or is shown either in the consolidated financial statements or
the notes thereto.
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
II-3
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1), or (4),
or 497(h) under the Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and this offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment to the Registration Statement on Form
S-1 to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Redwood City, State of California, on May 3, 1999.
PHONE.COM, INC.
/s/ Alan Black
By: _________________________________
Alan Black
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement on Form S-1 has been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chief Executive Officer May 3, 1999
______________________________________ and Chairman (Principal
(Alain Rossmann) Executive Officer)
/s/ Alan Black Vice President, Finance May 3, 1999
______________________________________ and Administration, Chief
(Alan Black) Financial Officer and
Treasurer (Principal
Financial and Accounting
Officer)
* Director May 3, 1999
______________________________________
(Roger Evans)
* Executive Vice President May 3, 1999
______________________________________ and Director
(Charles Parrish)
* Director May 3, 1999
______________________________________
(David Kronfeld)
* Director May 3, 1999
______________________________________
(Andrew Verhalen)
* Director May 3, 1999
______________________________________
(Reed Hundt)
</TABLE>
/s/ Alan Black
*By: ____________________________
Alan Black
(Attorney-in-Fact)
II-5
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Alain Rossmann and Alan Black, and each one of
them, his attorneys-in-fact, each with the power of substitution, for him in
any and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments), and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof. This Power of Attorney may be signed in
several counterparts.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Reed Hundt Director May 3, 1999
______________________________________
(Reed Hundt)
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
-------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1+ Amended and Restated Certificate of Incorporation of the Registrant.
3.2++ Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be filed and effective upon completion of this
offering.
3.3+ Amended and Restated Bylaws of the Registrant.
3.4 Certificate of Amendment of Certification of Incorporation of
Registrant.
3.5 Form of Amended and Restated Certificate of Incorporation of
Registrant to be filed prior to the completion of this offering.
4.1* Form of the Registrant's Common Stock Certificate.
5.1+ Opinion of Venture Law Group, a Professional Corporation.
10.1+ Form of Indemnification Agreement.
10.2+ 1995 Stock Plan, as amended, and form of stock option agreement and
restricted stock purchase agreement.
10.3+ 1996 Stock Plan and form of stock option agreement and restricted
stock purchase agreement.
10.4+ 1999 Employee Stock Purchase Plan and form of subscription
agreement.
10.5+ 1999 Directors' Stock Option Plan and form of stock option
agreement.
10.6+ Fourth Amended and Restated Investor Rights Agreement dated March
12, 1999.
10.7+ Voting Agreement dated January 23, 1998 and amendment thereto.
10.8+ Lease Agreement dated March 10, 1998 for offices at 800 Chesapeake
by and between Registrant and Seaport Centre Associates, LLC.
10.9+ Form of Change of Control Severance Agreement between the Registrant
and the Registrant's Named Executive Officers.
10.10++ Relocation Agreement dated December 23, 1996 between the Registrant
and Charles Parrish.
10.11+ Warrant Agreements to Purchase Series C Preferred Stock dated May
29, 1997 and July 17, 1997 by and between the Registrant and
Comdisco, Inc.
10.12+ Letter Agreement dated August 18, 1997 with Malcolm Bird.
10.13+ Incentive Compensation Plan for Malcolm Bird dated January 27, 1999.
10.14**++ OEM Master License Agreement with RSA Data Security dated December
2, 1996.
10.15+ Incentive Compensation Plan for Maurice Jeffery dated March 19,
1999.
10.16** Software License and Support Agreement dated as of May 1, 1996, with
AT&T Wireless Services, Inc., as amended.
10.17** Client License Agreement dated as of January 1, 1999, with
Matsushita Communication Industrial Co., Ltd.
21+ Subsidiaries of the Registrant.
23.1 Consent of Independent Accountants.
23.2+ Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-6).
27.1+ Financial Data Schedule.
99.1 Letter dated April 30, 1999 from Dataquest, a division of Gartner
Group, Inc.
99.2 Letter dated May 3, 1999 from International Data Corporation.
</TABLE>
- --------
+ Previously filed.
++ Supersedes previously filed exhibit.
* To be supplied by amendment.
** Confidential treatment has been requested with respect to this exhibit.
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PHONE.COM, INC.
ALAIN ROSSMANN HEREBY CERTIFIES THAT:
1. The original name of this corporation was Libris, Inc. and the date of
filing the original Certificate of Incorporation of this corporation with the
Secretary of State of the State of Delaware is December 16, 1994.
2. He is the duly elected and acting Chief Executive Officer and Secretary
of Phone.com, Inc., a Delaware corporation.
3. The Certificate of Incorporation of this corporation is hereby amended
and restated to read as follows:
ARTICLE I
"The name of this corporation is Phone.com, Inc. (the "Corporation").
-----------
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is:
The Prentice-Hall Corporation System, Inc.
1013 Center Road
Wilmington, DE 19805
The name of the Corporation's registered agent at said address is The
Prentice-Hall Corporation System, Inc.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
(A) Classes of Stock. The Corporation is authorized to issue two classes
----------------
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
------------ ---------------
The total number of shares which the Corporation is authorized to issue is
105,000,000 shares, each with a par value of
<PAGE>
$0.001 per share. 100,000,000 of such shares shall be Common Stock, and
5,000,000 of such shares shall be Preferred Stock.
(B) The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Certificate of Incorporation, to determine or alter
the rights, preferences, privileges and restrictions granted to or imposed upon
any wholly unissued series of Preferred Stock and the number of shares
constituting any such series and the designation thereof, or any of them; and to
increase or decrease the number of shares of any series subsequent to the
issuance of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
ARTICLE V
The number of directors of the Corporation shall be fixed from time to time
by a bylaw or amendment thereof duly adopted by the Board of Directors.
ARTICLE VI
"Listing Event" as used in this Amended and Restated Certificate of
-------------
Incorporation shall mean the first annual meeting of stockholders following such
time as the Corporation meets the criteria set forth in subdivisions (1), (2) or
(3) of Section 2115(c) the California Corporations Code as of the record date of
such meeting.
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, its directors and its stockholders or any class
thereof, as the case may be, it is further provided that, effective upon the
occurrence of the Listing Event:
(i) The number of directors which shall constitute the entire
Board of Directors, and the number of directors in each class, shall be fixed
exclusively by one or more resolutions adopted from time to time by the Board of
Directors. The Board of Directors shall be divided into three classes,
designated as Class I, Class II and Class III, respectively. Directors shall be
assigned to each class in accordance with a resolution or resolutions adopted by
the Board of Directors. Until changed by a resolution of the Board of Directors,
Class I shall consist of two directors, each of whom shall be designated by the
Board of Directors; Class II shall consist of two directors, each of whom shall
be designated by the Board of Directors; and Class III shall consist of one
director, each of whom shall be designated by the Board of Directors.
Upon the occurrence of the Listing Event, the terms of office
of the Class I directors shall expire, and Class I directors shall be elected
for a full term of three years. At the first annual meeting of stockholders
following the Listing Event, the term of office of the Class II directors shall
expire, and Class II directors shall be elected for a full term of three years.
At the second annual meeting of stockholders following the Listing Event, the
term of office of the
-2-
<PAGE>
Class III directors shall expire, and Class III directors shall be elected for a
full term of three years. At each succeeding annual meeting of stockholders,
directors shall be elected for a full term of three years to succeed the
directors of the class whose terms expire at such annual meeting.
Any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal, or other causes shall be filled by
either (i) the affirmative vote of the holders of a majority of the voting power
of the then-outstanding shares of voting stock of the corporation entitled to
vote generally in the election of directors (the "Voting Stock") voting together
------------
as a single class; or (ii) by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the Board
of Directors. Newly created directorships resulting from any increase in the
number of directors shall, unless the Board of Directors determines by
resolution that any such newly created directorship shall be filled by the
stockholders, be filled only by the affirmative vote of the directors then in
office, even though less than a quorum of the Board of Directors. Any director
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified.
(ii) There shall be no right with respect to shares of stock of the
Corporation to cumulate votes in the election of directors.
(iii) Any director, or the entire Board of Directors, may be removed
from office at any time (i) with cause by the affirmative vote of the holders of
at least a majority of the voting power of the then-outstanding shares of the
Voting Stock, voting together as a single class; or (ii) without cause by the
affirmative vote of the holders of at least 66-2/3% of the voting power of the
then-outstanding shares of the Voting Stock.
ARTICLE VII
No action shall be taken by the stockholders of the Corporation other than
at an annual or special meeting of the stockholders, upon due notice and in
accordance with the provisions of the Corporation's bylaws.
ARTICLE VIII
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
-3-
<PAGE>
ARTICLE IX
The Board of Directors of the Corporation is expressly authorized to make,
alter or repeal Bylaws of the Corporation.
ARTICLE X
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE XI
The Corporation shall have perpetual existence.
ARTICLE XII
(A) To the fullest extent permitted by the General Corporation Law of
Delaware, as the same may be amended from time to time, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
If the General Corporation Law of Delaware is hereafter amended to authorize,
with the approval of a corporation's stockholders, further reductions in the
liability of the Corporation's directors for breach of fiduciary duty, then a
director of the Corporation shall not be liable for any such breach to the
fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
(B) Any repeal or modification of the foregoing provisions of this Article
XII shall not adversely affect any right or protection of a director of the
Corporation with respect to any acts or omissions of such director occurring
prior to such repeal or modification.
ARTICLE XIII
(A) To the fullest extent permitted by applicable law, the Corporation is
also authorized to provide indemnification of (and advancement of expenses to)
such agents (and any other persons to which Delaware law permits the Corporation
to provide indemnification) though bylaw provisions, agreements with such agents
or other persons, vote of stockholders or disinterested directors or otherwise,
in excess of the indemnification and advancement otherwise permitted by Section
145 of the Delaware General Corporation Law, subject only to limits created by
applicable Delaware law (statutory or non-statutory), with respect to actions
for breach of duty to a corporation, its stockholders, and others.
(B) Any repeal or modification of any of the foregoing provisions of this
Article XIII shall not adversely affect any right or protection of a director,
officer, agent or other person
-4-
<PAGE>
existing at the time of, or increase the liability of any director of the
Corporation with respect to any acts or omissions of such director, officer or
agent occurring prior to such repeal or modification."
* * *
-5-
<PAGE>
The foregoing Amended and Restated Certificate of Incorporation has been
duly adopted by this Corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
Executed at Redwood City, California, on ____________________, 1999.
--------------------------------------
Alain Rossmann,
Chief Executive Officer and Secretary
-6-
<PAGE>
Exhibit 3.4
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
UNWIRED PLANET, INC.
The undersigned, Alain Rossmann, hereby certifies that:
1. He is the duly elected and acting Chief Executive Officer of Unwired
Planet, Inc., a Delaware corporation.
2. The Certificate of Incorporation of this corporation was originally
filed with the Secretary of State of Delaware on December 16, 1994, under the
name of Libris, Inc.
3. Pursuant to Section 242 of the General Corporation Law of the State of
Delaware, this Certificate of Amendment of Certificate of Incorporation amends
Article I of this corporation's Certificate of Incorporation to read in its
entirety as follows:
"I
The name of the corporation is Phone.com, Inc."
4. The foregoing Certificate of Amendment has been duly adopted by this
corporation's Board of Directors and stockholders in accordance with the
applicable provisions of Sections 228 and 242 of the General Corporation Law of
the State of Delaware.
Executed at Menlo Park, California, April 19, 1999.
/s/ ALAIN ROSSMANN
-------------------------------------
Alain Rossmann, Chief Executive Officer
<PAGE>
Exhibit 3.5
AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION
OF
PHONE.COM, INC.
Alain Rossmann hereby certifies that:
1. The original name of this corporation was Libris, Inc. and the date of
filing the original Certificate of Incorporation of this corporation with the
Secretary of State of the State of Delaware is December 16, 1994.
2. He is the duly elected and acting Chief Executive Officer and Secretary
of Phone.com, Inc., a Delaware corporation.
3. The Certificate of Incorporation of this corporation is hereby amended
and restated to read as follows:
"I
The name of the Corporation is Phone.com, Inc.
II
The address of the registered office of the Corporation in the State of
Delaware is:
The Prentice-Hall Corporation System, Inc.
1013 Center Road
Wilmington, DE 19805
The name of the Corporation's registered agent at said address is The
Prentice-Hall Corporation System, Inc.
III
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV
Upon the effective date of the filing of this Amended and Restated
Certificate of Incorporation, every three (3) shares of this corporation's
outstanding Common Stock and Preferred stock shall be converted and
reconstituted into two (2) shares of the like class and series of the
corporation's capital stock from which such shares were converted (the "Stock
-----
Split"). The number of shares to be issued shall be rounded to the nearest
- -----
whole share. No fractional shares shall be issued. All share amounts and
amounts per share set forth in this
<PAGE>
Amended and Restated Certificate of Incorporation have been appropriately
adjusted to reflect the Stock Split.
This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is 52,332,339
shares, 32,001,600 shares of which shall be Common Stock (the "Common Stock")
and 20,330,739 shares of which shall be Preferred Stock (the "Preferred Stock").
The Preferred Stock shall have a par value of one-tenth of one cent ($0.001 )
per share and the Common Stock shall have a par value of one-tenth of one cent
($0.001) per share.
A. The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares of Common Stock then outstanding)
by the affirmative vote of the holders of a majority of the stock of the
Corporation (voting together on an as-if-converted basis).
B. A description of the respective classes and series of stock and a
statement of the designations, preferences, voting powers, relative,
participating, optional or other special rights and privileges, and the
qualifications, limitations and restrictions of the Preferred Stock and Common
Stock are as follows:
1. Designation and Amount. There shall be designated a Series A
----------------------
Preferred Stock (the "Series A Preferred"), a Series B Preferred Stock (the
"Series B Preferred") and a Series C Preferred Stock ("Series C Preferred"), a
Series D Preferred Stock (the "Series D Preferred") and a Series E Preferred
Stock (the "Series E Preferred"). The number of shares constituting such Series
A Preferred shall be 4,732,237, the number of shares constituting such Series B
Preferred shall be 4,000,200, the number of shares constituting such Series C
Preferred shall be 2,666,800, the number of shares constituting such Series D
Preferred shall be 6,445,207 and the number of shares constituting such Series E
Preferred shall be 2,486,295.
The Board of Directors of the Corporation ("Board") is hereby
authorized to fix or alter the rights, preferences, privileges and restrictions
granted to or imposed upon additional series of Preferred Stock, and the number
of shares constituting any such series and the designation thereof, or any of
them. Subject to compliance with applicable protective voting rights which have
been or may be granted to Preferred Stock or series thereof in Certificates of
Determination or the Corporation's Certificate of Incorporation ("Protective
Provisions"), but notwithstanding any other rights of any series of Preferred
Stock, the rights, privileges, preferences and restrictions of any such
additional series may be subordinate to, pari passu with (including, without
---- -----
limitation, inclusion in provisions with respect to liquidation and acquisition
preferences, redemption and/or approval of matters by vote or written consent),
or senior to any of those of any present or future class or series of Preferred
Stock or Common Stock. Subject to compliance with applicable Protective
Provisions, the Board is also authorized to increase or decrease the number of
shares of any series (other than Series A Preferred, Series B Preferred, Series
C Preferred, Series D Preferred or Series E Preferred), prior or subsequent to
the issue of that series then outstanding. In case the number of shares of any
series shall be so decreased, the
<PAGE>
shares constituting such decrease shall resume the status which they had prior
to the adoption of the resolution originally fixing the number of shares of such
series.
2. Dividends and Distributions.
---------------------------
(a) Subject to the provisions for adjustment hereinafter set
forth, the holders of shares of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred shall be entitled to
receive, when, as and if declared by the Board out of funds legally available
for the purpose, an annual cash dividend in the amount of $0.0499, $0.1675,
$0.3811, $0.5082 and $0.7240 per share, respectively (as adjusted to reflect any
stock split, stock dividend, combination, recapitalization and the like
(collectively, a "Recapitalization") with respect to the Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E
Preferred, respectively), prior and in preference to any declaration or payment
of any dividend (payable other than in Common Stock) on the Common Stock of the
Corporation. Such dividends shall not be cumulative, and no right shall accrue
to holders of Series A Preferred, Series B Preferred, Series C Preferred, Series
D Preferred or Series E Preferred by reason of the fact that dividends on such
shares are not declared or paid in any year. Dividends, if paid or declared and
set apart for payment, must be paid or declared and set apart for payment in
full on the Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred and Series E Preferred contemporaneously, or if less than full
dividends are paid or declared and set apart for payment on the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred, the same percentage of dividends shall be paid or declared and set
apart for payment on each such series of Preferred Stock, based on the aggregate
dividend preference of each such series.
(b) Notwithstanding Section 2(a) hereof, the Corporation may at
any time, out of funds legally available therefor, repurchase shares of Common
Stock of the corporation (i) issued to or held by employees, directors or
consultants of the Corporation or its subsidiaries upon termination of their
employment or services, pursuant to any agreement providing for such right of
repurchase, or (ii) issued to or held by any person subject to the Corporation's
right of first refusal to purchase such shares where the purchase is pursuant to
the exercise of such right of first refusal, in either case whether or not
dividends on the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred or Series E Preferred shall have been declared and paid or
funds set aside therefor.
3. Liquidation Rights. In the event of any liquidation, dissolution
------------------
or winding up of the Corporation, whether voluntary or involuntary,
distributions shall be made to the holders of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred in
respect of such Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred, respectively, before any amount shall
be paid to the holders of Common Stock in respect of such Common Stock, in the
following manner:
(a) Series A Preferred, Series B Preferred, Series C Preferred,
-----------------------------------------------------------
Series D Preferred and Series E Preferred. The holders of the Series A Preferred
- -----------------------------------------
shall be entitled to be paid first out of the assets of capital stock an amount
per share equal to (i) $0.4999, as adjusted for any Recapitalization with
respect to the Series A Preferred plus (ii) all declared and unpaid
<PAGE>
dividends, if any. The holders of the Series B Preferred shall be entitled to be
paid first out of the assets of capital stock an amount per share equal to (i)
$1.6750, as adjusted for any Recapitalization with respect to the Series B
Preferred plus (ii) all declared and unpaid dividends, if any. The holders of
the Series C Preferred Stock shall be entitled to be paid first out of the
assets of capital stock an amount per share equal to (i) $3.8109, as adjusted
for any Recapitalization with respect to the Series C Preferred plus (ii) all
declared and unpaid dividends, if any. The holders of the Series D Preferred
Stock shall be entitled to be paid first out of the assets of capital stock an
amount per share equal to (i) $5.0813 per share, as adjusted for any
Recapitalization with respect to the Series D Preferred plus (ii) all declared
and unpaid dividends, if any. The holders of the Series E Preferred Stock shall
be entitled to be paid first out of the assets of capital stock an amount per
share equal to (i) $7.2397 per share, as adjusted for any Recapitalization with
respect to the Series E Preferred plus (ii) all declared and unpaid dividends,
if any. If, upon the occurrence of a liquidation, dissolution or winding up, the
assets and funds thus distributed among the holders of the Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred and Series E
Preferred shall be insufficient to permit the payment to such holders of their
full liquidation preferences, then the entire assets and funds of the
Corporation legally available for distribution to the holders of capital stock
shall be distributed ratably among the holders of the Series A Preferred, Series
B Preferred, Series C Preferred, Series D Preferred and Series E Preferred in
proportion to the aggregate preferential amounts owed to each such holder.
(b) Common Stock. If assets are remaining after payment of the
------------
full preferential amount with respect to the Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred set
forth in Section 3(a) above, then the holders of the Common Stock shall be
entitled to share ratably in all such remaining assets and surplus funds.
(c) Events Deemed a Liquidation. For purposes of this Section
---------------------------
3, a liquidation, dissolution or winding up of the Corporation shall be deemed
to be occasioned by and to include the consolidation or merger of the
Corporation with or into any other corporation or the sale by the Corporation of
all or substantially all of its assets (or any series of related transactions
resulting in the sale or other transfer of all or substantially all of its
assets) unless the stockholders of the Corporation immediately prior to any such
transaction are holders, directly or indirectly, of a majority of the voting
securities of the surviving or acquiring corporation immediately thereafter (and
for purposes of this calculation equity securities which any stockholder or the
Corporation owned immediately prior to such merger or consolidation as a
stockholder of another party to the transaction shall be disregarded).
(d) Valuation of Securities and Property. In the event the
------------------------------------
Corporation proposes to distribute assets other than cash in connection with any
liquidation, dissolution or winding up of the Corporation, the value of the
assets to be distributed to the holders of shares of Series A Preferred, Series
B Preferred, Series C Preferred, Series D Preferred and Series E Preferred shall
be determined in good faith by the Board. Any securities not subject to
investment letter or similar restrictions on free marketability shall be valued
as follows:
<PAGE>
(i) If traded on a securities exchange, the value shall
be deemed to the average of the security's closing prices on such exchange over
the thirty (30) day period ending three (3) days prior to the distribution;
(ii) If actively traded over-the-counter, the value shall
be deemed to be the average of the closing bid prices over the thirty (30) day
period ending three (3) days prior to the distribution; and
(iii) If there is no active public market, the value shall
be the fair market value thereof as determined in good faith by the Board.
The method of valuation of securities subject to investment letter or other
restrictions on free marketability shall be adjusted to make an appropriate
discount from the market value determined as above in clauses (i), (ii) or (iii)
to reflect the fair market value thereof as determined in good faith by the
Board. The holders of at least 50% of the outstanding Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred and Series E
Preferred taken together shall have the right to challenge any determination by
the Board of fair market value pursuant to this Section 3(d), in which case the
determination of fair market value shall be made by an independent appraiser
selected jointly by the Board and the challenging parties, the cost of such
appraisal to be borne equally by the Corporation and the challenging parties.
(e) The Corporation shall give each holder of record of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred written notice of such impending transaction not later than twenty
(20) days prior to the stockholders' meeting called to approve such transaction,
or twenty (20) days prior to the closing of such transaction, whichever is
earlier, and shall also notify such holders in writing of the final approval of
such transaction. The first of such notices shall describe the material terms
and conditions of the impending transaction and the provisions of this paragraph
IV(B)(3), and the Corporation shall thereafter give such holders prompt notice
of any material changes. The transaction shall in no event take place sooner
than twenty (20) days after the Corporation has given the first notice provided
for herein or sooner than ten (10) days after the Corporation has given notice
of any material changes provided for herein; provided, however, that such
periods may be shortened upon the written consent of the holders of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred which is entitled to such notice rights or similar notice rights and
which represents at least a majority of the voting power of all then outstanding
shares of such Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred taken together.
4. Conversion. The holders of the Series A Preferred, Series B
----------
Preferred, Series C Preferred, Series D Preferred and Series E Preferred have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred, Series
----------------
B Preferred, Series C Preferred, Series D Preferred and Series E Preferred shall
initially be convertible, at the option of the holder thereof, at any time after
the date of issuance of such share at the office of the Corporation or any
transfer agent for the Preferred Stock, into the number of
<PAGE>
fully paid and nonassessable shares of Common Stock which results from dividing
the per share Conversion Value (as hereinafter defined) of such series by the
Conversion Price (as hereinafter defined) per share in effect for such series at
the time of conversion. The initial Conversion Price per share of the Series A
Preferred shall be $0.4999, and the Conversion Value per share of the Series A
Preferred shall be $0.4999. The initial Conversion Price per share of the Series
B Preferred shall be $1.6750, and the Conversion Value per share of the Series B
Preferred shall be $1.6750. The initial Conversion Price per share of the Series
C Preferred shall be $3.8109, and the Conversion Value per share of the Series C
Preferred shall be $3.8109. The initial Conversion Price per share of the Series
D Preferred shall be $5.0813 per share, and the Conversion Value per share of
the Series D Preferred shall be $5.0813. The initial Conversion Price per share
of the Series E Preferred shall be $7.2397 per share, and the Conversion Value
per share of the Series E Preferred shall be $7.2397. The initial Conversion
Price per share of the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred shall be subject to
adjustment from time to time as provided in Section 4(d) hereof. Upon conversion
under this or the next succeeding paragraph, all declared and unpaid dividends
on the applicable shares of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred shall be paid in cash, to
the extent legally permitted.
(b) Automatic Conversion. Each share of Series A Preferred,
--------------------
Series B Preferred, Series C Preferred, Series D Preferred and Series E
Preferred shall automatically be converted into shares of Common Stock upon: (i)
the closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of securities for the account of the Corporation to
the public, the gross proceeds to the Company and/or Selling Stockholders of
which exceed $30,000,000 at a price to the public of at least $9.6288 per share
(appropriately adjusted for any Recapitalization of the Common Stock after the
date on which the first share of Series E Preferred was issued (the "Original
Issue Date")); or (ii) the written consent of holders of not less than two-
thirds (2/3) of the then-outstanding shares of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred taken
together, provided that no automatic conversion of any series of Preferred Stock
shall occur under this clause (ii) if, upon being solicited for consent to such
conversion, the holders of more than two-thirds (2/3) of the then-outstanding
shares of such series shall have both failed to consent to such conversion and,
within 10 days of the mailing of such solicitation, objected thereto in writing.
(c) Mechanics of Conversion. Before any holder of Series A
-----------------------
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred shall be entitled to convert the same into shares of Common Stock
and to receive certificates therefor, he or she shall surrender the certificate
or certificates therefor, duly endorsed, at the office of the Corporation or of
any transfer agent for the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred and shall give written
notice to the Corporation at such office that he or she elects to convert the
same; provided, however, that in the event of an automatic conversion pursuant
to Section 4(b) hereof, the outstanding shares of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred shall
be converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; and provided further that
the Corporation shall not be obligated
<PAGE>
to issue certificates evidencing the shares of Common Stock issuable upon such
automatic conversion unless and until the certificates evidencing such shares of
Preferred Stock are either delivered to the Corporation or its transfer agent as
provided above, or the holder notifies the Corporation or its transfer agent
that such certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection with such certificates. The Corporation shall,
as soon as practicable after such delivery, or after such agreement and
indemnification, issue and deliver at such office to such holder of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred, a certificate or certificates for the number of shares of Common
Stock to which he or she shall be entitled as aforesaid and a check payable to
the holder in the amount of any declared and unpaid dividends payable pursuant
to Section 4(a) hereof, if any. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the shares of Preferred Stock to be converted, or, in the case of automatic
conversion, immediately prior to the occurrence of the event leading to such
automatic conversion, and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock on such date.
(d) Adjustments to Conversion Price.
-------------------------------
(i) Special Definitions. For purposes of this Section
-------------------
4(d), the following definitions shall apply:
(1) "Options" shall mean rights, options or
-------
warrants to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(2) "Convertible Securities" shall mean any
----------------------
evidences of indebtedness, shares or other securities convertible into or
exchangeable for Common Stock (other than Options).
(3) "Additional Shares of Common" shall mean all
---------------------------
shares of Common Stock issued (or, pursuant to Section 4(d)(iii), deemed to be
issued) by the Corporation after the Original Issue Date, other than shares of
Common Stock issued or issuable:
(A) upon conversion of shares of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred or the exercise of securities convertible into or exchangeable for
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
or Series E Preferred that are issued and outstanding as of the Original Issue
Date;
(B) to officers, directors or employees of,
or consultants to, the Corporation pursuant to a stock grant, option plan or
purchase plan or other employee stock incentive program or agreement approved by
the Board.
(C) as a dividend or distribution on Series
A Preferred, Series B Preferred, Series C Preferred, Series D Preferred or
Series E Preferred;
<PAGE>
(D) in an event described in Section
4(d)(vi);
(E) as a dividend on Common Stock where the
Corporation declares or pays a Common Stock dividend on the Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred and Series E
Preferred in the same manner as declared or paid on the Common Stock; or
(F) by way of dividend or other
distribution on shares of Common Stock excluded from the definition of
Additional Shares of Common by the foregoing clauses (A), (B), (C), (D), (E) or
this clause (F).
(ii) No Adjustment of Conversion Price. No adjustment in
---------------------------------
the Conversion Price of the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred shall be made in respect of
the issuance of Additional Shares of Common unless the consideration per share
for an Additional Share of Common issued or deemed to be issued by the
Corporation is less than the Conversion Price for the Series A Preferred, Series
B Preferred, Series C Preferred, Series D Preferred or Series E Preferred, as
applicable, in effect on the date of, and immediately prior to, such issue.
(iii) Deemed Issue of Additional Shares of Common.
-------------------------------------------
(1) Options and Convertible Securities. In the
----------------------------------
event the Corporation at any time or from time to time after the Original Issue
Date shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities entitled to
receive any such Options or Convertible Securities, then the maximum number of
shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number) of
Common Stock issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the exercise of such Options and
conversions or exchange of such Convertible Securities shall be deemed to be
Additional Shares of Common issued as of the time of such issue or, in case such
a record date shall have been fixed, as of the close of business on such record
date, provided that in any such case in which Additional Shares of Common are
deemed to be issued:
(A) except as provided in Section
4(d)(iii)(1)(B), no further adjustment in the Conversion Price shall be made
upon the subsequent issue of Convertible Securities or shares of Common Stock
upon the exercise of such Options or conversion or exchange of such Convertible
Securities; and
(B) if such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any change in the consideration payable to the Corporation, or change in the
number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof (other than under or by reason of provisions designed to
protect against dilution), the Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto) and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be
<PAGE>
recomputed to reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities; and
(C) no readjustment pursuant to clause (B)
above shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (1) the Conversion Price on the original adjustment
date or (2) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common between the original adjustment date and such
readjustment date.
(iv) Adjustment of Conversion Price Upon Issuance of
-----------------------------------------------
Additional Shares of Common. In the event this Corporation at any time after the
- ---------------------------
Original Issue Date shall issue Additional Shares of Common (including
Additional Shares of Common deemed to be issued pursuant to Section 4(d)(iii)
without consideration or for a consideration per share less than the Conversion
Price of the Series A Preferred, Series B Preferred, Series C Preferred, Series
D Preferred or Series E Preferred in effect on the date of and immediately prior
to such issue, then and in each such event the Conversion Price of the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred, as applicable, shall be reduced to a price (calculated to the
nearest cent) determined by multiplying such Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of shares of Common Stock which
the aggregate consideration received by the Corporation for the total number of
Additional Shares of Common so issued would purchase at such Conversion Price;
and the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the number of such Additional
Shares of Common so issued; provided that, for the purposes of this Section
4(d)(iv), all shares of Common Stock issuable upon conversion of all outstanding
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred and upon exercise or conversion of all outstanding
Options and Convertible Securities shall be deemed to be outstanding, and,
immediately after any Additional Shares of Common are deemed issued pursuant to
Section 4(d)(iii), such Additional Shares of Common shall be deemed to be
outstanding.
(v) Determination of Consideration. For purposes of this
------------------------------
Section 4(d), the consideration received by the Corporation for the issue of any
Additional Shares of Common shall be computed as follows:
(1) Cash and Property. Such consideration shall:
-----------------
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Corporation;
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at the time of such issue, as
determined by the Board in the good faith exercise of its reasonable business
judgment; and
(C) in the event Additional Shares of Common
are issued together with other shares or securities or other assets of the
Corporation for
<PAGE>
consideration which converts both, be the proportion of such consideration so
received, computed as provided in clauses (A) and (B) above, as determined in
good faith by the Board.
(2) Options and Convertible Securities. The
----------------------------------
consideration per share received by the Corporation for Additional Shares of
Common deemed to have been issued pursuant to Section 4(d)(iii)(1), relating to
Options and Convertible Securities, shall be determined by dividing
(A) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by
(B) the maximum number of shares of Common
Stock as set forth in the instruments relating thereto, (without regard to any
provisions contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(vi) Other Adjustments to Conversion Price.
-------------------------------------
(1) Subdivisions, Combinations, or Consolidations
---------------------------------------------
of Common Stock. In the event the outstanding shares of Common Stock shall be
- ---------------
subdivided, combined or consolidated after the Original Issue Date, by stock
split, stock dividend, combination or like event, into a greater or lesser
number of shares of Common Stock, the Conversion Price of the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred in effect immediately prior to such subdivision, combination,
consolidation or stock dividend shall, concurrently with the effectiveness of
such subdivision, combination or consolidation, be proportionately adjusted.
Notwithstanding the foregoing, any adjustment of the Conversion Price pursuant
to this paragraph (1) shall not be made if the outstanding shares of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred are combined or consolidated in the same manner and at the same time
as the outstanding shares of Common Stock.
(2) Distribution of Other Than Cash Dividends Out
----------------------------------------------
of Retained Earnings. In case the Corporation shall declare a cash dividend upon
- --------------------
its Common Stock payable otherwise than out of retained earnings or shall
distribute to holders of its Common Stock shares of its capital stock (other
than Common Stock), stock or other securities of other persons, evidences of
indebtedness issued by the corporation or other persons, assets (excluding cash
dividends) or options or rights (excluding options to purchase and rights to
subscribe for Common Stock or other securities of the Corporation convertible
into or exchangeable for Common Stock), then, in each such case, the holders of
shares of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred and Series E Preferred shall,
<PAGE>
concurrently with the distribution to holders of Common Stock, receive a like
distribution based upon the number of shares of Common Stock into which such
series of Preferred Stock is then convertible.
(3) Reclassifications. In the case, at any time
-----------------
after the Original Issue Date, of any capital reorganization or any
reclassification of the stock of the corporation (other than as a result of a
stock dividend or subdivision, split-up or combination of shares), or the
consolidation or merger of the Corporation with or into another person (other
than a consolidation or merger in which the Corporation is the continuing entity
and which does not result in any change in the Common Stock or which is treated
as a liquidation pursuant to Section 3(c)), or of the sale or other disposition
of all or substantially all the properties and assets of the Corporation, then
the shares of the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred shall, after such reorganization,
reclassification, consolidation, merger, sale or other disposition, be
convertible into the kind and number of shares of stock or other securities or
property of the Corporation or otherwise to which such holder would have been
entitled if immediately prior to such reorganization, reclassification,
consolidation, merger, sale or other disposition he had converted his shares of
such Preferred Stock into Common Stock. The provisions of this clause
4(d)(vi)(3) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales or other dispositions.
(e) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price of the Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E Preferred
pursuant to this Section 4, the Corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price of the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of the Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred.
(f) Status of Converted Stock. In case any shares of Series A
-------------------------
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred shall be converted pursuant to Section 4 hereof, the shares so
converted shall be canceled, shall not be reissuable and shall cease to be a
part of the authorized capital stock of the Corporation.
(g) Fractional Shares. In lieu of any fractional shares to
-----------------
which a holder of Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred or Series E Preferred would otherwise be entitled upon
conversion, the Corporation shall pay cash equal to such fraction multiplied by
the fair market value of one share of Common Stock as
<PAGE>
determined by the Board. The number of whole shares issuable to each holder upon
such conversion shall be determined on the basis of the number of shares of
Common Stock issuable upon conversion of the total number of shares of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred or Series
E Preferred, as applicable, held by such holder at the time of converting into
Common Stock.
(h) Miscellaneous.
-------------
(i) All calculations under this Section 4 shall be made
to the nearest cent or to the nearest one hundredth (1/100) of a share, as the
case may be.
(ii) The holders of at least 50% of the outstanding
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred taken together shall have the right to challenge any
determination by the Board of fair value pursuant to this Section 4, in which
case such determination of fair value shall be made by an independent appraiser
selected jointly by the Board and the challenging parties, the cost of such
appraisal to be borne equally by the Corporation and the challenging parties.
(iii) No adjustment in the Conversion Price of the Series
A Preferred, Series B Preferred, Series C Preferred, Series D Preferred or
Series E Preferred need be made if such adjustment would result in a change in
such Conversion Price of less than $0.01. Any adjustment of less than $0.01
which is not made shall be carried forward and shall be made at the time of and
together with any subsequent adjustment which, on a cumulative basis, amounts to
an adjustment of $0.01 or more in such Conversion Price.
(i) No Impairment. The corporation will not through any
-------------
reorganization, Recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance of performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred against
impairment.
(j) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred , such number of its shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred. If at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
<PAGE>
5. Voting Rights. Except as otherwise required by law or by Section
-------------
8 hereof, each holder of shares of Common Stock issued and outstanding shall
have one vote for each share, and each holder of shares of Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E Preferred
issued and outstanding shall be entitled to the number of votes equal to the
number of shares of Common Stock into which such shares of Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred or Series E Preferred
could be converted at the record date for determination of the stockholders
entitled to vote on such matters, or, if no such record date is established, at
the date such vote is taken or any written consent of stockholders is solicited,
such votes to be counted together with all other shares of stock of the
Corporation having general voting power and not separately as a class.
Fractional votes by the holders of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred or Series E Preferred shall not, however,
be permitted, and any fractional voting rights shall (after aggregating all
shares into which shares of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred held by each holder could be
converted) be rounded to the nearest whole number.
6. Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred, at least twenty (20) days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken from the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
7. Notices. Any notice required by the provisions of the Certificate
-------
to be given to the holders of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred shall be deemed given when
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his or her address appearing on the books of this
Corporation.
8. Protective Provisions.
---------------------
(a) So long as any shares of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred or Series E Preferred are
outstanding, the Corporation shall not, without first obtaining the approval of
the holders of a majority of the then-outstanding shares of such Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred, voting together as a separate class, take any action that:
(i) authorizes any dividend or other distribution with
respect to Common Stock (other than a dividend payable in Common Stock or as
authorized by Section 2(b));or
(ii) results in the consolidation or merger with or into
any other corporation or the sale of all or substantially all of the assets of
this Corporation (or any series of
<PAGE>
related transactions resulting in the sale or other transfer of all or
substantially all of the assets of this Corporation) unless the stockholders of
this Corporation immediately prior to any such transaction are holders, directly
or indirectly, of a majority of the voting securities of the surviving or
acquiring corporation immediately thereafter (and for purposes of this
calculation equity securities which any stockholder or the Corporation owned
immediately prior to such merger or consolidation as a stockholder of another
party to the transaction shall be disregarded); or
(iii) creates any new class or series that is on a parity
with an existing class or series of Preferred Stock with respect to voting,
dividends or liquidation preferences.
(b) So long as any shares of Series A Preferred are outstanding,
the Corporation shall not, without first obtaining the approval of the holders
of a majority of the then-outstanding shares of such Series A Preferred, voting
as a separate class, take any action that:
(i) alters the rights, preferences or privileges of the
Series A Preferred in any manner that is adverse to the holders thereof without
so effecting the entire class of Preferred Stock (provided, however, that the
creation of a new class or series of shares that is on a parity with the Series
A Preferred with respect to voting, dividends or liquidation preferences shall
not be deemed to constitute a materially adverse alteration of the rights,
preferences and privileges of the Series A Preferred); or
(ii) creates any new class or series of shares that has a
preference over the Series A Preferred with respect to voting, dividends or
liquidation preferences.
(c) So long as any shares of Series B Preferred are outstanding,
the Corporation shall not, without first obtaining the approval of the holders
of a majority of the then-outstanding shares of such Series B Preferred, voting
as a separate class, take any action that:
(i) alters the rights, preferences or privileges of the
Series B Preferred in any manner that is adverse to the holders thereof without
so effecting the entire class of Preferred Stock (provided however that the
creation of a new class or series of shares that is on a parity with the Series
B Preferred with respect to voting, dividends or liquidation preferences shall
not be deemed to constitute a materially adverse alteration of the rights,
preferences and privileges of the Series B Preferred); or
(ii) creates any new class or series of shares that has a
preference over the Series B Preferred with respect to voting, dividends or
liquidation preferences.
(d) So long as any shares of Series C Preferred are outstanding,
the Corporation shall not, without first obtaining the approval of the holders
of a majority of the
<PAGE>
then-outstanding shares of such Series C Preferred, voting as a separate class,
take any action that:
(i) alters the rights, preferences or privileges of the
Series C Preferred in any manner that is adverse to the holders thereof without
so effecting the entire class of Preferred Stock (provided however that the
creation of a new class or series of shares that is on a parity with the Series
C Preferred with respect to voting, dividends or liquidation preferences shall
not be deemed to constitute a materially adverse alteration of the rights,
preferences and privileges of the Series C Preferred); or
(ii) creates any new class or series of shares that has a
preference over the Series C Preferred with respect to voting, dividends or
liquidation preferences.
(e) So long as any shares of Series D Preferred are outstanding,
the Corporation shall not, without first obtaining the approval of the holders
of a majority of the then-outstanding shares of such Series D Preferred, voting
as a separate class, take any action that:
(i) alters the rights, preferences or privileges of the
Series D Preferred in any manner that is adverse to the holders thereof without
so effecting the entire class of Preferred Stock (provided however that the
creation of a new class or series of shares that is on a parity with the Series
D Preferred with respect to voting, dividends or liquidation preferences shall
not be deemed to constitute a materially adverse alteration of the rights,
preferences and privileges of the Series D Preferred); or
(ii) creates any new class or series of shares that has a
preference over the Series D Preferred with respect to voting, dividends or
liquidation preferences.
(e) So long as any shares of Series E Preferred are outstanding,
the Corporation shall not, without first obtaining the approval of the holders
of a majority of the then-outstanding shares of such Series E Preferred, voting
as a separate class, take any action that:
(i) alters the rights, preferences or privileges of the
Series E Preferred in any manner that is adverse to the holders thereof without
so effecting the entire class of Preferred Stock (provided however that the
creation of a new class or series of shares that is on a parity with the Series
E Preferred with respect to voting, dividends or liquidation preferences shall
not be deemed to constitute a materially adverse alteration of the rights,
preferences and privileges of the Series E Preferred); or
(ii) creates any new class or series of shares that has a
preference over the Series E Preferred with respect to voting, dividends or
liquidation preferences.
<PAGE>
V
A. To the fullest extent permitted by Delaware statutory or decisional
law, as amended or interpreted, no director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director. This Article V does not affect the
availability of equitable remedies for breach of fiduciary duties.
B. Any repeal or modification of this Article V shall be prospective and
shall not affect the rights under this Article V in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VI
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
1. The management of the business and the conduct of the affairs of
the Corporation shall be vested in the Board. The number of directors which
shall constitute the whole Board shall be fixed by the Board in the manner
provided in the Bylaws.
2. The Board may from time to time make, amend, supplement or repeal
the Bylaws.
3. The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.
VII
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation where such amendment,
alteration, change or repeal is prescribed by statute, in the manner prescribed
by such statute, and all rights conferred upon the stockholders herein are
granted subject to this right.
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for the Corporation under the
provision of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority-in-number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the
<PAGE>
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation."
4. This Amended and Restated Certificate of Incorporation has been duly
approved and adopted by the Board of Directors of this Corporation in accordance
with the provisions of Sections 242 and 245 of the General Corporation Law of
the State of Delaware.
5. This Amended and Restated Certificate of Incorporation has been duly
approved, in accordance with Section 242 of the General Corporation Law of the
State of Delaware, by the written consent of the holders of the majority of the
outstanding stock entitled to vote thereon, and a majority of the outstanding
stock of each class entitled to vote thereon as a class, and written notice of
such action has been given to the holders of such shares who did not so consent,
in each case in accordance with Section 228 of the General Corporation Law of
the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, Phone.coom, Inc. has caused this Amended and Restated
Certificate of Incorporation to be signed by the Chief Executive Officer and the
Secretary on this __th day of ___________, 1999.
PHONE.COM, INC.
By______________________________________
Alain Rossmann, Chief Executive Officer
ATTEST:
By_______________________________
Alain Rossmann, Secretary
<PAGE>
Exhibit 10.10
RELOCATION AGREEMENT
--------------------
This RELOCATION AGREEMENT (this "Agreement") is made and entered into as of
---------
December __, 1996 (the "Execution Date"), by and between UNWIRED PLANET, INC., a
--------------
Delaware corporation (the "Company"), and CHARLES PARRISH ("Employee").
------- --------
WHEREAS, the Company acknowledges that Employee is a key employee of the
Company; and
WHEREAS, the Company acknowledges the disparity in cost of living and
housing costs between Atlanta, Georgia, where Employee and his family currently
reside, and the San Francisco Bay Area, and wishes to induce Employee to
relocate from Atlanta to the San Francisco Bay Area without undue hardship; and
WHEREAS, the Company wishes to help ensure Employee's continued dedication
and loyalty to the Company:
NOW THEREFORE, the Company and Employee hereby agree as follows:
1. Relocation Compensation. The Company agrees to pay to Employee a
-----------------------
relocation compensation payment of $3,570 on the first day of each month
commencing September 1, 1996 through and including July 1, 2003 and a final
relocation compensation payment of $3,690 on August 1, 2003 (each such payment
is referred to as a "Payment" and each such date is referred to as a "Payment
------- -------
Date").
- ----
2. Term. This Agreement shall commence on the Execution Date and shall
----
expire on the earlier of (i) the Company's or Employee's termination of
Employee's employment with the Company, voluntarily or involuntarily, for any
reason or for no reason, or upon Employee's death or disability, and (ii) the
close of business on August 31, 2003. The Company's obligation to make any
Payment on any Payment Date, and Employee's right to receive any Payment on any
Payment Date, shall immediately terminate in the event Employee's employment
with the Company is terminated by the Company or Employee, voluntarily or
involuntarily, for any reason or for no reason, or upon Employee's death or
disability.
3. Expense Reimbursement. The Company agrees to reimburse Employee for
---------------------
all reasonable and customary moving and other relocation expenses to the extent
set forth on the attached Exhibit A. The Company shall pay such expenses upon
delivery to the Company of a receipt or other appropriate documentation for such
expenses.
4. No Employment Rights. Nothing contained in this Agreement is intended
--------------------
or shall be construed to confer upon Employee any rights to employment or
continued employment with the Company, or shall alter in any way the nature of
Employee's current employment with the Company.
5. Governing Law. This Agreement and all acts and transactions pursuant
-------------
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in
<PAGE>
accordance with the laws of the State of California applicable to contracts
wholly made and performed in the State of California.
6. Dispute Resolution. All actions or proceedings relating to the
------------------
Agreement shall be maintained in a court located in San Mateo County, State of
California, and the parties hereto expressly consent to (i) the personal
jurisdiction of the federal and state courts within San Mateo County,
California, and (ii) service of process being effected upon them by registered
mail sent to the address below.
7. Entire Agreement. This Agreement constitutes the entire agreement of
----------------
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings related to such subject matter.
8. Modification. This Agreement shall not be amended without the written
------------
consent of both parties hereto.
9. Severability. In the event that any provision hereof becomes or is
------------
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
10. Construction. This Agreement is the result of negotiations between
------------
and has been reviewed by each of the parties hereto and their respective
counsel; accordingly, this Agreement shall be deemed to be the product of all of
the parties hereto, and no ambiguity shall be construed in favor of or against
any one of the parties hereto.
11. Titles and Subtitles. The titles and subtitles used in this Agreement
--------------------
are used or convenience only and are not to be considered in construing or
interpreting this Agreement.
12. Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be personally delivered or sent by prepaid registered or
certified mail, return receipt requested, addressed to the other party at the
address shown below or at such other address for which such party give notice
hereunder. Notices sent be mail shall be deemed to have been given 72 hours
after deposit in the United States mail.
13. Counterparts. This Agreement may be executed in two or more
------------
counterparts each of which shall be deemed an original and all of which together
shall constitute one instrument.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.
BORROWER: COMPANY:
UNWIRED PLANET, INC.
A Delaware corporation
/s/ Charles Parrish By: /s/ Rick Smith
- ------------------------------- ------------------------------
CHARLES PARRISH Title: CFO
Address: 390 Bridge Parkway Address: 390 Bridge Parkway
Redwood Shores, CA 94065 Redwood Shores, CA 94065
-3-
<PAGE>
EXHIBIT A
Moving and Other Relocation Expenses
------------------------------------
A. Moving Expenses
The following expenses are eligible for reimbursements/payment by the
Company subject to the limitations indicated.
1. Transportation of household goods and automobiles; and
2. Packing and unpacking of household goods. Insurance is provided
based on the reasonable value of household goods.
B. In-Transit Expenses
-------------------
Reasonable in-transit travel expenses for Employee and his family from
the former location to the new location by the most direct route.
C. Sale of Home
------------
The Company will reimburse Employee for reasonable and customary
closing costs of Employee associated with the sale of Employee's primary
residence including:
1. Attorneys fees.
2. Real Estate commission not to exceed 6%.
3. Mortgage pre-payment penalties.
4. Tax stamps.
5. Recording fees.
6. Title insurance.
D. Purchase of Home
----------------
The Company will reimburse Employee for reasonable and customary costs
incurred in connection with the purchase of a home as follows:
1. Loan origination fees (2% maximum)
2. Title costs
3. Appraisal fees
4. Credit report fees
5. Transfer tax
6. Mortgage application fees
7. Recording fees
8. Termite/home inspection fees
<PAGE>
E. Tax Gross Up
------------
The Company will pay Employee an amount to provide a tax gross-up for
reimbursement of moving and other relocation expenses covered by this Exhibit A.
-2-
<PAGE>
LOAN AGREEMENT
--------------
This LOAN AGREEMENT (this "Agreement") is entered into as of December __,
---------
1996, by and between UNWIRED PLANET, INC., a Delaware corporation (the
"Company"), and CHARLES PARRISH ("Borrower").
------- --------
RECITALS
A. The Company wishes to provide Borrower with assistance in purchasing a
residence by lending Borrower money to help enable Borrower to make such a
purchase.
B. For the foregoing purpose, Borrower desires to have the right to borrow
and the Company is willing to lend to Borrower an amount in cash up to $300,000
subject to adjustment as set forth below, which loan shall be secured by a deed
of trust on such residence under the terms and conditions of this Agreement.
NOW, THEREFORE, the Company and Borrower agree as follows:
1. The Loan. Subject to the terms and conditions contained herein, the
--------
Company, upon 30 days advance written request made by Borrower prior to August
1, 2003, will lend to Borrower an amount in cash equal to $300,000 less the
aggregate amount of all payments made by the Company to Borrower pursuant to
Section 1 of that certain Relocation Agreement dated as of December __, 1996
between the Company and Borrower (the "Loan"). The date on which the Loan is
----
made is referred to as the "Loan Date."
---------
2. The Note. In consideration of the Company's delivery of the Loan on
--------
the Loan Date, Borrower will execute and deliver the Note Secured By Deed of
Trust (the "Note") in substantially the form attached hereto as Exhibit A.
----
3. Interest. The Loan will not bear interest.
--------
4. Deed of Trust. Borrower will additionally execute and deliver the Deed
-------------
of Trust With Assignment Of Rents to the Company as security for Borrower's
obligation to repay the Loan.
5. Use of Proceeds. Borrower agrees that the proceeds of the Loan will be
---------------
used only to purchase the new principal residence of Borrower.
6. No Employment Rights. Nothing contained in this Agreement or in any of
--------------------
the attachments or exhibits hereto is intended or shall be construed to confer
upon Borrower any right to employment or continued employment with the Company,
or shall alter in any way the nature of Borrower's current employment with the
Company.
7. Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
the respective heirs, personal representatives, successors and assigns of the
parties hereto.
<PAGE>
8. Governing Law. This Agreement and all acts and transactions pursuant
-------------
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of California
applicable to contracts wholly made and performed in the State of California.
9. Dispute Resolution. All actions or proceedings relating to this
------------------
Agreement shall be maintained in a court located in San Mateo County, State of
California, and the parties hereto expressly consent to (i) the personal
jurisdiction of the federal and state courts within San Mateo County,
California, and (ii) service of process being effected upon them by registered
mail sent to the address set forth below.
10. Entire Agreement. This Agreement constitutes the entire agreement of
----------------
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings related to such subject matter.
11. Modification. This Agreement shall not be amended without the written
------------
consent of both parties hereto.
12. Severability. In the event that any provision hereof becomes or is
------------
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
13. Construction. This Agreement is the result of negotiations between
------------
and has been reviewed by each of the parties hereto and their respective
counsel; accordingly, this Agreement shall be deemed to be the product of all of
the parties hereto, and no ambiguity shall be construed in favor of or against
any one of the parties hereto.
14. Titles and Subtitles. The titles and subtitles used in this Agreement
--------------------
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
15. Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be personally delivered or sent by prepaid registered or
certified mail, return receipt requested, addressed to the other party at the
address shown below or at such other address for which such party gives notice
hereunder. Notices sent by mail shall be deemed to have been given 72 hours
after deposit in the United States mail.
16. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
17. Further Acts. Each party hereto agrees to execute, acknowledge and
------------
deliver or to cause to have executed, acknowledged and delivered, such other and
further instruments and documents as may reasonably be requested by the other to
carry out the purposes of this Agreement.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
UNWIRED PLANET, INC.
By: /s/ Charles Parrish
- ------------------------------------
Title:
Address: 390 Bridge Parkway
Redwood Shores, CA 94065
/s/ Rick Smith
- ------------------------------------
Address: 390 Bridge Parkway
Redwood Shores, CA 94065
-3-
<PAGE>
EXHIBIT A
NOTE SECURED BY DEED OF TRUST
-----------------------------
$[LOAN AMOUNT] [LOAN DATE]
----------- ---------
Redwood Shores, California
FOR VALUE RECEIVED, the undersigned CHARLES PARRISH ("Borrower") HEREBY
--------
PROMISES TO PAY to the order of UNWIRED PLANET, INC., a Delaware corporation
(the "Company"), at its principal offices at 390 Bridge Parkway, Redwood Shores,
-------
California 94065, the sum of $[LOAN AMOUNT], on the terms and conditions
-----------
specified below:
1. Principal. The principal amount of the loan evidenced by this Note
---------
shall be due and payable as follows: (a) in ____ equal monthly principal
installments of $3,570 with the first principal payment due and payable on
__________, 19__ [THE LAST DAY OF THE MONTH IN WHICH THE LOAN IS MADE] and the
---------------------------------------------------
following ____ payments due and payable on the last date of each month
thereafter through June 30, 2003, and (b) in one final principal payment of
$3,690 (or such other amount as shall be due and payable hereunder) due and
payable on July 31, 2003 (each date on which any principal payment is due is
referred to as a "Payment Date").
------------
2. Interest. The loan evidenced by this Note will not bear interest.
--------
3. Application of Payments. Payment shall be made in lawful tender of the
-----------------------
United States and shall be applied to the payment of principal. Prepayment of
principal may be made any time without penalty.
4. Events of Acceleration. The entire unpaid principal sum of this Note,
----------------------
shall, at the option of the Company, become immediately due and payable upon the
occurrence of one or more of the following events:
A. the failure of the Borrower to pay when due under this Note any
installment of principal and the continuation of such default for more than
thirty (30) days; or
B. fifteen (15) days following the date the Borrower ceases for any
reason to provide substantial services to the Company; or
C. the failure of the Borrower to execute the Deed of Trust (as
defined below) on his principal residence in California within thirty (30) days
of a request from the Company; or
D. if the Borrower shall sell, convey or alienate said property, or
any part thereof, or shall be divested of this title or any interest therein in
any manner or way, whether voluntarily or involuntarily, without the written
consent of the Company being first had and obtained; or
E. the insolvency of the Borrower, the commission of any act of
bankruptcy by the Borrower, the execution by the Borrower of a general
assignment for the benefit of
<PAGE>
creditors, the filing by or against the Borrower of a general assignment for the
benefit of creditors, the filing by or against the Borrower of any petition in
bankruptcy or any petition for relief under the provisions of the federal
bankruptcy act or any other state or federal law for the relief of debtors and
the continuation of such petition without dismissal for a period of thirty (30)
days or more, the appointment of a receiver or trustee to take possession of any
property or assets of the Borrower, or the attachment of or execution against
any property or assets of the Borrower; or
F. the occurrence of any event of default under the Deed of Trust
securing this Note or any obligation secured thereby.
5. Employment Requirement. The benefits of the interest arrangements
----------------------
under this Note are not transferable by Borrower and are conditioned on the
future performance of substantial services by the Borrower. For purposes of
applying the provisions of this Note, the Borrower shall be considered to
provide substantial services to the Company for so long as the Borrower renders
services as a full-time employee of the Company.
6. Use of Proceeds; Security; Itemized Deductions. The proceeds of the
----------------------------------------------
loan evidenced by this Note were applied solely to the purchase of the
Borrower's principal residence in _____________, California. Payment of this
Note shall be secured by a Deed of Trust With Assignment of Rents (the "Deed of
-------
Trust") on such principal residence. Borrower, however, shall remain personally
- -----
liable for payment of this Note, and assets of the Borrower, in addition to the
collateral under the Deed of Trust, may be applied to the satisfaction of the
Borrower's obligations hereunder. Borrower hereby certifies that he reasonably
expects to be entitled to and will itemize deductions for each year the loan
evidenced by this Note is outstanding.
7. Collection. If action is instituted to collect this Note, the Borrower
----------
promises to pay all costs and expenses (including reasonable attorney fees)
incurred in connection withsuch action.
8. Waiver. No previous waiver and no failure or delay by the Company in
------
acting with respect to the terms of this Note or the Deed of Trust shall
constitute a waiver of any breach, default, or failure of condition under this
Note, the Deed of Trust or the obligations secured thereby. A waiver of any
term of this Note, the Deed of Trust or of any of the obligations secured
thereby must be made in writing and shall be limited to the express terms of
such waiver.
The Borrower waives presentment; demand; notice of dishonor; notice of
default or delinquency; notice of acceleration; notice of protest and
nonpayment; notice of costs,expenses or losses and interest thereon; notice of
interest on interest; and diligence in taking any action to collect any sums
owing under this Note or in proceeding against any of the rights or interests in
or to properties securing payment of this Note.
9. Conflicting Agreements. In the event of any inconsistencies between
----------------------
the terms of this Note and the terms of any other document related to the loan
evidenced by this Note, the terms of this Note shall prevail.
-2-
<PAGE>
10. Governing Law. This Note shall be governed by and construed in
-------------
accordance with the laws of the State of California applicable to contracts
wholly made and performed in the State of California.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed as of the
date and year first above written.
"BORROWER"
____________________________
Charles Parrish
-3-
<PAGE>
EXHIBIT 10.14
RSA DATA SECURITY(TM)
OEM MASTER LICENSE AGREEMENT
THIS OEM MASTER LICENSE AGREEMENT ("Agreement"), effective as of the
later date of execution ("Effective Date"), is entered into by and between RSA
Data Security, Inc., a Delaware corporation ("RSA"), having a principal address
at 100 Marine Parkway, Suite 500, Redwood City, California 94065, and the
entity named below ("OEM"), having a principal address as set forth below.
OEM:
Unwired Planet, a Delaware corporation
- ----------------------------------------------------
(Name and jurisdiction of incorporation)
390 Bridge Parkway
- ----------------------------------------------------
(Address)
Redwood Shores, CA 94065
- ----------------------------------------------------
- ----------------------------------------------------
OEM Legal Contact:
Rick Smith, CFO, 415-596-5216
--------------------------------------------
(name, telephone and title)
OEM Billing Contact:
Bill Bradley, Controller, 415-596-5288
--------------------------------------------
(name, telephone and title)
OEM Technical Contact:
Andy Laursen, V.P. Engineering, 415-596-5233
--------------------------------------------
(name, telephone and title)
OEM Commercial Contact:
Andy Laursen, V.P. Engineering, 415-596-5233
--------------------------------------------
(name, telephone and title)
TERRITORY:
[ ] North America (United States and Canada)
[X] Worldwide, subject to Section 10.7.
SEPARATE MAINTENANCE AGREEMENT: YES [X] NO [ ]
1. DEFINITIONS
The following terms when used in this Agreement shall have the following
meanings:
1.1 "BUNDLED PRODUCT(S)" means one or more of the products or
product groups described on a License/Product Schedule attached hereto and
referencing this Agreement which has been or will be developed by OEM and which
incorporates in the OEM Product in any manner any portion of the RSA Object
Code. A Bundled Product must represent a significant functional and value
enhancement to the Licensed Software such that the primary reason for an End
User Customer to license such Bundled Product is other than the right to receive
a license to the Licensed Software included in the Bundled Product.
1.2 "DISTRIBUTOR" means a dealer or distributor in the business of
reselling Bundled Products to End User Customers, directly or through one or
more Distributors, by virtue of authority of OEM. Bundled Products resold by a
Distributor shall bear OEM's trademarks and service marks and shall not be
privately labeled by such Distributor or other parties. A Distributor shall
have no right to modify any part of the Bundled Product.
1.3 "END USER CUSTOMER" means a person or entity licensing RSA
Object Code as part of a Bundled Product from OEM or a Distributor solely for
personal or internal use and without right to license, assign or otherwise
transfer such Bundled Product to any other person or entity.
1.4 "INTERFACE MODIFICATION" means a modification to the RSA Source
Code constituting and limited to hooks, ports or interfaces and similar
modifications necessary to permit the Licensed Software to operate in
accordance with the User Manual in OEM Products.
1.5 "LICENSE/PRODUCT SCHEDULE" means a schedule substantially in the
form of Exhibit "A" hereto completed and executed with respect to a Bundled
Product and specifying the Licensed Software, Field of Use limitation (if any),
license and maintenance fees, and other matters with respect to such Bundled
Product. A License/Product Schedule can be amended pursuant to Section 10.5
with respect to a specified Bundled Product; and additional Bundled Products
may be added to this Agreement by executing an additional License/Product
Schedule referencing this Agreement. All such License/Product Schedules are
incorporated in this Agreement by this reference.
1.6 "FIELD OF USE" means a use, method of incorporation or product
purpose limitation with respect to the Licensed Software for
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
Page 1
<PAGE>
a Bundled Product specified on the License/Product Schedule for such Bundled
Product.
1.7 "LICENSED SOFTWARE" means those portions of the RSA Software
which perform the algorithm(s) specified on page 2 of a License/Product Schedule
hereto as having been licensed by OEM with respect to a particular Bundled
Product.
1.8 "NEW RELEASE" means a version of the RSA Software which shall
generally be designated by a new version number which has changed from the prior
number only to the right of the decimal point (e.g., Version 2.2 to Version
2.3).
1.9 "NEW VERSION" means a version of the RSA Software which shall
generally be designated by a new version number which has changed from the prior
number to the left of the decimal point (e.g., Version 2.3 to Version 3.0).
1.10 "OEM PRODUCT" means any product developed by OEM into which the
Licensed Software is to be incorporated to create a Bundled Product.
1.11 "RSA OBJECT CODE" means the Licensed Software in machine-
readable, compiled object code form.
1.12 "RSA SOFTWARE" means RSA proprietary software identified on a
License/Product Schedule hereto and as further described in the User Manuals
associated therewith. "RSA Software" shall also include all modifications and
enhancements (including all New Releases and New Versions) to such programs as
may be provided by RSA to OEM pursuant to this Agreement or a maintenance
agreement between RSA and OEM.
1.13 "RSA SOURCE CODE" means the mnemonic, high level statement
versions of the Licensed Software written in the source language used by
programmers.
1.14 "TERRITORY" means those geographic areas specified on page 1.
1.15 "USER MANUAL" means the most current version of the user manual
and/or reference manual customarily supplied by RSA to OEMs who license the RSA
Software.
2. LICENSES
2.1 LICENSE GRANT. During the term and within the Field of Use
limitation (if any) specified in the applicable License/Product Schedule, RSA
hereby grants OEM a non-exclusive, non-transferable license to:
2.1.1 use, if a source code license is specified in a
License/Product Schedule, a single copy of the RSA Source Code on a single
central processing unit accessed by one user at a time to: (i) modify the RSA
Source Code solely to create interface Modifications; (ii) compile the RSA
Source Code to create object code; and (iii) maintain Bundled Products and
support End User Customers.
2.1.2 (i) incorporate the RSA Object Code into an OEM Product
to create a Bundled Product; (ii) reproduce and have reproduced the RSA Object
Code as incorporated in a Bundled Product as reasonably needed for inactive
backup or archival purposes and if an internal use license is specified in a
License/Product Schedule for distribution in the Territory solely to employees
of OEM and solely for use by such employees for OEM's internal business
purposes; and (iii) reproduce, have reproduced, and license or otherwise
distribute the RSA Object Code as incorporated in a Bundled Product in the
Territory.
2.1.3 (i) use the User Manual to support End User Customers;
(ii) modify and incorporate portions of the User Manual in Bundled Product
document; and (iii) reproduce, have reproduced and distribute in the Territory
such portions of the User Manual as incorporated in Bundled Product
documentation.
2.2 LIMITATIONS ON LICENSES. The licenses granted in Section 2.1 are further
limited as follows:
2.2.1 LIMITATION ON DISTRIBUTORS. The RSA Object Code shall be
licensed or otherwise distributed only to (i) Distributors and (ii) End User
Customers.
2.2.2 NO EXPOSURE OF RSA SOFTWARE. The RSA Object Code may
only be accessed by the functionality of the Bundled Product in which it is
included, and a Bundled Product shall not make the RSA Object Code directly
accessible to End User Customer or to products other than the Bundled Product.
2.2.3 NO STANDALONE PRODUCT OR SERVICES. OEM may not in any
way sell, lease, rent, license, sublicense or otherwise distribute the RSA
Software or any part thereof or the right to use the RSA Software or any part
thereof to any person or entity except as part of a Bundled Product. Unless a
specific grant of rights is included in the applicable License/Product Schedule,
neither OEM nor any Distributor or End User Customer may use the Bundled Product
to operate a service bureau or other revenue-generating service business.
2.2.4 LICENSE RESTRICTED TO LICENSED SOFTWARE AND FIELD OF
USE. OEM may use or incorporate into a Bundled Product only that portion of the
RSA Software which is identified as Licensed Software in the applicable
License/Product Schedule. The RSA Object Code must be incorporated in a Bundled
Products, and may only be reproduced, licensed or distributed in accordance with
the Field of Use limitation, if any, specified in the applicable
Licensed/Product Schedule.
2.2.5 PROHIBITED ACTIVITIES. OEM shall not modify (except to
create Interface Modifications), translate, reverse engineer, decompile or
disassemble the RSA Software or any part thereof and shall prohibit Distributors
and End User Customers from doing the same.
2.2.6 RSA ROOT KEYS. OEM may include the RSA/VeriSign, Inc.
root keys (the "RSA Root Keys") in any Bundled Product in which a hierarchy root
key is utilized or incorporated, provided that any such incorporation must make
the RSA Root Keys functional within the Bundled Product and as accessible as any
other hierarchy root key within the Bundled Product.
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2.3 Title.
2.3.1 IN RSA. Except for the limited licenses expressly
granted in Section 2.1 and as further limited by Section 2.2, RSA does not by
this Agreement grant to OEM any right, title or ownership interest in and to the
RSA Software or in any related patents, trademarks, copyrights or proprietary or
trade secret rights.
2.3.2 IN OEM. Except as expressly provided below, OEM does not
by this Agreement grant to RSA any right, title or ownership interest in and to
any Interface Modifications created by OEM as may be authorized hereunder or any
related patents, copyrights or proprietary or trade secret rights of OEM;
provided, however, that OEM hereby agrees that it will not assert against RSA
any of such patents, copyrights or proprietary or trade secret rights with
respect to any ports or interfaces developed by RSA without reference to the
source code of OEM's Interface Modifications.
3. LICENSE FEES
3.1 LICENSE FEES. In consideration of RSA's grant to OEM of the
limited license rights hereunder, OEM shall pay to RSA the amounts set forth
below (the "License Fees"):
3.1.1 SOURCE CODE LICENSE FEES. If RSA is granting to OEM RSA
Source Code license rights as indicated on a License/Product Schedule, OEM shall
pay to RSA the source code License Fees specified on such License/Product
Schedule upon execution of such License/Product Schedule.
3.1.2 OBJECT CODE LICENSE FEES. In consideration of RSA's
grant to OEM of the RSA Object Code license rights for the Bundled Products
described in each License/Product Schedule, OEM shall pay to RSA the object code
License Fees specified on each such License/Product Schedule in accordance with
the terms contained therein.
3.2 TAXES. All taxes, duties, fees and other governmental charges
of any kind (including sales and use taxes, but excluding taxes based on the
gross revenues or net income of RSA) which are imposed by or under the authority
of any government or any political subdivision thereof on the License Fees or
any aspect of this Agreement shall be borne by OEM and shall not be considered a
part of, a deduction from or an offset against License Fees.
3.3 PREPAYMENT OF LICENSE FEES. OEM shall prepay License Fees in
the amount set forth in a License/Product Schedule, if any, upon execution of
the License/Product Schedule. In no event shall such prepayment be refundable.
If OEM has prepaid License Fees with respect to a Bundled Product, all of such
prepaid amounts may be offset against License Fees accrued at a rate of fifty
cents ($0.50) for each dollar ($1.00) of License Fees accrued until the
prepayments are exhausted. OEM shall show the application of prepaid License
Fees in the licensing reports provided to RSA pursuant to Section 3.7.
3.4 USE OF NET SALES PRICE. If a License Fees based on Net Sales
Price is specified in a License/Product Schedule, the "Net Sales Price" means
the gross amount of all cash, in-kind or other consideration receivable by OEM
at any time in consideration of the licensing or other distribution of the
Bundled Products, excluding any amounts receivable by OEM for sales and use
taxes, shipping, insurance and duties, and reduced by all discounts, refunds or
allowances granted in the ordinary course of business. For the purposes of
determining Net Sales Price, the amount of in-kind or other non-cash
consideration receivable by OEM shall be deemed to have a dollar value equal to
the standard price (as listed in OEM's published price schedule on the date of
the grant of the license or the sale in question) for such Bundled Product, less
all cash paid.
3.5 TERMS OF PAYMENT. Object code License Fees payable on an on-
going basis shall accrue with respect to Bundled Products licensed or otherwise
distributed by OEM or Distributors, as applicable, upon the date of invoice of
the Bundled Product to an End User Customer or Distributor. License Fees due RSA
hereunder shall be paid by OEM to the attention of the Software Licensing
Department at RSA's address set forth above on or before the thirtieth (30th)
day after the close of the calendar quarter during which the License Fees
accrued. A late payment penalty on any License Fees not paid when due shall be
assessed at the rate of one percent (1%) per thirty (30) days, beginning on the
thirty-first (31st) day after the last day of the calendar quarter to which the
delayed payment relates.
3.6 U.S. CURRENCY. All payments hereunder shall be made in lawful
United States currency and shall in no case be refundable. If OEM receives
payment in foreign currencies, the amount of its License Fees to RSA shall be
calculated using the closing exchange rate published in The Wall Street Journal,
Western Edition, on the last business day such journal is published in the
calendar quarter immediately preceding the date of payment.
3.7 LICENSING REPORT. A report in reasonably detailed form setting
forth the calculation of License Fees due from OEM and signed by a responsible
officer of OEM shall be delivered to RSA on or before the thirtieth (30th) day
after the close of each calendar quarter during the term of this Agreement,
regardless of whether License Fee payments are required to be made pursuant to
Section 3.5. The report shall include, at a minimum, the following information
(if applicable to the method of calculating License Fees designated in a
Licensed/Product Schedule) with respect to the relevant quarter; (i) the total
number of copies/units of Bundled Products licensed or otherwise distributed by
OEM and Distributors (indicating the names and versions thereof); (ii) if
applicable, the total Net Sales Price invoiced to Distributors and End User
Customers; and (iii) total License Fees accrued.
3.8 AUDIT RIGHTS. RSA shall have the right, at its sole cost and
expense, to have an independent certified public accountant conduct during
normal business hours and not more frequently than annually, an audit of the
appropriate records of OEM to verify the number of copies/units of Bundled
Products licensed or otherwise distributed by OEM and OEM's calculation of
License Fees. If the License Fees accrued are different than those reported, OEM
will be invoiced or credited for the difference, as applicable. Any additional
License Fees, along with the late payment penalty assessed in accordance with
Section 3.5, shall be payable within thirty (30) days of such invoice. If the
deficiency in License Fees paid by OEM is greater
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than five percent (5%) of the License Fees reported by OEM for any quarter. OEM
will pay the reasonable expenses associated with such audit, in addition to the
deficiency.
3.9 EVALUATION COPIES. OEM may deliver copies of Bundled Products to
prospective End User Customers on a trial basis for evaluation purposes only
(each, an "Evaluation Copy") provided that each such prospective End User
Customer has received a written or electronic trial license prohibiting the End
User Customer from copying, modifying, reverse engineering, decompiling or
disassembling the RSA Object Code or any part thereof. All Evaluation Copies
licensed shall contain a feature which disables the Evaluation Copy no later
than sixty (60) days after delivery to the prospective End User Customer. No
License Fees shall be reportable or payable with respect to Evaluation Copies
unless and until the Evaluation Copy is replaced with or converted to a standard
Bundled Product or the End User Customer is invoiced for the Bundled Product,
whichever occurs first.
4. LIMITED WARRANTY
4.1 LIMITED WARRANTY. During the initial ninety (90)-day term of
each License/Product Schedule RSA warrants that the Licensed Software specified
in such License/Product Schedule will operate in material conformance to RSA's
published specifications for the Licensed Software. RSA does not warrant that
the RSA Software or any portion thereof is error-free. OEM's exclusive remedy,
and RSA's entire liability in tort, contract or otherwise, shall be correction
of any warranted nonconformity as provided in Section 4.2 below. This limited
warranty and any obligations of RSA hereunder shall not apply to any interface
Modifications or any nonconformities caused thereby and shall terminate
immediately if OEM makes any modification to the RSA Software other than
interface Modifications.
4.2 ERROR CORRECTION. In the event OEM discovers an error in the
Licensed Software which causes the Licensed Software not to operate in material
conformance to RSA's published specifications therefor, OEM shall submit to RSA
a written report describing such error in sufficient detail to permit RSA to
reproduce such error. Upon receipt of any such written report, RSA will use its
reasonable business judgment to classify a reported error as either: (i) a
"Level 1 Severity" error, meaning an error that causes the Licensed Software to
fail to operate in a material manner or to produce materially incorrect results
and for which there is no work around or only a difficult work around; or (ii) a
"Level 2 Severity" error, meaning an error that produces a situation in which
the Licensed Software is usable but does not function in the most convenient or
expeditious manner, and the use or value of the Licensed Software suffers no
material impact. RSA will acknowledge receipt of a conforming error report
within two (2) business days and (A) will use its continuing best efforts to
provide a correction for any Level 1 Severity error to OEM as early as
practicable; and (B) will use its reasonable efforts to include a correction for
any Level 2 Severity error in the next release of the RSA Software.
4.3 DISCLAIMER. EXCEPT FOR THE EXPRESS LIMITED WARRANTY PROVIDED IN
THIS SECTION 4, THE RSA SOFTWARE IS PROVIDED "AS IS" WITHOUT ANY WARRANTY
WHATSOEVER. RSA DISCLAIMS ALL WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO
ANY MATTER WHATSOEVER, INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT OF THIRD PARTY RIGHTS. RSA
DISCLAIMS ANY WARRANTY OR REPRESENTATION TO ANY PERSON OTHER THAN OEM WITH
RESPECT TO THE RSA SOFTWARE. OEM SHALL NOT, AND SHALL TAKE ALL MEASURES
NECESSARY TO INSURE THAT ITS AGENTS AND EMPLOYEES DO NOT, MAKE OR PASS THROUGH
ANY SUCH WARRANTY ON BEHALF OF RSA TO ANY DISTRIBUTOR, END USER CUSTOMER OR
OTHER THIRD PARTY.
5. ADDITIONAL OBLIGATIONS OF OEM
5.1 BUNDLED PRODUCT MARKETING. OEM is authorized to represent to
Distributors and End User Customers only such facts about the RSA Software as
RSA states in its published product descriptions, advertising and promotional
materials or as may be stated in other non-confidential written material
furnished by RSA.
5.2 CUSTOMER SUPPORT. OEM shall, at its expense, provide all support
for the Bundled Products to Distributors and End User Customers.
5.3 LICENSE AGREEMENTS. OEM shall cause to be delivered to each
Distributor and End User Customer a license agreement which shall contain, at a
minimum, substantially all of the limitations of rights and the protections for
RSA which are contained in Sections 2.2, 5.4, 7, 10.7 and 10.8 of this
Agreement. OEM shall use commercially reasonable efforts to enforce the terms of
such agreements.
5.4 PROPRIETARY RIGHTS.
5.4.1 COPYRIGHT NOTICES: LICENSE SEALS. OEM agrees not to
remove or destroy any proprietary, trademark or copyright markings or notices
placed upon or contained within the RSA Source Code, RSA Object Code, User
Manuals or any related materials or documentation. OEM further agrees to insert
and maintain: (i) within every Bundled Product and any related materials or
documentation a copyright notice in the name of OEM; and (ii) within the splash
screens, user documentation, printed product collateral, product packaging and
advertisements for the Bundled Product, the RSA "License Seal" from the form
attached as Exhibit "B" to this Agreement and a statement that the Bundled
Product contains the RSA Software.
5.4.2 TRADEMARKS. By reason of this Agreement or the
performance hereof, OEM shall acquire no rights of any kind in any RSA
trademark, trade name, logo or product designation under which the RSA Software
was or is marketed and OEM shall not make any use of the same for any reason
except as expressly authorized by this Agreement or otherwise authorized in
writing by RSA. OEM shall cease to use the markings, or any similar markings, in
any manner of the expiration or other termination of this Agreement.
6. CONFIDENTIALITY
6.1 CONFIDENTIALITY. Each party acknowledges that in its performance
of its duties hereunder, the other party may communicate to it (or its
designees) certain confidential and proprietary information of such party,
including the RSA Software (in the case of RSA) and know-
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how technology, techniques, and business, product and marketing plans of each
such party (collectively, the "Know-How"), all of which are confidential and
proprietary to, and trade secrets of, the disclosing party. The receiving party
agrees to hold the Know-How disclosed to it and, in the case of OEM the RSA
Software, within its own organization and shall not, without the specific
written consent of the disclosing party or as expressly authorized herein,
utilize in any manner, publish, communicate, or disclose any part of the
disclosing party's Know-How or the RSA Software (in the case of OEM) to third
parties. This Section 6.1 shall impose no obligations on either party with
respect to any Know-How which: (i) is in the public domain at the time disclosed
by the disclosing party; (ii) enters the public domain after disclosure other
than by a breach of the receiving party's obligations hereunder or by a breach
of another party's confidentiality obligation; or (iii) is shown by documentary
evidence to have been known by the receiving party prior to its receipt from the
disclosing party. Each party will take such steps as are consistent with its
protection of its own confidential and proprietary information (but will in no
event exercise less than reasonable care) to insure that the provisions of this
Section 6.1 are not violated by its End User Customers, Distributors, employees,
agents or any other person.
6.2 SOURCE CODE. OEM acknowledges the extreme importance of the
confidentiality and trade secret status of the RSA Source Code and OEM agrees,
in addition to complying with the requirements of Section 6.1 as it relates to
the RSA Source Code, to: (i) only use the RSA Source Code at the address set
forth on page 1 hereof or such alternate location specified in the applicable
License/Product Schedule; (ii) inform any employee that is granted access to all
or any portion of the RSA Source Code of the importance of preserving the
confidentiality and trade secret status of the RSA Source Code; and (iii)
maintain a controlled, secure environment for the storage and use of the RSA
Source Code.
6.3 PUBLICITY. Neither party will disclose to third parties, other
than its agents and representatives on a need-to-know basis, the terms of this
Agreement or any exhibits hereto (including without limitation any
License/Product Schedule) without prior written consent of the other party,
except (i) either party may disclose such terms to the extent required by law;
(ii) either party may disclose the existence of this Agreement; and (iii) RSA
shall have the right to disclose that OEM is an OEM of the RSA Software and that
any publicly-announced Bundled Product incorporates the RSA Software.
7. LIMITATION OF LIABILITY. IN NO EVENT WILL EITHER PARTY BE LIABLE TO
THE OTHER FOR INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES
ARISING OUT OR RELATED TO THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO LOST
PROFITS, BUSINESS INTERRUPTION OR LOSS OF BUSINESS INFORMATION, EVEN IF SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, REGARDLESS OF WHETHER
ANY ACTION OR CLAIM IS BASED ON WARRANTY, CONTRACT, TORT OR OTHERWISE; (i)
EXCEPT FOR RSA'S OBLIGATIONS ARISING UNDER SECTION 8, UNDER NO CIRCUMSTANCES
SHALL RSA'S TOTAL LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT EXCEED
THE TOTAL AMOUNT PAID BY OEM HEREUNDER, AND (ii) EXCEPT FOR OEM'S LIABILITY
RESULTING FROM BREACH OF SECTIONS 2 AND 6. UNDER NO CIRCUMSTANCES SHALL OEM'S
TOTAL LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT EXCEED THREE (3)
TIMES THE TOTAL AMOUNT PAYABLE BY OEM TO RSA HEREUNDER.
8. INTELLECTUAL PROPERTY INDEMNITY
8.1 DUTY TO DEFEND. RSA agrees that it shall, at its own expense,
defend, or at its option settle, any action instituted against OEM, and pay any
award or damages assessed or settled upon against OEM resulting from such
action, insofar as the same is based upon a claim that any Licensed Software
used within the terms of this Agreement and the applicable License/Product
Schedule infringes any United States patent, copyright or trade secret or a
claim that RSA has no right to license the Licensed Software hereunder, provided
that OEM gives RSA: (i) prompt notice in writing of such action, (ii) the right
to control and direct the investigation, preparation, defense and settlement of
the action; and (iii) reasonable assistance and information.
8.2 RSA OPTIONS. If, as a result of any binding settlement among the
parties or a final determination by a court of competent jurisdiction, any of
the Licensed Software is held to infringe and is use is enjoined, or if RSA
reasonably determines in its sole discretion that the Licensed Software may
become subject to an injunction, RSA shall have the option to: (i) obtain the
right to continue use of the Licensed Software; (ii) replace or modify the
Licensed Software so that it is no longer infringing; or (iii) refund the
License Fees paid by OEM hereunder less depreciation for use assuming straight
line depreciation over a five (5)-year useful life and terminate the Agreement.
8.3. EXCLUSIONS. Notwithstanding the foregoing, RSA shall have no
liability under this Section 8 if the alleged infringement arises from (i) the
use, in the manner specified in the relevant User Manual, of other than the
current unaltered (including Interface Modifications) release of the Licensed
Software, or (ii) combination of the Licensed Software with other equipment or
software not provided by RSA, if such action would have been avoided but for
such use or combination.
8.4 EXCLUSIVE REMEDY. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THIS AGREEMENT, THE FOREGOING STATES RSA'S ENTIRE LIABILITY AND OEM'S EXCLUSIVE
REMEDY FOR PROPRIETARY RIGHTS INFRINGEMENT.
9. TERM AND TERMINATION
9.1 TERM. The license rights granted hereunder shall be effective
with respect to each Licensed/Product Schedule as of the date thereof and shall
continue in full force and effect for each item of Licensed Software for the
period set forth on the applicable Licensed/Product Schedule unless sooner
terminated pursuant to the terms of this Agreement.
9.2 TERMINATION. Either party shall be entitled to terminate this
Agreement at any time on written notice to the other in the event of a material
default by the other party and a failure to cure such default within a period of
thirty (30) days following receipt of written notice specifying that a default
has occurred.
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9.3 INSOLVENCY. Upon (i) the institution of any proceedings by or
against either party seeking relief, reorganization or arrangement under any
laws relating to insolvency, which proceeding are not dismissed within sixty
(60) days; (ii) the assignment for the benefit of creditors, or the appointment
of a receiver, liquidator or trustee, of any of either party's property or
assets; or (iii) the liquidation, dissolution or winding up of either party's
business; then and in any such events this Agreement may immediately be
terminated by the other party upon written notice.
9.4 TERMINATION FOR CONVENIENCE. The parties acknowledge and agree
that OEM may at any time delay, interrupt or cease use of the Licensed Software,
but this Agreement and all the terms and conditions contained herein or any
applicable License/Product Schedule shall continue in full force, including any
obligations to make quarterly reports. OEM may elect to terminate this Agreement
upon ninety (90) days written notice and it is expressly understood that such
termination shall not discharge any payment obligations accrued as of the date
of such termination or entitle OEM to a refund of any amounts previously paid to
RSA.
9.5 EFFECT OF TERMINATION. Upon the expiration or termination of
this Agreement (or the license rights under a particular License/Product
Schedule), OEM shall cease making copies of, using or licensing the RSA
Software, User Manual and Bundled Products, excepting only such copies of
Bundled Products necessary to fill orders placed with OEM prior to such
expiration or termination. OEM shall destroy all copies of the RSA Software,
User manual and Bundled Products not subject to any then-effective license
agreement with an End User Customer and all information and documentation
provided by RSA to OEM (including all Know-How), other than such copies of the
RSA Object Code, the User Manual and the Bundled Products as are necessary to
enable OEM to perform its continuing support obligations in accordance with
Section 5.2, if any. Notwithstanding the foregoing, if OEM has licensed RSA
Source Code hereunder, for a period of one (1) year after the date of expiration
or termination of the license rights granted under this Agreement for any reason
other than as a result of default or breach by OEM, OEM may retain one (1) copy
of the RSA Source Code and is hereby licensed for such term to use such copy
solely for the purpose of supporting End User Customers. Upon the expiration of
such one (1)-year period, OEM shall return such single copy of the RSA Source
Code to RSA or certify to RSA that the same has been destroyed. Any expiration
or termination shall not discharge any obligation to pay License Fees which have
accrued or are owing as of the effective date of such expiration or termination.
9.6 SURVIVAL OF CERTAIN TERMS. The following provisions shall
survive any expiration or termination: 2.2, 2.3, 3.8, 4.3, 6, 7, 9 and 10.
10. MISCELLANEOUS PROVISIONS
10.1 GOVERNING LAW AND JURISDICTION. This Agreement will be governed
by and construed in accordance with the laws of the State of California,
irrespective of its choice of law principles. All disputes arising out of this
Agreement will be subject to the exclusive jurisdiction and venue of the
California state courts and the United States District Court for the Northern
District of California, and the parties consent to the personal and exclusive
jurisdiction of these courts. The parties agree that the United Nations
Convention on Contracts for the International Sale of Goods shall not apply to
this Agreement.
10.2 BINDING UPON SUCCESSORS AND ASSIGNS. Except as otherwise
provided herein, this Agreement shall be binding upon, and inure to the benefit
of, the successors, representatives, administrators and assigns of the parties
hereto. Notwithstanding the generality of the foregoing, this Agreement shall
not be assignable by OEM, by operation of law or otherwise, without the prior
written consent of RSA, which shall not be unreasonably withheld; provided,
however, that RSA may withhold its consent to the assignment of this Agreement
with respect to any License/Product Schedule providing for a paid-up License
Fee. Any such purported assignment or delegation without RSA's written consent
shall be void and of no effect.
10.3 SEVERABILITY. If any provision of this Agreement is found to be
invalid or unenforceable, such provision shall be severed from the Agreement and
the remainder of this Agreement shall be interpreted so as best to reasonably
effect the intent of the parties hereto. It is expressly understood and agreed
that each and every provision of this Agreement is intended by the parties to be
severable and independent of any other provision and to be enforced as such.
10.4 ENTIRE AGREEMENT. This Agreement and the exhibits and schedules
hereto constitute the entire understanding and agreement of the parties hereto
with respect to the subject matter hereof and supersede all prior and
contemporaneous agreements, representations and understandings between the
parties.
10.5 AMENDMENT AND WAIVERS. Any term or provision of this Agreement
may be amended, and the observance of any term of this Agreement may be waived,
only by a writing signed by the party to be bound.
10.6 NOTICES. Any notice, demand, or request with respect to this
Agreement shall be in writing and shall be effective only if it is delivered by
hand or mailed, certified or registered mail, postage prepaid, return receipt
requested, addressed to the appropriate party at its address set forth on page
1. Such communications shall be effective when they are received by the
addressee; but if sent by certified or registered mail in the manner set forth
above, they shall be effective not later than ten (10) days after being
deposited in the mail. Any party may change its address for such communications
by giving notice to the other party in conformity with this Section.
10.7 EXPORT COMPLIANCE AND FOREIGN RESHIPMENT LIABILITY. THIS
AGREEMENT IS EXPRESSLY MADE SUBJECT TO ANY LAWS, REGULATIONS, ORDERS OR OTHER
RESTRICTIONS ON THE EXPORT FROM THE UNITED STATES OF AMERICA OF THE RSA SOFTWARE
OR BUNDLED PRODUCTS OR OF INFORMATION ABOUT THE RSA SOFTWARE OR BUNDLED PRODUCTS
WHICH MAY BE IMPOSED FROM TIME TO TIME BY THE GOVERNMENT OF THE UNITED STATES OF
AMERICA. NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY,
OEM SHALL NOT EXPORT OR REEXPORT, DIRECTLY OR INDIRECTLY, ANY RSA SOFTWARE OR
BUNDLED PRODUCTS OR INFORMATION PERTAINING THERETO TO ANY COUNTRY TO WHICH SUCH
EXPORT OR REEXPORT IS
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RESTRICTED OR PROHIBITED, OR AS TO WHICH SUCH GOVERNMENT OR ANY AGENCY THEREOF
REQUIRES AN EXPORT LICENSE OR OTHER GOVERNMENTAL APPROVAL AT THE TIME OF EXPORT
OR REEXPORT WITHOUT FIRST OBTAINING SUCH LICENSE OR APPROVAL.
10.8 FEDERAL GOVERNMENT LICENSE. OEM and each of OEM's Distributors
shall in all proposals and agreements with the United States government or any
contractor of the United States government identify and license the Bundled
Product, including the RSA Object Code incorporated therein, as follows: (i)
for acquisition by or on behalf of civilian agencies, as necessary to obtain
protection as "commercial computer software" and related documentation in
accordance with the terms of OEM's or such Distributor's customary license, as
specified in 48 C.F.R. 12.212 of the Federal Acquisition Regulations and its
successor regulations; or (ii) for acquisition by or on behalf of units of the
Department of Defense, as necessary to obtain protection as "commercial
computer software" as defined in 48 C.F.R. 227.7014(a)(1) of the Department of
Defense Federal Acquisition Regulation Supplement (DFARS) and related
documentation in accordance with the terms of OEM's or such Distributor's
customary license, as specified in 48 C.F.R. 227.7202.1 of DFARS and its
successor regulations.
10.9 REMEDIES NON-EXCLUSIVE. Except as otherwise expressly provided,
any remedy provided for in this Agreement is deemed cumulative with, and not
exclusive of, any other remedy provided for in this Agreement or otherwise
available at law or in equity. The exercise by a party of any remedy shall not
preclude the exercise by such party of any other remedy.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date of the last signature below.
OEM:
UNWIRED PLANET, INC.
By: /s/ Rick Smith
------------------------------------
Printed Name: Rick Smith
--------------------------
Title: CFO
---------------------------------
Date: 11/27/96
----------------------------------
RSA DATA SECURITY, INC.
By: /s/ D. James Bidzos
------------------------------------
Printed Name: D. James Bidzos
--------------------------
Title: President
---------------------------------
Date: 12/2/96
----------------------------------
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License/Product Schedule Number: 7-UPI-O-LPS-4
EXHIBIT "A"
LICENSE/PRODUCT SCHEDULE
OEM:
Unwired Planet
- ------------------------------------------------------------------------------
OEM Master License Agreement Number:
1196-UPI-O-MLA-1 (the "Agreement")
- ------------------------------------------------------------------------------
Date of OEM Master License Agreement:
November 30, 1996
- ------------------------------------------------------------------------------
This License/Product Schedule Amends Schedules
Dated:
N/A
- ------------------------------------------------------------------------------
Term of Agreement for this Bundled Product:
Perpetual
- ------------------------------------------------------------------------------
Bundled Products:
OEM's products currently known as 1) "Secure Port," an add-on module to UP Link
(a Bundled Product from License/Product Schedule #UPI-0297-O-LPS-3) which
activates secure messaging notification functionality to UP Link ("Server
Bundled Product"), and 2) "Unwired Planet SDK" ("SDK Client Bundled Product"),
a software development kit which allows third party developers to add
functionality to an application so that the application may engage in secure
messaging notification only with the Server Bundled Product to prevent domain
name spoofing between Push Content Providers (defined below) and their
customers utilizing wireless telecommunication systems of Service Carriers
(defined below).
RSA Software:
BSAFE v.3.0 (provided by RSA on Solaris, Windows 95 and Windows NT platforms)
OEM may obtain copies of the RSA Software on other platforms as may be generally
available at RSA's then current published price list, each additional platform
version of which will be covered RSA Software under this Licensed/Product
Schedule.
Delivery of RSA Software to OEM:
One (1) copy of each of the RSA Object Code, the RSA Source Code (if licensed
hereunder) and the User Manual for the RSA Software identified above:
[X] have been received by OEM, or
[ ] will be delivered by RSA as soon as practicable, but not later than
ten (10) business days after the date of execution of this License/Product
Schedule.
<PAGE>
RSA Data Security, Inc.
Exhibit "A"
Page 2
LICENSED SOFTWARE AND FIELD OF USE RESTRICTION FOR THIS BUNDLED PRODUCT
<TABLE>
<CAPTION>
RIGHT TO
INCLUDE
OBJECT
SOURCE CODE IN DESCRIBE
CODE BUNDLED FIELD OF USE FIELD OF USE
LICENSE PRODUCT RESTRICTION RESTRICTION
BSAFE YES NO YES NO YES NO
<S> <C> <C> <C> <C> <C> <C> <C>
RSA Public Key Cryptosystem [ ] [X] [X] [ ] [X] [ ] */
Diffie-Hellman Key Negotiation [ ] [X] [X] [ ] [X] [ ] */
Bloom-Shamir Secret Sharing [ ] [X] [X] [ ] [X] [ ] */
Data Encryption Standard (DES) [ ] [X] [X] [ ] [X] [ ] */
Extended Data Encryption [ ] [X] [X] [ ] [X] [ ] */
Standard (DESX)
Triple DES (3DES) [ ] [X] [X] [ ] [X] [ ] */
RC2 Variable-Key Size [ ] [X] [X] [ ] [X] [ ] */
Symmetric Block Cipher
RC4 Variable-Key Size [ ] [X] [X] [ ] [X] [ ] */
Symmetric Stream Cipher
RC5 Variable-Key Size [ ] [X] [X] [ ] [X] [ ] */
Symmetric Block Cipher
MD Hashing Algorithm [ ] [X] [X] [ ] [X] [ ] */
MD2 Hashing Algorithm [ ] [X] [X] [ ] [X] [ ] */
MD5 Hashing Algorithm [ ] [X] [X] [ ] [X] [ ] */
Secure Hashing Algorithm [ ] [X] [X] [ ] [X] [ ] */
(SHA)
Digital Signature Algorithm [ ] [X] [X] [ ] [X] [ ] */
(DSA)
TIPEM (all set forth below) [ ] [X] [X] [ ] [X] [ ] */
RSA Public Key Cryptosystem
Data Encryption Standard (DES)
RC2 Variable Key Size
Symmetric Block Cipher
MD2 Hashing Algorithm
MD5 Hashing Algorithm
BCERT [ ] [X] [X] [ ] [X] [ ] */
- --------------------
</TABLE>
<PAGE>
RSA Data Security, Inc.
Exhibit "A"
Page 3
*/ Solely for authentication and privacy between applications built with the
SDK Client Bundled Product and Server Bundled Product utilizing the SSL
protocol. The SDK Client Bundled Product shall not communicate with any other
server products.
<PAGE>
RSA Data Security, Inc.
Exhibit "A"
Page 4
LICENSE FEES
Source Code License Fee for this License/Product Schedule:
N/A
Object Code License Fees for this License/Product Schedule:
Fixed Dollar License Fee. [*] for each copy/unit of the Server Bundled Product.
Offset Rate. Notwithstanding the provisions of the third sentence of Section
3.3 of the Agreement to the contrary, OEM shall have the right to offset
accrued License Fees with respect to the Bundled Products covered by this
License/Product Schedule on a dollar-for-dollar basis.
Prepayment of License Fees for this License/Product Schedule: [*], payable upon
execution of this License/Product Schedule.
Present Annual Maintenance Fee for this License/Product Schedule: [*].
SPECIAL TERMS AND CONDITIONS: The following Special Terms and Conditions shall
apply to the Bundled Product covered under this License/Product Schedule:
1. Distribution Channel: The parties contemplate distribution of the SDK
Client Bundled Product in order to allow secure messaging notification as
follows: End User Customers ("Push Content Providers") may securely deliver or
"push" their content (such as advertisements and URLs) through the wireless
system of the wireless telecommunications service provider ("Service Carrier")
using the Server Bundled Product's secure messaging notification functionality,
which is located within the UP.Link Bundled Product, so that the content
securely reaches the Service Carrier's subscribers. The Push Content Providers
may do so by downloading off OEM's website the SDK Client Bundled Product and
thereupon building applications which communicate directly with the Server
Bundled Product to engage in such secure messaging notification.
THE PROVISIONS OF THIS LICENSE/PRODUCT SCHEDULE ARE PROVIDED AS A BASIS OF
DISCUSSION BETWEEN OEM AND RSA AND WILL BECOME BINDING UPON THE PARTIES ONLY IF
(1) OEM HAS EXECUTED A OEM MASTER LICENSE AGREEMENT AND HAVE INDICATED THEIR
ACCEPTANCE OF THE TERMS CONTAINED IN THIS LICENSE/PRODUCT SCHEDULE BY THEIR
SIGNATURES BELOW ON OR BEFORE SEPTEMBER 26, 1997; AND (2) RSA HAS EXECUTED THE
OEM MASTER LICENSE AND THIS LICENSE/PRODUCT SCHEDULE.
OEM:
UNWIRED PLANET, INC.
By: /s/ Alan J. Black
-------------------------------------
Printed Name: Alan J. Black
--------------------------
Title: CFO
----------------------------------
Date: 9/17/97
-----------------------------------
RSA DATA SECURITY, INC.
By: /s/ D James Bidzos
-------------------------------------
Printed Name: D. James Bidzos
--------------------------
Title: CEO & President
----------------------------------
Date: 9/25/97
-----------------------------------
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
RSA DATA SECURITY, INC.
By: /s/ D. James Bidzos
------------------------------------
Printed Name: D. James Bidzos
--------------------------
Title: CEO & President
---------------------------------
Date: 9/25/97
----------------------------------
Page 4
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
AMENDMENT NUMBER ONE TO
OEM MASTER LICENSE AGREEMENT
THIS AMENDMENT NUMBER ONE TO OEM MASTER LICENSE AGREEMENT (the
"AMENDMENT"), effective as of the date of the later signature below, is entered
into between RSA Data Security, Inc., a Delaware corporation ("RSA"), and
Unwired Planet, Inc., a Delaware corporation ("OEM").
R E C I T A L S
A. RSA and OEM entered into that certain OEM Master License
Agreement No. 1196-UPI-O-MLA-1 dated as of November 30, 1996 (the "AGREEMENT"),
pursuant to which RSA granted to OEM certain limited rights in the RSA Software.
B. The parties now wish to amend the Agreement as set forth in this
Amendment.
A G R E E M E N T
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined in
this Amendment shall have the meanings designated in the Agreement.
2. SECTION 5.3. For purposes of License/Product Schedule No.
0598-UPI-O-LPS-5 (Exhibit "A"), the parties hereto agree to amend Section 5.3
of the OEM Agreement, to read in its entirety as follows:
"OEM shall cause to be delivered to each Distributor and End User
Customer a license agreement which shall contain, at a minimum,
substantially all of the limitations of rights and the protections for
RSA which are contained in Section 2.2, 5.4, 7, 10.7 and 10.8 of the
Agreement; provided, however, that in the event a Distributor is a
wireless device manufacturer that incorporated Bundled Product into its
wireless devices (a "Wireless Device Manufacturer"), then OEM shall
cause to be included in its license with such Wireless Device
Manufacturer provisions with, at a minimum, substantially all of the
limitations of rights and the protections for RSA which are contained in
Section 2.2, 5.4, 7, 10.7 and 10.8 of this Agreement."
3. REPLACEMENT EXHIBIT "A". RSA and OEM agree that License/Product
Schedule No. 0697-UPI-O-LPS-3 to the Agreement dated June 25, 1997 is hereby
replaced in its entirety with License/Product Schedule No. 0598-UPI-O-LPS-5
(Exhibit "A") attached to this Amendment.
4. EFFECT OF AMENDMENT. This Amendment is an amendment to the
Agreement effective as of the date of the later signature hereto. In the event
of any inconsistency between the terms of this Amendment and the Agreement, the
terms of this Amendment shall be controlling. Except as expressly amended
above, all other terms of the Agreement shall remain in full force and effect.
This First Amendment shall terminate upon termination or expiration of the OEM
Agreement.
<PAGE>
Amendment Number One to
OEM Master License Agreement
Page 2
IN WITNESS WHEREOF, the parties have caused this Amendment and the
attached Exhibit "A" to be executed by their duly authorized representatives.
OEM:
UNWIRED PLANET, INC. RSA DATA SECURITY, INC.
By: /s/ ALAN J. BLACK By: /s/ HEDY T. BREAKFIELD
---------------------------- -------------------------
Printed Name: ALAN J. BLACK Printed Name: HEDY T. BREAKFIELD
----------------- ------------------
Title: CFO Title: V.P. Finance
----------------------- ------------------------
Date: May 29, 1998 Date: May 29, 1998
------------------------ -------------------------
<PAGE>
License/Product Schedule Number: 0598-UPI-O-LPS-5
----------------
EXHIBIT "A"
LICENSE/PRODUCT SCHEDULE
OEM:
Unwired Planet, Inc.
For purposes of this License/Product Schedule, "OEM" shall include any entity
that is controlled by Unwired Planet, Inc., provided that such entity agrees in
writing to be bound by all of the terms and conditions of this Agreement
("Affiliate"). "Control," for purposes of identifying Affiliates, shall mean
ownership of greater than fifty percent (50%) of the voting interests of an
entity. Notwithstanding the generality of the foregoing, Unwired Planet, Inc.
shall be solely responsible for reporting and paying License Fees accrued to
all OEM's under this Agreement.
OEM MASTER LICENSE AGREEMENT NUMBER:
1196-UPI-O-MLA-1 (THE "AGREEMENT")
DATE OF OEM MASTER LICENSE AGREEMENT:
NOVEMBER 30, 1996
THIS LICENSE/PRODUCT SCHEDULE AMENDS SCHEDULES DATED:
(i) June 25, 1997 (No. 0697-UPI-O-LPS-3) and supersedes it in its entirety as
of the effective date of this License/Product Schedule No. 0598-UPI-O-LPS-5;
and (ii) September 25, 1997 (No. 0997-UPI-O-LPS-4), but only with respect to
the amount of Maintenance Fees payable under such License/Product Schedule; in
all other respects License/Product Schedule No. 0997-UPI-O-LPS-4 shall remain
in full force and effect.
TERM OF AGREEMENT FOR THIS BUNDLED PRODUCT:
PERPETUAL
BUNDLED PRODUCTS:
OEM's products: (1) client product currently known as "UP.Browser", and/or any
new or successor browser client software products for wireless handheld devices
offering substantially the same functionality, (the "Client Bundled Product")
and (2) server product currently known as "UP.Link", and/or any new or
successor product offering substantially the same functionality (the "Server
Bundled Product"). Bundled Products provide encryption of wireless
communications between the Client Bundled Product and Server Bundled Product
and between the Bundled Products and third party wireless devices and servers.
RSA SOFTWARE:
BSAFE(TM) v. 2.0 (limited to Diffie-Hellman Key Negotiation algorithm only)
provided by RSA on the UNIX platform; BSAFE(TM) v. 3.0, BCERT(TM) v. 1.0 and
TIPEM(TM) v. 2.0, collectively provided by RSA on the Solaris, Windows 95 and
Windows NT platforms. OEM may obtain copies of the RSA Software on other
platforms as may be generally available at RSA's then current published price
list, each additional platform version of which will be covered RSA Software
under this License/Product Schedule.
DELIVERY OF RSA SOFTWARE TO OEM:
One (1) copy of each of the RSA Object Code, the RSA Source Code (if licensed
hereunder) and the User Manual for the RSA Software identified above:
[X] has been received by OEM, or
[ ] will be delivered by RSA as soon as practicable, but not later than
ten (10) business days after the date of execution of this License/Product
Schedule.
<PAGE>
LICENSED SOFTWARE AND FIELD OF USE RESTRICTION FOR THIS BUNDLED PRODUCT
<TABLE>
<CAPTION>
RIGHT TO
INCLUDE
OBJECT
SOURCE CODE IN DESCRIBED
CODE BUNDLED FIELD OF USE FIELD OF USE
LICENSE PRODUCT RESTRICTION RESTRICTION
BSAFE YES NO YES NO YES NO
<S> <C> <C> <C> <C> <C> <C> <C>
RSA Public Key Cryptosystem [X] [ ] [X] [ ] [X] [ ] */
Diffie-Hellman Key Negotiation [X] [ ] [X] [ ] [X] [ ] */
Bloom-Shamir Secret Sharing [X] [ ] [X] [ ] [X] [ ] */
Data Encryption Standard (DES) [X] [ ] [X] [ ] [X] [ ] */
Extended Data Encryption [X] [ ] [X] [ ] [X] [ ] */
Standard (DESX)
Triple DES (3DES) [X] [ ] [X] [ ] [X] [ ] */
RC2 Variable-Key Size [X] [ ] [X] [ ] [X] [ ] */
Symmetric Block Cipher
RC4 Variable-Key Size [X] [ ] [X] [ ] [X] [ ] */
Symmetric Stream Cipher
RC5 Variable-Key Size [X] [ ] [X] [ ] [X] [ ] */
Symmetric Block Cipher
MD Hashing Algorithm [X] [ ] [X] [ ] [X] [ ] */
MD2 Hashing Algorithm [X] [ ] [X] [ ] [X] [ ] */
MD5 Hashing Algorithm [X] [ ] [X] [ ] [X] [ ] */
Secure Hashing Algorithm (SHA) [X] [ ] [X] [ ] [X] [ ] */
Digital Signature Algorithm [X] [ ] [X] [ ] [X] [ ] */
(DSA)
TIPEM (all set forth below) [ ] [X] [X] [ ] [X] [ ] */
RSA Public Key Cryptosystem
Data Encryption Standard (DES)
RC2 Variable Key Size
Symmetric Block Cipher
MD2 Hashing Algorithm
MD5 Hashing Algorithm
BCERT [ ] [X] [X] [ ] [X] [ ] */
JSAFE [ ] [X] [ ] [X] [ ] [ ]
</TABLE>
- --------------------------
*/ Solely for key management, wireless encryption and authentication between
(i) Client Bundled Product and Server Bundled Product; (ii) Client Bundled
Product and third party servers; (iii) Server Bundled Product and third party
client products; (iv) Client Bundled Product and third party wireless devices;
and (v) Server Bundled Product and third party servers.
Page 2
<PAGE>
LICENSE AND MAINTENANCE FEES
SOURCE CODE LICENSE FEE FOR THIS LICENSE/PRODUCT SCHEDULE:
[*], of which amount RSA acknowledges receipt under License/Product Schedule No.
1196-UPI-O-LPS-1.
Object Code License Fees for this License/Product Schedule:
PERCENTAGE OF PRODUCT REVENUE LICENSE FEE:
OEM shall pay to RSA as License Fees an amount equal to [*] of all Product
Revenue, but not less than [*] for each copy/unit of the Server Bundled
Product used, licensed or otherwise distributed by or for OEM. "Product
Revenue" means the gross amount of all cash, in-kind or other consideration
receivable by OEM at any time in consideration of the licensing or other
distribution of the Bundled Products, whether as a sale, license, use,
transaction, or service fee based on or involving the Bundled Products, but
excluding any amounts receivable by OEM for standard maintenance and support
fees which are not intended to avoid any payment of License Fees under this
License/Product Schedule, sales and use taxes, shipping, insurance and
duties, and reduced by all discounts or refunds granted in the ordinary
course of business, and excluding Service Revenue. For the purposes of
determining Product Revenue, the amount of in-kind or other non-cash
consideration receivable by OEM shall be deemed to have a dollar value equal
to the standard price (as listed in OEM's published price schedule on the
date of the grant of the license or the sale in question) for such Bundled
Product, less all cash paid.
PERCENTAGE OF SERVICE REVENUE LICENSE FEE:
Notwithstanding the provisions of the second sentence of Section 2.2.3 of the
Agreement, RSA agrees that OEM may use the Bundled Products covered by this
License/Product Schedule to provide services to third parties (the "OEM
Services"). Based upon the foregoing, and in addition to the License Fees set
forth above, OEM shall pay to RSA as License Fees an amount equal to [*] of
all Service Revenue. "Service Revenue" means the gross amount of all cash,
in-kind or other consideration receivable by OEM at any time in consideration
of providing the OEM Services (excluding any amounts receivable by OEM for
consulting, maintenance, and support services which are not intended to avoid
any payment of License Fees under this License/Product Schedule) whether as
use, transaction, subscription, or service fees, or any comparable fees based
on or involving the use of OEM Services. For the purposes of determining
Service Revenue, the amount of in-kind or other non-cash consideration
receivable by OEM shall be deemed to have a dollar value equal to the
standard price (as listed in OEM's published price schedule on the date the
OEM Services are provided) for the OEM Services, less all cash paid.
ANNUAL LICENSE FEE:
In addition to the License Fees set forth above, OEM shall pay RSA an annual
License Fee during the term of this License/Product Schedule in the amount of
[*] so that OEM is not required to pay a minimum amount of on-going License
Fee for each copy/unit of Client Bundled Product used, licensed, or
distributed. Such amount shall be due and payable for the first year upon
execution of this License/Product Schedule, and for each subsequent year on
the anniversary of the execution of this License/Product Schedule. In no
event shall any of such annual License Fees be refundable.
PREPAYMENT OF LICENSE FEES FOR THIS LICENSE/PRODUCT SCHEDULE:
[*], of which amount (i) RSA acknowledges receipt of [*] under
License/Product Schedule No. 0697-UPI-O-LPS-3, and (ii) [*] is due and
payable upon execution of this License/Product Schedule. Notwithstanding the
foregoing, the total amount of prepaid License Fees available to offset
accrued License Fees as of the effective date of this License/Product
Schedule shall be equal to the total amount of prepaid License Fees set forth
above less the amount of prepaid License Fees previously used to offset
accrued License Fees under License/Product Schedule No. 0697-O-LPS-3. Prepaid
License Fees may not be used to offset any annual License Fees.
PRESENT ANNUAL MAINTENANCE FEE FOR THIS LICENSE/PRODUCT SCHEDULE:
[*]. Notwithstanding any other provision of this License/Product Schedule or
License/Product
Page 3
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
Schedule No. 0997-UPI-O-LPS-4 to the contrary, such amount is the present
annual Maintenance Fee for the Bundled Products covered by this
License/Product Schedule and the Bundled Products covered by License/Product
Schedule No. 0997-UPI-O-LPS-3. Such amount shall be due and payable upon
execution of this License/Product Schedule. Execution of this License/Product
Schedule No. 0598-UPI-O-LPS-5 shall restart OEM's maintenance term and payments
originated under License/Product Schedule No. 0697-UPI-O-LPS-3, as of the date
of execution hereof.
SPECIAL TERMS AND CONDITIONS
The following Special Terms and Conditions shall apply to the Bundled Products
covered by this License/Product Schedule:
1. LIMITED RIGHTS TO SUBLICENSE CLIENT BUNDLED PRODUCT.
a. GRANT OF RIGHTS. Notwithstanding the provisions of Section 2 of
the Agreement, RSA further hereby grants to OEM a non-exclusive, non-
transferable, non-assignable license, except under Section 10.2 of the
Agreement, during the term of this License/Product Schedule to sublicense its
rights granted in Section 2.1.2, as limited by Section 2.2, of the Agreement
with respect to the RSA Object Code as part of the Client Bundled Product to
OEM's licensees in the Territory who are granted the right to access the
Wireless Application Protocol ("WAP") API, or any successor technology offering
substantially the same functionality set by an appropriate standards-setting
body, of the Client Bundled Product directly (each, an "OEM Sublicensee") for
use only in their own WAP-compliant products in which substantial functionality
or value is added to the Client Bundled Product so that such products are not a
substitute for the RSA Software (collectively, "Sublicensee Products"). All
sublicenses permitted under this paragraph shall be subject to all of the
following conditions: (i) all such sublicenses will be granted in a signed
writing containing at a minimum all of the restrictions set forth in Exhibit "A-
1" attached hereto, and OEM acknowledges that RSA shall be an implied third
party beneficiary of such sublicense agreements; (ii) OEM shall use its best
efforts to enforce the provisions of such sublicenses as they relate to RSA and
the RSA Software; (iii) the Sublicensee Products shall incorporate the RSA
Object Code in such a way so as to ensure that the security functions of the RSA
Object Code may only be accessed by the functionality of the Sublicense Product
in which it is included so that the RSA Object Code shall not be directly
accessible to End User Customers or to software products other than the
Sublicensee Products; (iv) the OEM Sublicensees to whom such rights are
sublicensed shall have no further right to sublicense such rights; (v) on or
before the date that OEM grants any sublicense hereunder, OEM shall submit to
RSA an Exhibit "A" Extension in the form attached as Exhibit "A-2" for the
applicable OEM Sublicensee; (vi) OEM shall report to RSA in its reports
delivered pursuant to Section 3.7 of the Agreement OEM's Product Revenue and
Service Revenue with respect to Sublicensee Products used, licensed or otherwise
distributed by or for all OEM Sublicensees, and shall pay RSA License Fees
pursuant to Section 3 of the Agreement and this License/Product Schedule based
on such Product Revenue and Service Revenue to OEM, applying the same percentage
of Product Revenue and Service Revenue referred to above for the Bundled
Products; and (vii) any rights of any OEM Sublicensee sublicensed by OEM shall
survive only so long as both this License/Product Schedule and the sublicense
between OEM and such OEM Sublicensee remain in effect. Notwithstanding the
provisions of subsection (i) of this section, RSA shall provide OEM with ten
(10) business days written notice prior to the filing of any breach of contract
claim or action against an OEM Sublicensee to enforce RSA's rights as a third
party beneficiary under a sublicense agreement between OEM and Sublicensee.
b. SUBLICENSE FEES. OEM shall pay to RSA additional annual License
Fees in the amount of [*] per existing OEM Sublicensee, up to a maximum of [*]
per year. Such amount shall be due and payable for the first year along with
each submission of an Exhibit "A" extension pursuant to clause (v) in paragraph
1.a., above, and for each subsequent year on the anniversary of such date. No
additional payment of annual License Fees shall be required for the first
sublicense granted hereunder.
2. OPTION TO ELIMINATE ANNUAL FEES. OEM shall have the option to eliminate
future payment of the [*] annual License Fee and future payment of the annual
sublicense fees under paragraph 1.b., above, from and after the date such option
is exercised. Such option is exercisable by OEM on or before the date [*] after
the execution of this License/Product Schedule, by providing notice to RSA in
accordance with Section 10.6 of the Agreement and paying a one-
Page 4
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
time License Fee of [*].
3. OPTION TO ELIMINATE OTHER ONGOING PAYMENTS OF LICENSE FEES. OEM shall
have the option to eliminate future payment of License Fees based on Product
Revenue and on Service Revenue and future payment of the minimum per copy/unit
Server Bundled Product minimum License Fee, from and after the date such option
is exercised. Such option is exercisable by OEM on or before the date [*] after
the execution of this License/Product Schedule, by providing notice to RSA in
accordance with Section 10.6 of the Agreement and paying a one-time License Fee
of [*]. Notwithstanding any other provision of the Agreement or any
License/Product Schedule thereunder to the contrary, there shall be credited
against such one-time License Fee an amount equal to any amount of prepaid
License Fees actually received by RSA under this License/Product Schedule
(including those previously paid under License/Product Schedule No. 0697-UPI-0-
LPS-3) which have not been offset against accrued License Fees as of the date
the option is exercised. This option does not eliminate payment of ongoing
License Fees with respect to any Bundled Products other than the Bundled
Products under this License/Product Schedule.
4. COPYRIGHT NOTICES; LICENSE SEALS. RSA acknowledges and agrees that the
Bundled Products are not themselves end user products. Accordingly, the parties
agree that the second sentence of Section 5.4.1 of the Agreement is amended to
read in its entirety as follows: "OEM further agrees to insert and maintain
within every Bundled Product and any related materials or documentation a
copyright notice in the name of OEM. To the extent that OEM's name or logo
appears in any product which incorporates or is bundled with the Bundled Product
or in any user documentation, printed product collateral, product packaging or
advertisements therefor, RSA's name, logo, or "Licensee Seal" in the form
attached as Exhibit "B" to this Agreement shall appear, equally prominently. In
addition, OEM may insert and maintain within splash screens, user documentation,
printed products collateral, product packaging and advertisements for the
Bundled Product, the RSA Licensee Seal and a statement that the Bundled Product
contains the RSA Software."
THE PROVISIONS OF THIS LICENSE/PRODUCT SCHEDULE ARE PROVIDED AS A BASIS OF
DISCUSSION BETWEEN OEM AND RSA AND WILL BECOME BINDING UPON THE PARTIES ONLY IF
(1) OEM HAS EXECUTED AN OEM MASTER LICENSE AGREEMENT AND HAS INDICATED ITS
ACCEPTANCE OF THE TERMS CONTAINED IN THIS LICENSE/PRODUCT SCHEDULE BY SIGNING
BELOW ON OR BEFORE MAY 29, 1998; AND (2) RSA HAS EXECUTED THE OEM MASTER LICENSE
AGREEMENT AND THIS LICENSE/PRODUCT SCHEDULE.
OEM:
UNWIRED PLANET, INC.
By: /s/ ALAN J. BLACK
Printed Name: Alan J. Black
Title: CFO
Date: May 29, 1998
RSA DATA SECURITY, INC.
By: /s/ HEDY T. BREARFIELD
Printed Name: Hedy T. Brearfield
Title: V.P. Finance
Date: 5/29/98
Page 5
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
EXHIBIT "A-1"
MANDATORY SUBLICENSE TERMS
All sublicense agreements for the license of the RSA Object Code in the Client
Bundled Product (herein "Bundled Product") by OEM to OEM Sublicensees will
include all of the following restrictions:
I. The OEM Sublicensee will receive no greater rights with respect to the
Bundled Product than those permitted in Sections 2.1.2 of the Agreement as
limited by Section 2.2 of the Agreement.
II. The OEM Sublicensee will agree not to remove or destroy any proprietary,
trademark or copyright markings or confidentiality legends placed upon or
contained within the Bundled Product or any related materials or documentation.
III. If applicable, the OEM Sublicensee will agree that any license of the
Bundled Product to the United States Government or an agency thereof will state
that such software and related documentation is "commercial computer software"
as that term is defined for purposes of the Federal Acquisition Regulations
(FARs) or the Department of Defense Federal Acquisition Regulations Supplement
(DFARS), as applicable, then in effect.
IV. The OEM Sublicensee will agree not to export or reexport any Bundled
Product or any part thereof or information pertaining thereto to any country for
which a U.S. government agency requires an export license or other governmental
approval without first obtaining such license or approval.
V. The OEM Sublicensee will agree that, except for the limited licenses
granted under the license agreement, OEM and its licensors will retain full and
exclusive right, title and ownership interest in and to the Bundled Product and
in any and all related patents, trademarks, copyrights or proprietary or trade
secret rights.
VI. OEM will have the right to terminate the license for the OEM
Sublicensee's breach of a material term. The OEM Sublicensee will agree that,
upon termination of the license, the OEM Sublicensee will return to OEM all
copies of the object code and documentation for the Bundled Product or certify
to OEM that the OEM Sublicensee has destroyed all such copies, except that the
OEM Sublicensee may retain one (1) copy of the object code for the Bundled
Product solely for the purpose of supporting the OEM Sublicensee's existing
licensees.
VII. The OEM Sublicensee will agree not to reverse compile, disassemble or
modify the Bundled Product.
VIII. The OEM Sublicensee will agree not to distribute the Bundled Product or
any part thereof except pursuant to a license agreement meeting the requirements
in Section 5.3 of the Agreement.
IX. The sublicense agreement will state that in no event will OEM or its
licensors be liable for indirect, incidental, special, consequential or
exemplary damages arising out of or related to the Bundled Product, including
but not limited to lost profits, business interruption or loss of business
information, even if such party has been advised of the possibility of such
damages.
Page 6
<PAGE>
Exhibit A Extension Number:
-------------------------
Date of this Exhibit A Extension:
-------------------
EXHIBIT "A-2"
EXHIBIT A (LICENSE/PRODUCT SCHEDULE) EXTENSION
OEM: APPROVED:
Unwired Planet, Inc.
- ------------------------------------
OEM:
OEM Master License Agreement Number: UNWIRED PLANET, INC.
1196-UPI-O-MLA-1
- ------------------------------------
BY:
-----------------------------------
Date of OEM Master License Agreement:
November 30, 1996 Printed Name:
- ------------------------------------- -------------------------
Title:
This Extension Extends License/ --------------------------------
Product Schedule Number:
0598-UPI-O-LPS-5
- -------------------------------------
RSA DATA SECURITY, INC.
Name and Jurisdiction of
Incorporation of OEM Sublicensee:
By:
- ------------------------------------- -----------------------------------
Printed Name:
Sublicensee Product which -------------------------
Incorporates Bundled Product: Title:
- ------------------------------------- -------------------------------
Annual Sublicense Fee:
- -------------------------------------
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<PAGE>
AMENDMENT NUMBER TWO TO
BSAFE/TIPEM OEM MASTER LICENSE AGREEMENT
THIS AMENDMENT NUMBER TWO TO BSAFE/TIPEM OEM MASTER LICENSE AGREEMENT
(the "Amendment") is entered into on June 29, 1998, between RSA Data Security,
Inc., a Delaware corporation ("RSA"), and Unwired Planet, Inc., a Delaware
corporation ("OEM").
R E C I T A L S
A. RSA and OEM entered into an OEM Master License Agreement No.
1196-UPI-O-MLA-1, dated as of December 2, 1996 (the "Agreement"), and an
accompanying License/Product Schedule No. 1196-UPI-O-LPS-1, pursuant to which
RSA granted to OEM certain limited rights in the RSA Software.
B. RSA and OEM executed an additional License/Product Schedule No.
0497-UPI-O-LPS-2, dated as of May 2, 1997.
C. RSA and OEM executed an additional License/Product Schedule No.
0697-UPI-O-LPS-3, dated as of June 25, 1997.
D. RSA and OEM executed an additional License/Product Schedule No.
0997-UPI-O-LPS-4, dated as of September 25, 1997.
E. RSA and OEM executed an additional License/Product Schedule No.
0598-UPI-O-LPS-5, dated as of May 29, 1998, which superseded in its entirety
License/Product Schedule No. 0697-UPI-O-LPS-3, dated as of June 25, 1997.
A G R E E M E N T
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined in
this Amendment shall have the meanings designated in the Agreement.
2. AMENDMENT TO OEM AGREEMENT. RSA and OEM agree that the following
Section 2.1.1 of the Agreement shall be replaced in its entirety:
"2.1.1 use, if a source code license is specified in a License/Product
Schedule, two copies of the RSA Source Code, each of which on a single
central processing unit accessed by one user at a time to (i) modify the
RSA Source Code solely to create interface Modifications; (ii) compile
the RSA Source to create object code; and (iii) maintain Bundled
Products and support End User Customers."
3. CONSIDERATION. In consideration for RSA's grant of License for
the RSA Software as set forth above, OEM shall pay to RSA License Fees in the
amount of [*] upon execution of this Amendment.
4. EFFECT OF AMENDMENT. This Amendment is an amendment to the OEM
Agreement, in the event of any inconsistency between the terms of this
Amendment and the OEM Agreement, the
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
RSA/Unwired Planet, Inc.
Amendment Number Two
Page 2
term of this Amendment shall be controlling. Except as expressly amended above,
the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date set forth above.
OEM:
UNWIRED PLANET, INC. RSA DATA SECURITY, INC.
By: /s/ ALAN BLACK By: /s/ ALBERT E. SISTO
------------------------ --------------------------
Printed Name: Alan Black Printed Name: Albert E. Sisto
--------------- ----------------
Title: CFO Title: Chief Operating Officer
--------------------- -----------------------
Date: 6/25/98 Date: June 25, 1998
--------------------- -----------------------
<PAGE>
Exhibit 10.16
SOFTWARE LICENSE AND SUPPORT AGREEMENT
between
Unwired Planet, Inc.
and
AT&T Wireless Services, Inc.
Dated as of May 1, 1996
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Section 1. Definitions.................................................... 1
Section 2. License........................................................ 4
2.1 Grant of License for UPI Software.................................... 4
2.2 Grant of License for Application Server Software..................... 4
2.2.1 Grant.......................................................... 4
2.2.2 Limitations on Use............................................. 5
2.2.3 No Content Restrictions........................................ 6
2.3 Limitation........................................................... 6
2.4 Delivery............................................................. 6
Section 3. Software Integration Services................................... 6
3.1 Scope................................................................ 6
3.2 Schedule and Duration................................................ 7
3.3 Cooperation.......................................................... 7
Section 4. Support Services................................................ 7
4.1 Scope................................................................ 7
4.2 [****************]................................................... 7
4.3 Duration............................................................. 8
Section 5. Compensation.................................................... 8
5.1 Fee for License and Software Integration Services.................... 8
5.2 [Superseded by Section 5 of Third AT&T Amendment].................... 8
5.3 Fees for Support Services............................................ 8
5.4 Payments............................................................. 9
5.6 Payment in Full...................................................... 9
5.7 [*******************]................................................ 9
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Section 6. Proprietary Rights.............................................. 10
6.1 Ownership........................................................... 10
6.2 Source Code Escrow.................................................. 10
6.3 Trademarks and Trade Names.......................................... 10
6.4 Marketing Limitations............................................... 11
6.5 Content Provider Licenses........................................... 11
Section 7. Warranty and Indemnification.................................... 11
7.1 Warranty............................................................ 11
7.2 Indemnification..................................................... 11
7.2.1 General....................................................... 11
7.2.2 Infringement.................................................. 12
7.2.3 Additional Infringement Remedies.............................. 12
7.2.4 Limitations................................................... 12
7.2.5 Indemnification by AT&T....................................... 12
7.2.6 Entire Liability.............................................. 13
Section 8. Term and Termination............................................ 13
8.1 Term................................................................ 13
8.2 Termination......................................................... 13
8.2.1 Termination of Term........................................... 13
8.2.2 Termination of License........................................ 13
8.3 Effect of Termination of License.................................... 14
8.4 Effect of Termination of Term....................................... 14
8.5 Survival............................................................ 14
Section 9. Arbitration..................................................... 14
9.1 Selection of Arbitrator............................................. 14
9.2 Location............................................................ 14
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
9.3 Jurisdiction........................................................ 15
9.4 Decision............................................................ 15
9.5 Costs............................................................... 15
Section 10. Miscellaneous.................................................. 15
10.1 Performance........................................................ 15
10.2 Confidential Information........................................... 15
10.3 No Consequential Damages........................................... 16
10.4 Force Majeure...................................................... 16
10.5 Limitation of Damages.............................................. 16
10.6 Independent Contractor............................................. 16
10.7 Assignment......................................................... 17
10.8 No Delegation of Duties............................................ 17
10.9 Notices............................................................ 17
10.10 Nonwaiver......................................................... 17
10.11 Compliance and Severability....................................... 17
10.12 Counterparts...................................................... 17
10.13 Entire Agreement.................................................. 18
10.14 Governing Law..................................................... 18
</TABLE>
PAGE iii
<PAGE>
LIST OF EXHIBITS
----------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Exhibit Description Reference
------- ----------- ---------
- -----------------------------------------------------------------------------------------------------
<S> <C>
A Licensed. Programs and Documentation
- -----------------------------------------------------------------------------------------------------
B Escrow Agreement
- -----------------------------------------------------------------------------------------------------
C Software Integration Services
- -----------------------------------------------------------------------------------------------------
2C Email Services
- -----------------------------------------------------------------------------------------------------
D Specifications
- -----------------------------------------------------------------------------------------------------
E Support Services
- -----------------------------------------------------------------------------------------------------
F Initial Server Sites
- -----------------------------------------------------------------------------------------------------
G [Superseded by Section 5 of the Third AT&T Amendment]
- -----------------------------------------------------------------------------------------------------
H Commercial Server Acceptance Criteria
- ------------------------------------------------------------------------------------------------------
I Designated Information Services
- ------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
SOFTWARE LICENSE AND SUPPORT AGREEMENT
This Agreement, dated as of May 1, 1996, is made and entered into by and
between Unwired Planet, Inc., a Delaware corporation ("UPI"), and AT&T Wireless
Services, Inc., a Delaware corporation ("AT&T").
RECITALS
A. AT&T has made an investment in the capital stock of UPI; and
B. In consideration with and as a part of such investment the parties
understood and agreed that UPI would grant to AT&T certain licenses to certain
UPI software as described in this Agreement; and
C. The terms and conditions of such licenses are the result of AT&T's
investment in UPI.
AGREEMENT
Therefore, AT&T and UPI agree as follows:
Section 1. Definitions
Whenever used in this Agreement with initial letters capitalized, the
following terms will have the following specified meanings:
1.1 "Affiliate" means any Person that controls, is controlled by or is
under common control with a party.
1.2 "ANT Server" means a UPI Air Network Translator server (also referred
to as "UPILink Gateway") used to transmit UPI formatted data to and from UPI
Supported Devices.
1.3 "Application Server" means the server computer or computers on which
the Information Application Software is to be loaded and executed.
1.4 "Application Server Program" means the object code version of the UPI
application server program described in, and which complies with, the
Specifications applicable thereto, together with any and all Upgrades and
Enhancements to such application server program delivered by UPI to AT&T
pursuant to this Agreement.
1.5 "Application Server Software" means the Application Server Program and
the related Documentation.
1.6 "Application Server Software Source Code" means all source code owned
or licensed by UPI for the Application Server Software.
1.7 [******************] means any user of the UPI Service who is [**
***************] or [************], or an agent, contractor or representative of
[********************] while engaged on [***********************] behalf.
1.8 "AT&T Network" means any network operated or utilized by AT&T or its
Affiliates.
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<PAGE>
1.9 "Confidential Information" means any information of either party which
is not generally known to the public, whether of a technical, business or other
nature (including, but not necessarily limited to: trade secrets, know how,
computer program source codes, and information relating to the customers,
business plans, promotional and marketing activities, finances and other
business affairs of such party); provided that the same is conspicuously marked
or otherwise identified as confidential or proprietary information prior to,
upon or promptly after receipt by the other party; and provided further that the
UPI Software Source Code and the Application Server Software Source Code will be
deemed to constitute the Confidential Information of UPI.
1.10 "Content Provider" means any person that provides content that is made
available to Subscribers over the AT&T Network.
1.11 "Documentation" means all manuals, instructions and other documents
relating to the use, operation, maintenance and servicing of the Licensed
Programs or the AppliCation Server Program, as the case may be, described on the
attached Exhibit A. The Documentation may be in printed or machine readable
form.
1.12 "Enhancement" means any enhancement, improvement, modification, update
or new release of any UPI Software or the Application Server Software, as the
case may be, but does not include Upgrades.
1.13 "Escrow Agent" means Data Securities International, Inc., or another
third party designated by UPI and approved by AT&T (which approval will not be
unreasonably withheld) to act as the escrow agent under the Escrow Agreement.
1.14 "Escrow Agreement" means an escrow agreement substantially in the form
attached as Exhibit B or such other form as may be agreed upon by the parties.
1.15 "HDML" means the handheld device markup language that is used to
select, format, interpret and communicate data to or from a UPI Supported Device
through the ANT Server.
1.16 "Information Application Software" means the AT&T-provided HDML
application software used in connection with the UPI Software and the
Application Server Software to enable data communications between UPI Supported
Devices and the Application Server as a part of the provision by AT&T of an
Information Service.
1.17 "Information Service" means the service provided by AT&T to its
Subscribers that (a) enables them to use UPI Supported Devices to send and
receive information over the ANT Server and the Application Server, and (b) is
implemented using the Information Application Software.
1.18 "Launch Date" means the date on which the parties agree in writing
that the Licensed Programs and Application Server Program are fully installed
and in use by AT&T to provide commercial service to its customers.
1.19 "Licensed Programs" means the computer programs described on the
attached Exhibit A, together with any and all Upgrades and Enhancements to such
computer programs that are delivered by UPI to AT&T pursuant to this Agreement.
1.20 "Major Release Event" means any one of the following: (a) UPI no
longer provides, or no longer has the capability to provide, ongoing maintenance
and support for the UPI Software or the Application Server Software (including,
without limitation, the refusal or total failure to provide to
PAGE 2
<PAGE>
AT&T and its Affiliates any of the Support Services required to be provided
under this Agreement); or (b) this Agreement is rejected on behalf of UPI by the
debtor-in-possession or trustee in bankruptcy.
1.21 "Minor Release Event" means any event with gives AT&T the right to
immediately terminate the Term pursuant to paragraph 8.2, regardless of whether
AT&T elects to exercise such right of termination.
1.22 "Person" means any individual, corporation, partnership, trust,
association or other entity.
1.23 "Proprietary Right" means any patent, copyright, trademark, mask work,
trade secret or other intellectual property right.
1.24 "Release Event" means any Major Release Event or any Minor Release
Event.
1.25 "Services" means the Software Integration Services, the Support
Services and any other services performed or to be performed by UPI under this
Agreement.
1.26 "Software Integration Services" means the services performed or to be
performed by UPI under this Agreement in connection with the installation,
integration and implementation of the Licensed Programs and Application Server
Program, as more specifically described in Section 3 and the attached Exhibit C.
1.27 "Specifications" means the design, functional and performance
specifications for the UPI Software and the Application Server Software set
forth in the attached Exhibit D.
1.28 "Subscriber" means a subscriber to the UPI Service who has taken all
steps reasonably required by AT&T to subscribe to the UPI Service. The
Subscribers will not include, [*****************************************].
1.29 "Support Services" means the on-going software maintenance and support
services performed or to be performed by UPI under this Agreement, as more
specifically described in Section 4 and the attached Exhibit E.
1.30 "Term" means the term of this Agreement described in Section 8.
1.31 "Upgrade" means any functional change to the UPI Software or the
Application Server Software, as the case may be, that is required to keep the
code compatible and consistent with the underlying infrastructure, including
without limitation bug fixes, corrections and modifications.
1.32 "UPI" means Unwired Planet, Inc.
1.33 "UPI Client Software" means computer software owned by UPI and used by
UPI Supported Devices to enable such devices to communicate with server
computers utilizing the UPI Software.
1.34 "UPI Service" means the information and/or transaction services
offered by AT&T using the UPI Software to transmit UPI-formatted data over an
AT&T Network to and from UPI Supported Devices.
1.35 "UPI Software" means the Licensed Programs and related Documentation.
PAGE 3
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1.36 "UPI Software Source Code" means all source code owned or licensed
by UPI for the UPI Software.
1.37 "UPI Supported Device" means a remote communications device
utilizing UPI Client Software to send and receive data from the ANT Server.
Section 2. License
2.1 Grant of License for UPI Software
UPI hereby grants to AT&T and its Affiliates that operate or utilize an
AT&T Network a nonexclusive, worldwide, license to do the following until such
time as the license granted herein terminates in the manner described in
paragraphs 8.2.2 and 8.3:
(a) install and use the Licensed Programs on any ANT Server situated
at the site or sites identified on the attached Exhibit F and any other
site or sites designated from time to time by AT&T;
(b) copy and reproduce the Licensed Programs in connection with the
exercise of the rights granted under (a), above;
(c) make and keep a reasonable number of copies of the Licensed
Programs for archival or backup purposes provided that AT&T keeps such
copies securely stored in a locked area with access restricted to
employees who need such access in order to operate or maintain the AT&T
Network; and
(d) use, reproduce and distribute internally the related Documentation
in connection with the exercise of any of the rights granted under this
paragraph 2.1;
provided that all such copies of the Licensed Programs and related Documentation
will remain subject to the provisions of Section 10.2.
2.2 Grant of License for Application Server Software
2.2.1 Grant
UPI hereby grants to AT&T a nonexclusive, nontransferable (other than as
provided in paragraph 10.7) license to do the following until such time as the
license granted herein terminates in the manner described in paragraphs 8.2.2
and 8.3:
(a) install and use the Application Server Program on any AT&T
Application Server or on a Content Provider's application server as
provided in paragraph 2.2.2(b) or (c);
(b) copy and reproduce the Application Server Program in connection
with the exercise of the rights granted under (a), above;
(c) make and keep a reasonable number of copies of the Application
Server Program for archival or backup purposes provided that AT&T keeps
such copies securely stored in a locked area with access restricted to
employees who need such access in order to operate or maintain AT&T's
Application Servers; and
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(d) use, reproduce and distribute internally the related Documentation
in connection with the exercise of any of the rights granted under this
paragraph 2.2;
provided that all such copies of the Application Server Program and related
Documentation will remain subject to the provisions of Section 10.2.
2.2.2 Limitations on Use
The Application Server Program shall be installed and used solely for
purposes of developing and running AT&T's Information Application Software for
the following limited Information Services:
(a) any Information Service provided with respect to content that is
owned exclusively by AT&T or any of its Affiliates and not by any other
Content Provider; or
(b) for a period of no more than forty-two (42) months from the Launch
Date, any Information Service provided with respect to content owned by a
Content Provider other than AT&T or any of its Affiliates, where:
(i) the Information Service and the content provided thereby is
distributed and marketed in a real, substantial and meaningful way to
end users by an AT&T Affiliate through an AT&T Network other than the
AT&T network, in addition to being distributed and marketed by AT&T
(or any of its subsidiaries); and
(ii) the cost to AT&T for such Information Service and/or content
is less than or equal to the cost of such Information Service and/or
content to an AT&T Affiliate distributing or marketing such
Information Service and/or content; and
(iii) AT&T has paid the full cost of developing and implementing
the Information Application Software; and
(iv) AT&T, its Affiliates or a Content Provider directly operates
and continues to operate an Application Server or application server;
or
(c) any of the four (4) Content Providers and their Information
Services generally described in the attached Exhibit I, provided:
(i) as of April 8, 1996, AT&T had been engaged in discussions
for such content with the Content Provider; and
(ii) AT&T bears a significant and substantial portion of
development cost of the Information Application Software; and
(iii) AT&T, its Affiliates or a Content Provider operates and
continues to operate an Application Server or application server.
Notwithstanding the foregoing, as to such four (4) Information Services,
the license granted hereunder shall not be used with (A) any other
Information Service or any other content provided by such Content Provider,
or (B) any Information Service or Information Application
PAGE 5
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Software marketed to end users by anyone other than AT&T or its dealers,
agents or resellers of AT&T's wireless voice and data transport services.
The license granted under paragraph 2.2.1 applies only to the extent the
Application Server Program is used to market the Information Service and the
related content to end users and may not be sublicensed, sold, assigned or
otherwise transferred in any way (other than as provided in paragraph 10.7).
2.2.3 No Content Restrictions
Nothing in this Agreement shall be construed to preclude AT&T from
marketing or selling content to anyone through any means other than the ANT
Server (utilizing the UPI Software) or the Application Server (utilizing the
Application Server Software).
2.3 Limitation
The rights expressly granted to AT&T under this Agreement (including
without limitation the license set forth in paragraphs 2.1 and 2.2 and the
license set forth in paragraph 6.2) set forth the entirety of AT&T's rights in
the UPI Software and the Application Server Software. Without limiting the
generality of the foregoing, such rights do not include the right to, and AT&T
will not, use, reproduce, print, disclose or otherwise make the UPI Software or
the Application Server Software available to any third party (other than a third
party under contract with AT&T, or any AT&T Affiliate, who is assisting AT&T in
its operation of the AT&T Network and who has agreed to keep the UPI Software
confidential), in whole or in part, in whatever form, except as authorized under
this Agreement. Further, AT&T will not (a) reverse engineer, disassemble,
decompile or, except as necessary to exercise the rights granted under paragraph
6.2, make derivative works from any Licensed Program or Application Server
Program, or (b) except as authorized under paragraph 6.3, remove, obscure or
alter any notice of any Proprietary Right related to the UPI Software or the
Application Server Software.
2.4 Delivery
UPI will deliver to AT&T one (1) copy of each Licensed Program and the
Application Server Program and one (1) copy of the associated Documentation not
later than the earlier of (a) one (1) month prior to the scheduled Launch Date,
and (b) June 17, 1996, but in no event will UPI be obligated to deliver such
items to AT&T prior to sixty (60) days after receipt by UPI of a commercial
quality wireless communications device/telephone (as determined by AT&T) from at
least one of its independent vendors for UPI's testing purposes. UPI will
deliver to AT&T all Enhancements and Upgrades of each Licensed Program and the
Application Server Program and other UPI Software or Application Server Software
to which AT&T is entitled under this Agreement as these Enhancements and
Upgrades are created by UPI.
Section 3. Software Integration Services
3.1 Scope
UPI will provide the installation, training, integration and other
services described in the attached Exhibit C, in accordance with the terms and
conditions of this Agreement.
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3.2 Schedule and Duration
UPI will commence and use commercially reasonable efforts to perform and
complete the Software Integration Services in accordance with the schedule
mutually agreed upon by the parties. if a schedule is not agreed upon, UPI will
commence performance upon notice to proceed from AT&T and will thereafter
diligently prosecute the Software Integration Services to completion. The
parties agree that UPI will complete all Beta testing of the UPI Software and
the Application Server Software, and deliver tested UPI Software and Application
Server Software which meets the criteria listed on Exhibit H, on or before June
17, 1996, but in no event will UPI be obligated to complete such testing or
achieve the Launch Date prior to sixty (60) days after receipt by UPI of a
commercial quality wireless communications device/telephone (as determined by
AT&T) from at least one of its independent vendors for UPI's testing purposes.
Without limiting the generality of any provision of this Agreement, any failure
to complete the Beta testing or achieve the Launch Date within two (2) months
after the later of June 17, 1996, or the expiration of the above sixty (60) day
period will be conclusively deemed to constitute a material breach of this
Agreement and entitle AT&T, at its sole option and in addition to all other
rights or remedies to which it may be entitled under this Agreement or by law,
to immediately terminate this Agreement as provided in paragraph 8.2.1 or to
negotiate a reduction in the dollar and percentage usage fees specified in
Exhibit G. For purposes of this Agreement, an "Alpha" version means a version in
which all features are implemented and which is suitable for internal testing,
and a "Beta" version means the first version in which all features are
functional and which is ready for installation and testing on external units.
3.3 Cooperation
In connection with the performance of the Software Integration Services,
AT&T will inform UPI in writing of work that is being or will be performed by
others with whom UPI will need to work and cooperate with in performing its
obligations under this Section 3. UPI will cooperate with AT&T and coordinate
the Software Integration Services with any related work being performed by AT&T
or others. If any part of the Software Integration Services depends on the
results of work by AT&T or others, UPI will promptly notify AT&T in writing of
any actual or apparent deficiencies or defects in such other work that render it
unsuitable for performance of the Software Integration Services in accordance
with this Agreement.
Section 4. Support Services
4.1 Scope
UPI will furnish to AT&T and its Affiliates the software maintenance and
support services described in the attached Exhibit E. Any Enhancements or
Upgrades furnished in the course of performing such services will be included as
part of the UPI Software or the Application Server Software, as applicable,
under this Agreement.
4.2 [*****************]
UPI will develop and furnish to AT&T, as part of the Support Services, such
Enhancements and Upgrades to the UPI Software and the Application Server
Software as are necessary to ensure that the UPI Software is, [*****************
********************************************************************************
***********************************************************]. If AT&T at any
time believes or otherwise determines that the UPI Software or the Application
Server Software [**************************************************************
***************], AT&T will so notify UPI. If UPI thereafter fails to take any
remedial action reasonably requested by AT&T [*****] the UPI Software or the
Application Server Software, as applicable, [*********], AT&T may, as AT&T's
PAGE 7
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sole remedy for a breach of this paragraph 4.2, [******************************
************************************], and UPI will, at AT&T's cost, provide to
AT&T such support services as may be reasonably requested by AT&T [************
***************************************]. The foregoing limitation shall not
prohibit the exercise by AT&T of any remedy for any breach of any provision of
this Agreement other than this paragraph 4.2.
4.3 Duration
The obligation of UPI to furnish the Support Services under paragraph 4.1
will commence on the date of this Agreement and end upon expiration of the Term.
Section 5. Compensation
5.1 Fee for License and Software Integration Services
Subject to the terms and conditions of this Agreement, AT&T will pay to
UPI the sum of [*********************************************] as an initial
license fee for the license rights in the UPI Software and Application Server
Software granted to AT&T and its Affiliates under Section 2 and as full
compensation for performance of the Software Integration Services. [*****
*********************************] of the amount payable under this paragraph
5.1 will be subject to invoice by UPI upon satisfactory conclusion, as
determined by AT&T, of the Beta testing and delivery of tested software
referenced in paragraph 3.2 and the remaining [***************************
**********] of the amount payable under this paragraph 5.1 will be subject to
invoice by UPI upon the Launch Date.
5.2 [Superseded by Third AT&T Amendment]
5.3 Fees for Support Services
As full compensation for performance of the Support Services, AT&T will
pay to UPI an annual support fee of [**********************************] with
respect to the ANT Server or ANT Servers and Application Servers located at the
first site designated by AT&T under paragraph 2.1 (a) and [*******************
***********] with respect to the ANT Server or ANT Servers or Application
Servers located at the second site designated by AT&T thereunder. [*********
**************************] with respect to the ANT Server or ANT Servers or
Application Servers located at any
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subsequent sites so designated by AT&T; provided, however, that AT&T will bear
the reasonable. costs and expenses incurred by UPI with respect to any on-site
maintenance and support services performed by UPI at the request of AT&T with
respect to any ANT Server or ANT Servers or Application Servers located at any
such subsequent site. The annual support fee for the first calendar year of
support will be invoiced in advance upon execution of this Agreement and
thereafter the annual support fee will be invoiced in advance on the first day
of each calendar year during the Term, with the annual support fee being
prorated on a daily basis for any partial calendar year at the beginning and end
of the Term. In the event the end of the Term occurs prior to the end of any
calendar year for which AT&T has paid the annual support fee in advance, UPI
will promptly refund to AT&T the prorated portion of the annual support fee
applicable to the period of time between the end of the Term and the end of such
calendar year.
5.4 Payments
Except as otherwise provided in paragraphs 5.2, AT&T will pay the fees and
other amounts payable to UPI under this Agreement within thirty (30) days after
AT&T's receipt of UPI's invoice therefor. AT&T will pay and be responsible for
any sales, use, value-added, personal property or other taxes assessed against
AT&T by any governmental agency having jurisdiction for any of the rights
granted to AT&T under this Agreement. If UPI is required to pay any such taxes,
AT&T will reimburse UPI therefor. Payments not made by AT&T when due will be
subject to a late charge equal to one and one-half percent (1.5%) per month (or,
if less, the maximum allowed by applicable law) on the overdue balance. AT&T may
withhold or delay payment, in whole or in part, on account of any failure of UPI
to perform in accordance with this Agreement.
5.6 Payment in Full
Payment of the amounts specified in this Section 5 will constitute full
compensation for the license and other rights granted by UPI under this
Agreement and for the Services to be provided by UPI under this Agreement.
5.7 [********************]
UPI warrants and agrees that [******************************************
*****************************************************************************]
under this Agreement shall be, [***********************************************
*******************************************************************************
*******************************************************************************]
[**************************************************************************
*****************************************************************] provided that
in the event the [*************************************************************
********************************************************************************
*******************************************************************************
******************************************************************************
********************************************************]. If UPI shall enter
into [*************************************************************************
**************************************************************************
*************************************************************] then this
Agreement will [***************************************************************
********************************************] and UPI will [*****************
****************************************************************************
*******]. Within [****************************************************], UPI
will deliver to AT&T [*****************************************************
*****************************************************************************
*****************************************************.]
PAGE 9
<PAGE>
Section 6. Proprietary Rights
6.1 Ownership
Except for the license granted under Section 2, UPI reserves all of its
Proprietary Rights in the UPI Software and Application Server Software, and no
title to or ownership of the UPI Software or Application Server Software is
transferred to AT&T or its Affiliates under this Agreement.
6.2 Source Code Escrow
Immediately following the execution of this Agreement, the parties and
the Escrow Agent will enter into the Escrow Agreement and UPI will prepare and
deliver to the Escrow Agent to be held in escrow under the Escrow Agreement a
complete, current and accurate copy of the UPI Software Source Code and the
Application Server Software Source Code. Thereafter, UPI will deliver to the
Escrow Agent under the Escrow Agreement all source code for each Enhancement and
Upgrade within three (3) days after such Enhancement or Upgrade is delivered to
AT&T. UPI will resubmit the UPI Software Source Code and the Application Server
Software Source Code to the Escrow Agent promptly after the occurrence of every
Upgrade to such code, and will ensure that the UPI Software and Application
Server Software code held in escrow (both source and object) will at all times
match the UPI Software and Application Server Software which is then being used
by AT&T. All relevant versions of the supporting UPI Software code (as it
relates to the hardware platforms, operating systems, utilities, database
management systems and any other supporting code necessary to run the system)
will also be delivered to and held in escrow by the Escrow Agent. Upon the
occurrence of any Release Event and satisfaction of the conditions described in
the Escrow Agreement, the UPI Software Source Code and the Application Server
Software Source Code will be delivered to AT&T, together with any and all UPI
Software Source Code and the Application Server Software Source Code that, as of
such date, has not been delivered to the Escrow Agent. Upon release of the UPI
Software Source Code or the Application Server Software Source Code, as the case
may be, to AT&T following a Minor Release Event relating to such source code,
UPI grants to AT&T and its Affiliates a license to use, [******************] UPI
Software Source Code or the Application Server Software Source Code, as the case
may be, and to take such other actions with respect thereto as may be necessary
to use, correct, maintain and otherwise support the UPI Software or the
Application Server Software, as the case may be. Upon release of the UPI
Software Source Code or the Application Server Software Source Code, as the case
may be, following a Major Release Event relating to such source code, UPI grants
to AT&T and its Affiliates a license to use, [********************************
*******************] the UPI Software Source Code or the Application Server
Software Source Code, as the case may be, and to take such other actions with
respect thereto as may be necessary to use, correct, maintain, [**************
*********************************] and otherwise support the UPI Software or
the Application Server Software, as the case may be. Notwithstanding the
foregoing, if the default or other reason giving rise to the release of the UPI
Software Source Code or the Application Server Software Source Code from the
escrow created by the Escrow Agreement is cured by UPI, then AT&T will return
such source code to the Escrow Agent to be held in escrow under the Escrow
Agreement and the license granted under this paragraph 6.2 with respect to such
source code will terminate until such time as there is a subsequent occurrence
of any Release Event and satisfaction of the conditions described in the Escrow
Agreement.
6.3 Trademarks and Trade Names
UPI reserves any and all trade names and trademarks which UPI uses in
connection with the UPI Software and the Application Server Software. AT&T and
its Affiliates may market, promote, distribute, provide, operate and otherwise
deal with the UPI Service, and any other services offered by AT&T or its
Affiliates over an AT&T Network, using their own private labels, trade names,
logos,
PAGE 10
<PAGE>
trademarks, notices (e.g., copyright or otherwise) and other identifications,
and may remove any, private label, trade name, trademark, notice or other
identification of UPI from the UPI Software and the Application Server Software
that would be observable or physically apparent to a user of the UPI Service
other than a small UPI copyright notice. UPI in addition agrees that the UPI
Client Software will [********************] UPI copyright notice, [***********
*************************************************************************];
provided, however, upon AT&T's request, UPI agrees to configure on or before
December 31, 1996, the UPI Client Software provided to any manufacturer of UPI
Supported Devices with whom AT&T has an agreement so that the UPI Client
Software is capable of displaying an AT&T provided private label, trade name,
trademark, logo, notice or other identification.
6.4 Marketing Limitations
AT&T will not promote or otherwise endorse the UPI Service as being
compatible with (a) any integrated communication device used by end users to
communicate with the AT&T ANT Server that uses software for such purposes other
than UPI Client Software, (b) any client software other then UPI Client
Software, (c) any application server that uses application server software to
enable applications to communicate with the ANT Server other than the
Application Server Software, or (d) any application server software other than
the Application Server Software.
6.5 Content Provider Licenses
Upon the request of any content provider which markets or makes available,
or desires to market or make available, its content over the UPI Service, UPI
will license the Application Server Software to each such content provider on
commercially reasonable terms and conditions, which terms and conditions do not
differentiate or discriminate based on whether the content provider is doing
business with AT&T or some other data communication provider.
Section 7. Warranty and Indemnification
7.1 Warranty
UPI represents and warrants that (a) it has sufficient right, title and
interest in and to the UPI Software and the Application Server Software to grant
the license described in Section 2 and paragraph 6.2, (b) the Services will be
performed by UPI in a professional, workmanlike and skillful manner; (c) the
Licensed Programs and the Application Server Program will comply in all material
respects with the applicable Specifications and applicable Documentation; and
(d) the UPI Software and the Application Server Software do not [**********]
infringe [***************] any Proprietary Right of any third party. OTHER THAN
THE WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, THERE ARE NO EXPRESS OR
IMPLIED WARRANTIES RELATING TO THE UPI SOFTWARE, THE APPLICATION SERVER SOFTWARE
OR THE SERVICES COVERED BY THIS AGREEMENT, AND UPI EXPRESSLY DISCLAIMS ANY
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
7.2 Indemnification
7.2.1 General
Each party will [*****], indemnify [*******************************] from
and against any and all claims, losses, harm, liabilities, damages, costs and
expenses (including but not limited to attorneys' fees) arising out of any
personal injury, death or property damage that may occur as a result of the acts
or omissions of the indemnifying party or its employees, agents or contractors.
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<PAGE>
7.2.2 Infringement
UPI [**********] will [*******], indemnify, [***************] AT&T and its
Affiliates from and against any and all claims, losses, harm, costs,
liabilities, damages, and expenses (including but not limited to attorneys'
fees) related to any claim, action, suit or proceeding involving the UPI
Software or the Application Server Software, to the extent such claim, action,
suit or proceeding is based upon any [***************] infringement, [*******
**********************] by the UPI Software or the Application Server Software
of any Proprietary Right of any third party. UPI will have sole control of the
defense of any such claim, action, suit or proceeding and any related settlement
negotiations. In addition, AT&T will notify UPI promptly in writing of any such
claim, action, suit or proceeding, give UPI authority to proceed as contemplated
herein and, at UPI' sole cost and expense, give UPI such assistance in the
defense and settlement of such claim, action, suit or proceeding as UPI may
reasonably request.
7.2.3 Additional Infringement Remedies
If all or any part of the UPI Software or the Application Server Software,
as the case may be, as a result of any proceeding described in paragraph 7.2.2,
is held to constitute infringement of any Proprietary Right of a third party,
and AT&T's or its Affiliates' use of such UPI Software or Application Server
Software is enjoined, UPI will at its sole cost and expense (a) procure for AT&T
and its Affiliates the right to continue to use the UPI Software or the
Application Server Software, as the case may be; (b) replace the UPI Software or
the Application Server Software, as the case may be, with substantially equal
items that do not infringe, [******************************] any Proprietary
Right of any third party; or (c) modify the UPI Software or the Application
Server Software, as the case may be, so it becomes noninfringing, provided that
the usefulness (in AT&T's reasonable determination) of the same is maintained.
The [******] set forth in this paragraph 7.2.3 [**] in addition to [********
*******] to which AT&T may be entitled under this Agreement (including, without
limitation, [********] set forth in paragraph [***]) and [************].
7.2.4 Limitations
Notwithstanding paragraphs 7.2.2 and 7.2.3, UPI assumes no liability for
(a) infringement Phone caused by the combination of the UPI Software or the
Application Server Software with non-UPI software products, including any AT&T
products, if such combination is not contemplated by this Agreement or otherwise
authorized by UPI and such infringement would not have occurred absent such
combination, (b) trademark infringement caused by any marking or branding not
applied by or with the approval of UPI, or (c) infringement caused by the
modification or servicing of the UPI Software or the Application Server Software
without the approval or not done at the direction of UPI, and such infringement
would not have occurred but for such modification or servicing.
7.2.5 Indemnification by AT&T
Except for any infringement, [**************] and other claims covered by
the UPI indemnity in paragraph 7.2.2, AT&T will indemnify and hold UPI harmless
from any claims, losses, harm, costs, liabilities, damages and expenses
(including but not limited to attorneys' fees) arising out of third party claims
against UPI based on AT&T's (a) representation of the UPI Software or
Application Server Software in a manner inconsistent with UPI's published UPI
Software or Application Server Software descriptions and warranties, or (b) use
or distribution of the UPI Software or Application Server Software in violation
or contravention of the express terms of this Agreement. AT&T will have sole
control of the defense of any such claim and any related settlement
negotiations. In addition, UPI will notify AT&T promptly in writing of any such
claim, give AT&T
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authority to proceed as contemplated herein and, at AT&T's sole cost and
expense, give AT&T such assistance in the defense and settlement of such claim
as AT&T may reasonably request.
7.2.6 Entire Liability
THE FOREGOING PROVISIONS OF PARAGRAPHS 7.2.2, 7.2.3 AND 7.2.4 STATE THE
ENTIRE LIABILITY AND OBLIGATIONS OF UPI AND THE EXCLUSIVE REMEDY OF AT&T AND ITS
CUSTOMERS WITH RESPECT TO ANY ALLEGED INFRINGEMENT OF PROPRIETARY RIGHTS BY THE
UPI SOFTWARE OR APPLICATION SERVER SOFTWARE OR ANY PART THEREOF OR ANY BREACH OF
THE WARRANTY CONTAINED IN PARAGRAPH 7.1(d).
Section 8. Term and Termination
8.1 Term
The term of this Agreement will commence on the date of this Agreement
and, unless earlier terminated in accordance with paragraph 8.2 or renewed as
provided in this paragraph 8.1, will end upon the [****] anniversary of the date
of this Agreement. The term will be renewed automatically for successive renewal
periods of [*******] years each unless and until AT&T gives UPI written notice
of its intent not to renew the term for any such renewal period at least [*****
***] days prior to the end of the then-current term.
8.2 Termination
8.2.1 Termination of Term
Either party may, by written notice to the other party, immediately
terminate the Term if the other party fails to cure in all material respects any
material default or breach of this Agreement within thirty (30) days of its
receipt of written notice regarding such default or breach; provided that, so
long as such defaulting party is acting diligently and in good faith, is
exercising commercially reasonable best efforts to cure such default or breach,
is making real and substantial progress toward such a cure, and there is a
reasonable expectation that such defaulting party will achieve such a cure, the
thirty (30) day cure period will be extended, but for not more than two (2)
additional thirty (30) day periods.
8.2.2 Termination of License
The licenses granted to AT&T and its Affiliates under Section 2 will
terminate automatically upon expiration of the Term if and only if such
expiration is due to AT&T's election not to renew the Term for any renewal
period under paragraph 8.2.1. UPI may terminate the licenses granted to AT&T and
its Affiliates under Section 2 only by giving written notice to AT&T following
the occurrence of a substantial and material breach of this Agreement by AT&T
that:
(a) is not cured in all material respects within [*********] days
after the date on which AT&T receives written notice from UPI of such
breach; and
(b) [**********************************************************
**************************************************************************
*****************************************************]
(c) [***********************************************************
**********************************************************************
*****************************]
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<PAGE>
[**********************************************************************
*************************************************************************
*************************************************************************
*************************************************************************
*************************************************************************
**********************************************].
The licenses granted to AT&T and its Affiliates under Section 2 shall not under
any circumstances terminate or be terminated except as expressly provided in
this paragraph 8.2.2.
8.3 Effect of Termination of License
In the event UPI terminates the license pursuant to paragraph 8.2.2, AT&T
and its Affiliates will, upon the resulting termination of the license,
discontinue their use of the UPI Software and the Application Server Software
and promptly deliver to UPI all copies of the UPI Software and the Application
Server Software in its possession. At AT&T's option, all copies of the UPI
Software and the Application Server Software required to be delivered to UPI may
be destroyed by AT&T, in which case AT&T will provide to UPI written
certification that such destruction has been completed.
8.4 Effect of Termination of Term
In the event AT&T, based on the occurrence of a Minor Release Event,
enforces its rights under paragraph 6.2 and the Escrow Agreement, terminates the
Term under paragraph 8.2.1 and continues to exercise the license rights granted
under Section 2, AT&T will continue to pay usage fees to UPI at a rate equal to
[*******************] of the amount that would otherwise be payable under
paragraph 5.2. Further, in such event, AT&T will not be entitled to Support
Services under Section 4 and UPI will not be obligated to provide such services.
8.5 Survival
Sections 7, 9 and 10 and paragraphs 6.1,6.2, 6.3, 6.5, 8.3, 8.4 and 8.5,
any accrued payment obligations of AT&T hereunder and all other provisions of
this Agreement which may reasonably be interpreted or construed as surviving the
expiration or termination of the Term or this Agreement, will survive the
expiration or termination of the Term or this Agreement. Further, subject to
paragraphs 8.2.2, 8.3 and 8.4, Section 2 will survive any termination of the
Term by AT&T pursuant to paragraph 8.2.1.
Section 9. Arbitration
9.1 Selection of Arbitrator
Any controversies between the parties arising out of or relating to this
Agreement will, upon demand of either party, be resolved exclusively by
submission to an arbitrator or a panel of three arbitrators. If the parties
cannot agree upon a single arbitrator, then each party will designate one
arbitrator and the two arbitrators designated by them will designate a third for
the panel of three arbitrators, if the two arbitrators designated by the parties
cannot agree upon the third arbitrator, then, upon request of any party, the
third arbitrator will be appointed by the Court as specified in paragraph 9.3.
No arbitrator will have any direct or indirect interest in either party or the
matter submitted for determination.
9.2 Location
The arbitration will be conducted in [*****************] or such other
location as may be agreed upon by the parties.
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9.3 Jurisdiction
The arbitration will be conducted pursuant to the Commercial Arbitration
Rules of the American Arbitration Association, as the same may have been or may
be amended, and will be subject to the jurisdiction of the [********************
************************************************].
9.4 Decision
The arbitrators will render a decision not later than thirty (30) days
after the matter has been submitted, and such decision will be final and binding
upon the parties. The decision of a panel of three arbitrators will require the
concurrence of at least two arbitrators. The decision will be in writing. The
decision of the arbitrators may be entered as a final decree or judgment in any
court of competent jurisdiction or may be enforced against the parties and their
assets wherever they are found. The arbitrators are specifically authorized to
grant injunctive relief, either as part of the final decision or prior to the
final decision. The parties desire that the courts promptly enforce all
injunctive relief granted prior to final decision as though it were part of a
final decision, even though such enforcement may be requested prior to final
decision.
9.5 Costs
Any costs incurred by any arbitration proceedings (such as compensation
to the arbitrators and reporter and the expense of hearing room facilities) will
be divided equally among the parties, except that each party will bear its own
attorneys' fees and costs of witnesses; provided, that, the arbitrators will
have the authority to require, as part of the final decision, the party against
whom the arbitrators render a decision to reimburse any or all costs, expenses
and attorneys' fees incurred by the other party in connection with the
arbitration.
Section 10. Miscellaneous
10.1 Performance
UPI will perform the Services in a prompt and efficient manner in
accordance with the schedule and other terms of this Agreement. UPI will ensure
that it and its employees are properly licensed, qualified, equipped and
experienced to perform the Services. UPI will, in its performance of the
Services, comply with all applicable laws, ordinances, rules, regulations and
other requirements now or hereafter in effect of any governmental authority
having jurisdiction. Upon request, UPI will furnish AT&T with documentation of
any Services previously performed or then being performed in the form of written
and/or verbal (as requested) progress reports.
10.2 Confidential Information
In the performance of or otherwise in connection with this Agreement, one
party ("Disclosing Party") may disclose to the other party ("Receiving Party")
certain Confidential Information of the Disclosing Party. The Receiving Party
will treat such Confidential Information as confidential and proprietary of the
Disclosing Party and will use such Confidential Information solely for the
purposes for which it is provided by the Disclosing Party and will not disclose
such Confidential Information to any third party (other than a third party under
contract with AT&T (or under contract with any AT&T Affiliate) who is assisting
AT&T in its operations of the AT&T Network and who has agreed to keep the
Confidential Information confidential). Without limiting the generality of the
foregoing, the Receiving Party will take reasonable precautions to prevent any
unauthorized use or disclosure of such Confidential Information. The obligations
under this paragraph will not apply to any: (a) use or
PAGE 15
<PAGE>
disclosure of any information pursuant to the exercise of the Receiving Party's
rights under this Agreement; (b) information that is now or later becomes
publicly available through no fault of the Receiving party; (c) information that
is obtained by the Receiving Party from a third party authorized to make such
disclosure (other than in connection with this Agreement) without any obligation
of secrecy or confidentiality; (d) information that is independently developed
by the Receiving Party (e.g., without reference to any Confidential
Information); (e) any disclosure required by applicable law (e.g., pursuant to
applicable securities laws or legal process), provided that the Receiving Party
will use reasonable efforts to give advance notice to and cooperate with the
Disclosing Party in connection with any such disclosure; and (f) any disclosure
with the consent of the Disclosing Party.
10.3 No Consequential Damages
NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR ANY COSTS OF PROCUREMENT OF
SUBSTITUTE GOODS OR SERVICES, LOSS OF USE, INTERRUPTION OF BUSINESS, LOST
PROFITS OR ANY OTHER CONSEQUENTIAL, SPECIAL, INCIDENTAL OR INDIRECT DAMAGES OF
ANY KIND UNDER ANY CAUSE OF ACTION (INCLUDING NEGLIGENCE), WHETHER OR NOT SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THESE LIMITATIONS
WILL APPLY NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL PURPOSE OF ANY REMEDY.
10.4 Force Majeure
Neither party will be liable for, or be considered to be in breach of or in
default under this Agreement on account of, any delay or failure to perform as
required by this Agreement caused or contributed to by any condition,
circumstance, event or occurrence beyond the affected party's reasonable control
and that cannot be overcome by the exercise of reasonable diligence, including
but not limited to: fire, explosion, earthquake, volcanic activity, storm,
flood, wind, drought, and acts of God or the elements; court order and act,
delay, and failure to act by civil, military, and other governmental authority;
and riot, insurrection, sabotage, and war, provided that the affected party
gives the other party written notice of such condition, circumstance, event or
occurrence immediately after the affected party becomes or is made aware of the
same. UPI and AT&T will each cooperate and use their best efforts to eliminate
or minimize any delay resulting from any such condition, circumstance, event or
occurrence.
10.5 Limitation of Damages
[***********************************************************************
***], THE TOTAL LIABILITY OF UPI FOR DAMAGES IN CONNECTION WITH THIS AGREEMENT,
WHETHER IN AN ACTION IN CONTRACT OR TORT OR ANY OTHER FORM OF ACTION, WILL IN NO
EVENT EXCEED [****************************************************************].
10.6 Independent Contractor
UPI and AT&T will be and act as independent contractors in the performance
of the Services and their respective duties hereunder. Neither party will be
entitled to, nor attempt to, create or assume any obligation, express or
implied, on behalf of the other party. This Agreement will not be interpreted or
construed to create an association, joint venture, partnership, or franchise
between the parties or to impose any partnership obligation or liability upon
either party.
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10.7 Assignment
Neither party will (by contract, operation of law or otherwise) assign this
Agreement or any right or interest in this Agreement, except as follows:
(a) to any person or entity into or with which a party is merged
or consolidated or to which a party transfers substantially all of its
assets to which this Agreement relates;
(b) to an Affiliate of a party; or
(c) to any other person or entity with the prior written consent of
the other party.
Subject to the foregoing, this Agreement is binding upon, inures to the benefit
of, and is enforceable by the parties and their respective heirs, successors,
assigns, and personal representatives.
10.8 No Delegation of Duties
Neither party will delegate performance of the Services or any other duties
hereunder or contemplated hereby to any other person or entity, other than its
regular or contract employees, without the prior written consent of the other
party, which consent will not be unreasonably withheld. Any such person or
entity designated by either party with the other party's consent to perform any
of the Services or any other duties hereunder or contemplated hereby will abide
by such rules of conduct and meet such performance standards as may be required
by this Agreement or reasonably established by such other party. Any removal or
replacement of such persons will be made only with notice to and approval by the
other party.
10.9 Notices
Any notice or other communication under this Agreement will be in writing
and will be delivered in person, by facsimile, by nationally recognized
overnight courier, or mailed, properly addressed and stamped, to the intended
recipient at the address appearing on the signature page of this Agreement.
Notices will be deemed received only upon actual receipt. Either party may
change its address by giving the other party notice of the change in accordance
with this paragraph.
10.10 Nonwaiver
The failure of either party to insist upon or enforce strict performance by
the other of any of the provisions of this Agreement or to exercise any right
under this Agreement will not be construed as a waiver or relinquishment of its
right to assert or rely upon any provision or right in that or any other
instance; rather, the provision and right will remain in full force and effect.
10.11 Compliance and Severability
UPI and AT&T will each perform its obligations under this Agreement in
accordance with all applicable laws, rules and regulations now or hereafter in
effect. If any term or provision of this Agreement will be found to be illegal
or unenforceable, this Agreement will remain in full force and effect and such
term or provision will be deemed stricken.
10.12 Counterparts
This Agreement may be signed in counterparts, which together constitute one
instrument.
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10.13 Entire Agreement
This Agreement (together with all attached exhibits, each of which is
hereby incorporated herein by this reference) sets forth the entire agreement of
the parties, and supersedes any and all prior agreements (including, but not
limited to, the Letter of Intent dated December 19, 1995, and executed by UPI
and AT&T), related to the subject matter hereof. No change, amendment, or
modification of any provision of this Agreement will be valid unless set forth
in a written instrument signed by both parties.
10.14 Governing Law
This Agreement will be interpreted, construed and enforced in all
respects in accordance with the laws of the State of Washington without
reference to its choice of law rules.
UPI: AT&T:
- ---- -----
Unwired Planet, Inc. AT&T Wireless Services, Inc.
By: /s/ A. Rossmann By: K.A. VanderMuelen
---------------------------- --------------------------
Title: CEO & Chairman Title: VP & GM, Wireless Data
------------------------- -----------------------
Address: 90 Middlefield Road, Suite 201 Address: 10230 N.E. Points Dr.
Menlo Park, California 94025 Kirkland, Washington 98033
Attn: President Attn: WDD General Counsel
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EXHIBIT A
Licensed Programs and Documentation
Unless otherwise defined herein, all terms defined in the Agreement will
have the same meanings when used In this Exhibit A with initial letters
capitalized. The computer programs and documentation to be provided by UPI to
AT&T are as follows:
1. The following Licensed Programs, all of which will be provided to AT&T
[******************************] as provided in [***********] of the Agreement:
(a) the exactable version of the UPI Air Network Translator Server
Software and Upgrades developed by or for UPI for integration into an AT&T
Network to allow for the transmission of UPI formatted data (as defined in
Exhibit D and associated documents) to and from integrated communication devices
which will be configured with UPI Client Software, along with any and all
related software applications and/or electronic file generally made available by
UPI to its customers without additional charge including Enhancements (generally
made available by UPI to its customers without additional charge) to Install,
configure, test, manage, and operate the server, including without limitation
configuration files, installation scripts, test scripts, management applications
and subsystems;
(b) the executable version of any other software required for support
of the ANT Servers including without limitation utilities, system management
applications and Interface software developed by or for UPI and used to Install,
configure, test, manage, and operate complementary sewers (e.g. applications,
content access, gateways, etc.), including without limitation configuration
files, installation scripts, test scripts, management applications or
subsystems, but specifically excluding the Oracle database and [**********]; and
(c) all Enhancements to the Licensed Program specified in (a) and (b),
above, that are developed by or for UPI during the Term which are generally made
available by UPI to its customers without additional charge
(d) all Enhancements to the Licensed Programs specified in (a) and (b),
above, that are developed by or for UPI during the Term which are generally made
available by UPI to its customers with an additional charge and which are
purchased by and delivered to AT&T pursuant to the terms of this Agreement.
2. The following Documentation, presented in professional form and content
and sufficiently complete to allow AT&T to readily install and operate the UPI
Software will be available on a prioritized basis (as prioritized by AT&T)
beginning as of the Launch Date, provided that complete Documentation will be
delivered no later than November 1, 1996:
. Licensed Program specifications and implementation and selected design
documents.
. UPI test procedures, results, and recommendations.
. Server installation procedures.
. Server configuration procedures and recommendations.
. Server management procedures.
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EXHIBIT A
Licensed Programs and Documentation (continued)
. Error recovery procedures.
. Server backup and administration procedures.
. Programmer's interface documentation. This should include UPI
documentation used for the integration of Oracle and other similar
service development interfaces.
. Error codes and their meanings.
. Platform configuration recommendations (e.g. operating system
parameters, performance tuning, hardware requirements).
. Provisioning and customer care procedures.
. Billing interfaces, extraction processes/procedures.
. End user manual and quick reference card.
. Any and all documentation of the type described above in this paragraph
2 relating to Enhancements and Upgrades developed by or for UPI during
the Term.
. Sufficient documentation to enable AT&T to troubleshoot to Levels 1,2
and 3.
PAGE 2
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EXHIBIT B
See Attached Form Escrow Agreement
PAGE i
<PAGE>
ESCROW AGREEMENT
between
Unwired Planet, Inc.,
AT&T Wireless Services, Inc.,
and
Data Securities International, Inc.
Dated as of _____________,1996
<PAGE>
CONTENTS
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ESCROW AGREEMENT
This Escrow Agreement, dated as of ____________,1996, is made and entered
into by and among AT&T Wireless Services, Inc., a Delaware corporation
("AT&T"); Unwired Planet, Inc., a Delaware corporation ("UPI"); and Data
Securities International, Inc., a _____________ corporation ("Agent").
RECITALS
A. UPI and AT&T have entered into a Software License and Support
Agreement, dated as of May 1, 1996 (the "Software Agreement"). All terms defined
in the Software Agreement shall have the same meanings when used in this Escrow
Agreement with initial letters capitalized.
B. Pursuant to paragraph 6.2 of the Software Agreement, UPi must prepare
and deliver to the Escrow Agent to be held in escrow a complete, current and
accurate copy of all the UPI Software Source Code and the Application Server
Software Source Code.
E. UPI and AT&T desire to appoint Agent to act as the Escrow Agent to
receive, hold and release the UPI Software Source Code and the Application
Server Software Source Code pursuant to the Software Agreement in accordance
with the terms, conditions and provisions set forth in this Escrow Agreement.
AGREEMENT
UPI, AT&T and Agent therefore agree as follows:
1. Appointment
UPI and AT&T hereby appoint Agent, and Agent hereby accepts appointment, to
act as the "Escrow Agent" contemplated by the Software Agreement.
2. Deposit
Upon execution of this Escrow Agreement and thereafter within [*********]
days after any Enhancement is delivered to AT&T, UPI shall deposit with Agent,
and Agent shall accept from UPI, for storage purposes only, a complete, current
copy of all UPI Software Source Code and Application Server Software Source Code
to be held in escrow pursuant to this Escrow Agreement. Further, if UPI
thereafter makes any material revision, supplement, improvement, addition,
update or new version to any UPI Software Source Code or the Application Server
Software Source Code, as the case may be, during the Term relating to an
executable version that is generally provided to licensees of the UPi Software
or Application Server Software without additional charge, UPI shall promptly
deposit with Agent, and Agent shall accept from UPI, for storage purposes only,
a complete, current copy of the same to be held in escrow pursuant to this
Escrow Agreement, whereupon UPI may remove from the Deposit any UPI Software
Source Code or Application Server Software Source Code, as the case may be, that
is replaced or superseded by newly deposited items. UPI shall also promptly
deposit with Agent, and Agent shall accept from UPI, for storage purposes only,
all other UPI Software or Application Server Software code required to be
deposited in escrow by UPI under paragraph 6.2 of the Software Agreement. The
items deposited in escrow under this Escrow Agreement are sometimes collectively
referred to herein as the "Deposit".
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3. Deposit List
Upon each deposit under paragraph 2, UPI shall furnish to Agent a complete,
current list ("Deposit List"), identifying all of the items contained in the
Deposit, together with a written certification by an authorized agent of UPI
that: (a) the Deposit List is accurate; and (b) a complete master, reproducible
copy of each item on the Deposit List is in the Deposit. Each time that UPI
deposits any items pursuant to paragraph 2, Agent shall prepare and deliver to
UPI a written receipt for the same. Promptly after each deposit, Agent shall
deliver to AT&T a copy of the Deposit List and certification furnished by UPI
and a copy of the receipt prepared by Agent.
4. Responsibility for Accuracy and Completeness
Agent shall not be required to determine the accuracy or completeness of
any deposit under paragraph 2 or any Deposit List furnished by UPI under
paragraph 3. Further, Agent shall not be responsible for any items not actually
deposited with it, whether or not such items were required to be deposited under
the terms of this Escrow Agreement, the Software Agreement or any other
agreement.
5. Retention and Release of Deposit
Agent shall hold in safekeeping and preserve in confidence the Deposit
during the Term and shall release or disclose the Deposit only in accordance
with the terms of this Agreement.
6. Release of Deposit
Agent shall release the Deposit only as follows:
(a) Agent shall release the Deposit to UPI or AT&T upon Agent's
receipt of written instructions to do so signed by an officer of each of
UPI and AT&T; provided that all fees payable to Agent for performance of
its services hereunder have been fully paid.
(b) Agent shall release the Deposit to UPI at any time that Agent
ceases doing business or is unable to hold the Deposit in accordance with
the terms of this Agreement clue to forces beyond its reasonable control;
provided that all fees payable to Agent for performance of its services
hereunder have been fully paid, and provided further that Agent gives such
advance notice to UPI and AT&T as is reasonably practicable in the
circumstances. Upon such notice, UPI and AT&T shall use their best efforts
to agree upon a substitute escrow agent and enter into an escrow agreement
containing substantially the same terms as this Escrow Agreement pursuant
to which UPI shall deliver the Deposit to the substitute escrow agent.
(c) Agent shall release the Deposit to AT&T on the [***************]
day after Agent gives UPI a written Release Notice therefor pursuant to
paragraph 7.3, provided that Agent does not receive a Dispute Notice from
UPI in the manner and within the time specified in paragraph 7.4.
(d) Agent shall release all or a portion of the Deposit in accordance
with any arbitration award pursuant to Section 8 determining that a Release
Event as to the UPI Software or the Application Server Software, as the
case may be, has occurred, but in no event less than [******] days
following such award.
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(e) Agent shall release the Deposit to such persons and in such
manner as may be directed by order of any court of competent jurisdiction
pursuant to Section 9 or otherwise.
(f) Upon the termination or expiration of the Term pursuant to Section
13, Agent shall release the Deposit to UPI or, if directed in writing signed by
an officer of UPI and an officer of AT&T, to a substitute escrow agent.
7. Release Events
7.1 Release Events
AT&T shall be entitled to release of the Deposit upon the occurrence of a
Release Event.
7.2 Release Notice
Upon the occurrence of any Release Event, AT&T may deliver to Agent a
written notice (the "Release Notice") of the Release Event and requesting
release of the Deposit as provided for in paragraph 7.1. The Release Notice must
contain a statement, verified by an officer of AT&T, that the applicable Release
Event has occurred and that the Deposit is to be released.
7.3 Agent's Notice to UPI
Upon receipt of a Release Notice, Agent shall promptly give UPI written
notice of such receipt and transmit with such notice a copy of the Release
Notice.
7.4 Dispute
UPI may dispute a Release Notice at any time within [******] days after
UPI receives written notice thereof pursuant to paragraph 7.3, by giving written
notice to Agent specifically denying the occurrence of such Release Event and
setting forth a description of any facts that indicate that the Release Event
did not occur (the "Dispute Notice").
7.5 Agent's Notice to AT&T
Upon receipt of a Dispute Notice, Agent shall promptly give AT&T notice of
such receipt and transmit with such notice a copy of the Dispute Notice.
7.6 Withdrawal of Notice
AT&T may withdraw its Release Notice at any time by giving Agent and UPI
written notice of such withdrawal. UPI may withdraw its Dispute Notice at any
time by giving Agent and AT&T written notice of such withdrawal.
8. Arbitration
8.1 General
Any dispute of a Release Notice pursuant to paragraph 7.4 shall be settled
by final and binding arbitration in accordance with the provisions of this
section. The sole issue to be decided in any such arbitration shall be whether
any Release Event has occurred.
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8.2 Notice
If, within fifteen (15) days after receipt of any notice from Agent that it
has received a Dispute Notice, the dispute has not been resolved in a mutually
acceptable manner, either party may initiate the arbitration procedure under
this section by giving the other party written notice demanding arbitration of
the dispute.
8.3 Arbitration
Unless otherwise agreed by UPI and AT&T, any dispute submitted to
arbitration under this section shall be presented to a panel of three
arbitrators. The party demanding arbitration under paragraph 8.2 shall appoint
and specify one of the arbitrators in its notice demanding the arbitration. The
other party shall appoint a second arbitrator and give the demanding Party
written notice of such appointment within thirty (30) days after the notice
demanding the arbitration. The two arbitrators so appointed shall appoint a
third arbitrator who shall act as chairman of the arbitration panel. If the two
arbitrators appointed by the parties do not agree upon the third arbitrator
within thirty (30) days after appointment of the second arbitrator, then, upon
request of UPI or AT&T, the third arbitrator shall be appointed in accordance
with the Arbitration Rules of the Judicial Arbitration and Mediation Services,
Inc. (J.A.M.S.). If any arbitrator is unable to serve as an arbitrator, then a
substitute arbitrator shall be promptly designated by the person or persons who
appointed the arbitrator who is unable to serve.
8.4 No Ex Parte Discussions
No party may discuss the dispute to be arbitrated with any arbitrator after
such arbitrator is appointed and prior to the arbitration panel's determination,
without providing the other party with reasonable advance notice and the
opportunity to participate in such discussions.
8.5 Procedures
The arbitration shall be conducted in accordance with the Arbitration Rules
of J.A.M.S. Additional rules of procedure for the conduct of the arbitration may
be determined by a majority of the arbitrators. Such rules of procedures shall
direct the expeditious evaluation of the merits of the dispute and rendering of
a decision consistent with the complexity of the dispute being arbitrated. In
any arbitration, each party shall have:
(a) full access to the records of the other parties that pertain to
the dispute;
(b) the power to call for testimony of any director, officer,
employee, agent or representative of the other parties; and
(c) all other rights of discovery accorded to parties in civil actions
under the Federal Rules of Civil Procedure (or rules or laws applicable to court
proceedings adopted in lieu thereof) applicable in proceedings before the court
specified in section 9.8.
8.6 Decision
Unless otherwise agreed by UPI and AT&T, the arbitrators shall render a
decision determining whether the Release Event has occurred within thirty (30)
calendar days after completion of the arbitration proceeding. The decision of
the arbitration panel shall be made by a majority of the arbitrators and shall
be binding upon the parties.
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8.7 Location
Any arbitration hearings under this Agreement shall be held at a mutually
acceptable location in or near San Francisco, California, U.S.A.
8.8 Jurisdiction
The Superior Court of the State of California in and for the City and
County of San Francisco, shall be the forum for any court supervision of any
arbitration under this section.
8.9 Costs
Each party shall pay for the services and expenses of the arbitrator
appointed by it. The costs for the services and expenses of the third arbitrator
and all administration costs of the arbitration shall be paid by the non-
prevailing party.
9. Interpleader
Notwithstanding any other provision of this Agreement, if Agent receives a
Release Notice and Agent is uncertain whether the Release Notice was timely or
otherwise effective, then Agent may, in its sole discretion, begin an
interpleader action and deposit the Deposit with the clerk of the court or
withhold release of the Deposit until instructed otherwise by court order. In
connection with any such deposit, Agent shall seek an appropriate order to seal
the deposit so as to prevent release or disclosure to third parties.
10. Fees
AT&T shall pay to Agent the initial and annual fees prescribed on the
attached Exhibit I for performance of services by Agent during the Term. Agent
may change its rates from time to time by providing at least sixty (60) days'
advance written notice of such change to AT&T.
11. No Duty to Inquire Into Truth, Authenticity or Authority; Right to
Require Additional Documents
Agent shall not be required to inquire into the truth of any statements or
representations contained in any notices, certificates or other documents
required or otherwise provided hereunder, and shall be entitled to assume that
the signatures on such documents are genuine, that the persons signing on behalf
of any party thereto are duly authorized to execute the same, and that all
actions necessary to render any such documents binding on the party purportedly
executing the same have been duly undertaken. Without in any way limiting the
foregoing, Agent may in its discretion require from UPI or AT&T additional
documents which it deems to be necessary or desirable in the course of
performing its obligations hereunder.
12. Indemnification
Agent shall be responsible to perform its obligations under this Agreement
and to act in a reasonable and prudent manner with regard to the escrow
arrangement set forth herein. Provided Agent has acted in the manner stated in
the preceding sentence, AT&T and UPI each agree to indemnify, defend and hold
harmless Agent from any and all claims, actions, damages, arbitration fees and
expenses, costs, attorney's fees and other liabilities incurred by Agent
relating in any way to the escrow arrangement set forth in this Agreement.
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13. Termination
13.1 Termination by Agent
Agent may, at any time, terminate the term of this Agreement by resigning
as escrow agent hereunder. Agent shall provide UPI and AT&T ninety (90) days'
advance written notice of its intention to resign. Further, Agent may terminate
the term of this Agreement upon written notice to UPI and AT&T if AT&T defaults
in the payment of the fees payable to Agent under section 10 and fails to cure
such default within ten (10) days after its receipt of written notice of default
from Agent.
13.2 Termination by AT&T
AT&T may, at any time, terminate the term of this Agreement by providing
Agent fourteen (14) days advance written notice of such termination, signed by
an officer of AT&T; provided that all fees payable to Agent for performance of
its services hereunder have been fully paid.
13.3 No Other Termination
Except as provided in paragraphs 13.1 and 13.2, this Escrow Agreement may
not be terminated or modified except in writing signed by Agent, UPI and AT&T;
provided, however, that this Agreement will terminate and all items held in
escrow hereunder will be returned to UPI upon any termination of the license
granted to AT&T under Section 2 of the Software Agreement.
14. Miscellaneous
14.1 Entire Agreement
This Escrow Agreement constitutes the final and entire agreement among the
parties with respect to the subject matter hereof and supersedes all prior
arrangements or understandings.
14.2 Notices
All notices, requests, consents and other communications provided for
herein to any party shall be deemed to be sufficient if contained in a written
instrument either: (a) delivered in person or by facsimile or telex; or (b) sent
by first-class registered or certified mail postage prepaid, addressed to the
party at the address set forth below, or such other address as may be hereafter
be designated in writing by the party. Notices will be effective only upon
actual receipt.
If to UPI: Unwired Planet, Inc.
90 Middlefield Road, Suite 201
Menlo Park, California 94025
Attn: President
If to AT&T: AT&T Wireless Services, Inc
Wireless Data Division
10230 N E Points Dr.
Kirkland, Washington 98033
Attn: WDD General Counsel
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If to Agent: Data Securities International, Inc.
425 California Street, Suite 1450
San Francisco, CA 94104
Attn: _____________________
14.3 Changes
The terms of this Escrow Agreement may not be modified or amended, or any
of the provisions hereof waived, temporarily or permanently, except pursuant to
the written consent of the parties.
14.4 Severability
If any term or provision of this Escrow Agreement or the application
thereof as to any person or circumstance shall to any extent be invalid or
unenforceable, the remaining terms and provisions of this Escrow Agreement or
the application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected
thereby and each term and provision of this Escrow Agreement shall be valid and
enforceable to the fullest extent permitted by law.
14.5 Facsimile
This Escrow Agreement may be executed by facsimile signature.
14.6 Counterparts
This Escrow Agreement may be executed in any number of counterparts, and
each such counterpart shall be deemed to be an original instrument. All such
counterparts together shall constitute but one agreement.
14.7 Headings
The headings of the various sections of this Escrow Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Escrow Agreement.
14.8 Specific Performance
In the event of any breach of or default under this Agreement by any party,
other than a breach or default of a monetary obligation, the other party may
suffer irreparable harm and have no adequate remedy at law. Consequently, in the
event of such breach or default, or any threat of such breach or default, by any
party, then the other parties will be entitled to temporary or permanent
injunctive relief, specific performance and such other equitable relief as may
be appropriate in he circumstances in order to restrain or enjoin the breach or
default. This paragraph will not be interpreted or construed to require the
release of the Deposit pursuant to a Release Notice that has been disputed in
good faith by UPI in accordance with paragraph 7.4, prior to resolution of the
dispute pursuant to Section 8. The rights and remedies under this paragraph are
in addition to, and not in lieu of, any other right or remedy afforded under any
other provision of this Agreement, by law or otherwise.
14.9 Governing Law
This Escrow Agreement shall be governed by and construed in accordance with
the laws of the State of California without regard to the principles of
conflicts of laws.
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14.10 Successors and Assigns
This Agreement shall inure to the benefit of, be binding upon and be
enforceable by each of the parties and their respective successors and assigns.
The assignment and delegation rights of the Parties with respect to this
Agreement are set forth in Section 10.5 and 10.6 of the Software Agreement.
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as
of the date set forth above.
UPI: Unwired Planet, Inc.
By __________________________
Title ______________________
AT&T: AT&T Wireless Services, Inc.
By __________________________
Title ______________________
Agent: Data Securities International, Inc.
By __________________________
Title ______________________
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EXHIBIT 1 TO ESCROW AGREEMENT
Fee Schedule
------------
Fee: Amount:
- ---- -------
1. Initial Fee ________________
2. Annual Fee ________________
(One Container)
3. Additional Container ________________
(Per Year)
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EXHIBIT C
Software Integration Services
Unless otherwise defined herein, all terms defined in the Agreement will
have the same meanings when used in this Exhibit C with initial letters
capitalized.
The Software Integration Services to be provided by UPI to AT&T are defined
as follows:
UPI will, in conjunction with AT&T, define specifications for hardware,
operating systems, Oracle database versions, and [********] or a UPI-specified
email engine/package and configuration that will support the UPI Software and
Application Server Software and will integrate into AT&T's network. Upon receipt
of such specifications from UPI, AT&T will establish its computer or computers
on which the ANT Server and Application Server run along with all other
hardware, operating system, Oracle database, email engine, and other software
necessary to operate the ANT Server and Application Server and their connection
to the AT&T Network, with the exception of the UPI Software and the Application
Server Software. Such computers will be fully functioning and will conform to
the specifications supplied by UPI as described above. In connection with AT&T's
initial installation of the computers to be used as the ANT Server and the
Application Server, UPI will provide the following services:
1. Installation of the UPI Software and Application Server Software on
the AT&T computers to establish an ANT Server and an Application
Server on the AT&T Network to support an initial user/client
population of [****] on the Launch Date, [****] by [******************
********], [*****] by [***************************] and [*****] by [**
************************].
2. Cooperation with and provision of assistance to agents and
representatives of AT&T and AT&T's other software and hardware
suppliers which supply elements of the interface with the ANT Server
and Application Server, in the appropriate initial configuration of
the other software and hardware elements to support an initial
user/client population of [****].
3. Cooperation with and provision of assistance to agents and
representatives of AT&T in the initial configuration of AT&T's billing
system and information extraction processes and procedures to support
an initial user/client population of [****].
4. Cooperation with and provision of assistance to agents and
representatives of AT&T in the initial configuration of AT&T's
customer care and provisioning procedures to support an initial
user/client population of [****].
UPI representatives will be present at the site of the installation of the
UPI Software and Application Server Software on the first computer
configurations to serve as an ANT Server and an Application Server, and will
provide training to an AT&T team with the understanding that at the conclusion
of the installation of the UPI Software and Application Server Software, the
team will be capable of conducting a similar installation on the next AT&T
computer to be designated as an ANT Server or an Application Server. The visit
will be at UPI's cost and expense. In the second such installation, UPI
representatives will be present at the site and will not conduct the
installation, but will act as advisors to AT&T staff conducting the
installation. This visit will be at UPI' cost and expense. In the third and all
subsequent installations, UPI representatives will provide remote telephone and
fax assistance until each installation is formally accepted by AT&T according to
installation standards established at the time of the first installation by the
UPI/AT&T installation
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EXHIBIT C
Software Integration Services (continued)
team. If the installation of the UPI Software cannot be accomplished with remote
assistance, representatives of UPI will appear on site to assist in such
installation. Such visits will be at UPI's cost and expense; provided that if
the problem or error is not attributable to the UPI Software or UPI's
instructions on the installation of subsequent updates or releases, AT&T will
reimburse UPI for such costs and expenses. AT&T will retain responsibility for
the AT&T Network, including responsibility for procuring necessary hardware,
operating systems and software scheduling, planning, and coordinating other
third party suppliers, and other similar activities.
In connection with the installation of updates and subsequent releases of
the UPI Software or Application Server Software to which AT&T is entitled under
the Agreement, UPI will provide AT&T with disks or other media containing such
updates and releases along with instructions on appropriate installation of such
updates and releases. Representatives of UPI will be available by telephone to
assist in such installation and if such installation cannot be accomplished with
remote assistance in conformity with ordinary and routine procedures, practices
and response times, representatives of UPI will appear on site to assist in such
installation. Such visits will be at UPI's cost and expense; provided that if
the problem or error is not attributable to the UPI Software, the Application
Server Software or UPI's instructions on the installation of subsequent updates
or releases, AT&T will reimburse UPI for such costs and expenses. AT&T will not
update or install new releases of any other elements of the ANT Server, the
Application Server or the AT&T Network (such as the Oracle database or the
platform operating system) until UPI shall have confirmed in writing that the
UPI Software or the Application Server Software, as applicable, will operate and
is compatible with such update or release or has provided AT&T with an update or
release of the UPI Software that will operate and is compatible with the update
or release of such other element.
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EXHIBIT 2C
Email Services
Unless otherwise defined herein, all terms defined in the Agreement will
have the same meanings when used in this Exhibit 2C with initial letters
capitalized.
In connection with AT&T's initial installation of the computer to be used
as the ANT Server, UPI will cooperate with and provide assistance to agents and
representatives of AT&T and Oracle in the appropriate configuration of the
Oracle database [***************] or some other UPI-specified email package to
support an initial user/client population of [****], including without
limitation the following:
1. UPI will cooperate with and assist agents and representatives of AT&T
in evaluating alternative email engines and/or software packages
including, but not limited to, [********], and any other email
software that UPI considers using to offer, store and forward
functionality to customers.
2. If AT&T elects to license the email code which UPI has developed to
run in conjunction with [********] (the [****************]), UPI will
grant to AT&T a nonexclusive, nontransferable (other than as provided
in paragraph 10.7 of the Agreement) and nonsublicensable license to
such UP/HP Email Code in connection with the AT&T Network at a
mutually agreed upon price not to exceed [******]. UPI will provide to
AT&T training and code review for a period not to exceed 7 business
days over elapsed time of three (3) weeks. This support will be
provided by a UPI employee fully qualified and experienced in the
development of the [**************] set. Thereafter, UPI will not be
obligated to provide any support of the code to AT&T. AT&T will not
sell, sublicense or otherwise transfer the [**************] to any
third party. Each employee or contractor used by AT&T in customizing
or further developing the [**************] will be required to sign a
document promising that they will not develop or work on any code for
a competing product (i.e., any messaging or email service designed to
operate on a handheld wireless device) for a period of [**********]
after performance of the work on the [**************]. AT&T will not
be liable for the actions of any employees following termination of
their employment with AT&T or any contractors following termination of
their contracted activities with AT&T.
3. If AT&T elects to license UPI's email application (the "UPI Email
Application"), UPI will license such application to AT&T at a price of
[*] per seat for the first [****] seats, [*] per seat for the next
[****] seats and [*] per seat for each seat over [****]. In addition,
UPI will provide to AT&T maintenance and upgrade support at an annual
rate of [***] per seat. Enhancements will not be included. Seats may
be purchased in blocks of [****] each, with payment for each block due
upon issuance to AT&T of the seats for such block.
4. UPI will utilize documented API's and/or standard data communications
protocols to communicate between the ANT and UPI Mail. UPI software
will not utilize undocumented system features, system calls, or
communications links in the integration of the UPI Email Application.
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EXHIBIT 2C
Email Services
Unless otherwise defined herein, all terms defined in the Agreement will
have the same meanings when used in this Exhibit 2C with initial letters
capitalized.
In connection with AT&T's initial installation of the computer to be used
as the ANT Server, UPI will cooperate with and provide assistance to agents and
representatives of AT&T and Oracle in the appropriate configuration of the
Oracle database and HPOpenMail or some other UPI-specified email package to
support an initial user/client population of 10,000, including without
limitation the following:
1. UPI will cooperate with and assist agents and representatives of AT&T
in evaluating alternative email engines and/or software packages
including, but not limited to, HPOpenMail, and any other email
software that UPI considers using to offer, store and forward
functionality to customers.
2. If AT&T elects to license the email code which UPI has developed to
run in conjunction with HPOpenMail (the "UP/HP Email Code"), UPI will
grant to AT&T a nonexclusive, nontransferable (other than as provided
in paragraph 10.7 of the Agreement) and nonsublicensable license to
such UP/HP Email Code in connection with the AT&T Network at a
mutually agreed upon price not to exceed $200,000. UPI will provide to
AT&T training and code review for a period not to exceed 7 business
days over elapsed time of three (3) weeks. This support will be
provided by a UPI employee fully qualified and experienced in the
development of the UP/HP Email Code set. Thereafter, UPI will not be
obligated to provide any support of the code to AT&T. AT&T will not
sell, sublicense or otherwise transfer the UP/HP Email Code to any
third party. Each employee or contractor used by AT&T in customizing
or further developing the UP/HP Email Code will be required to sign a
document~ promising that they will not develop or work on any code for
a competing product (i.e., any messaging or email service designed to
operate on a handheld wireless device) for a period of one (1) year
after performance of the work on the UP/HP Email Code. AT&T will not
be liable for the actions of any employees following termination of
their employment with AT&T or any contractors following termination of
their contracted activities with AT&T.
3. If AT&T elects to license UPI's email application (the "UPI Email
Application"), UPI will license such application to AT&T at a price of
$23 per seat for the first 20,000 seats, $13 per seat for the next
40,000 seats and $8 per seat for each seat over 60,000. In addition,
UPI will provide to AT&T maintenance and upgrade support at an annual
rate of $1.60 per seat. Enhancements will not be included. Seats may
be purchased in blocks of 10,000 each, with payment for each block due
upon issuance of the seats for such block.
4. UPI will utilize documented API's and/or standard data communications
protocols to communicate between the ANT and UPI Mail. UPI software
will not utilize undocumented system features, system calls, or
communications links in the integration of the UPI Email Application.
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EXHIBIT 2C
Email Services (continued)
5. If AT&T elects to license UPI Email Application, UPI will cooperate
with and assist agents and representatives of AT&T in integrating the
AT&T-based UPI email server with the AT&T-based ANT in accordance with
the terms of the agreement between UPI and AT&T relating to such
email products;
6. [************************************************************
**************************************************************
**************************************************************
**************************************************************
**************************************************************
**************************************************************
**************************************************************
**************************************************************]
7. If, during the Term of this Agreement, AT&T elects to license UPI
Email Application, UPI will continue to provide email Support Services
hereunder for prior versions of the UPI Email Application used by AT&T
in its service offering for a period of twelve (12) months following
the latest maintenance release, but in no event less than two (2)
years from the Launch Date.
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EXHIBIT D
Specifications
Unless otherwise defined herein, all terms defined in the Agreement will
have the same meanings when used in this Exhibit D with initial letters
capitalized.
1. General Description of UPI Software
The UPI Software as described, demonstrated, and defined within the
documents below is described as the AirNet Service. The AirNet Network
Translator (ANT) is the core of this system. It is responsible for request and
notification translation, subscriber authorization and billing, and overall
system fault detection and reporting. The ANT shall provide this service as an
Internal Fixed End System (F-ES) within an AT&T Network. It is developed upon
standard, object oriented software development methods. It has been initially
developed to run on the Solaris operating system of SunSoft, utilizing an Oracle
database (not included within the definition of 'UPI Software"). The design
documents denote an anticipated [********] plus Subscriber load that the ANT has
been designed to scale to.
In addition to the performance requirements set forth in Section 4 of this
Exhibit D, the minimum performance characteristics for the UPI Software are to
support:
. [****] Subscribers as of the Launch Date
. [****] Subscribers by [**********]
. [*****] Subscribers by [**********]
. [*****] Subscribers by [**********]
UPI will consult with AT&T regarding AT&T Network architecture needs as UPI's
plans for product migration unfold. AT&T will provide UPI with notice of AT&T
Network architectural needs and changes. UPI will design its UPI Software so
that AT&T is required to use no more than a commercially reasonable amount and
type of hardware to operate such UPI Software.
2. General Description of Application Server Software
The Application Server Software sits on a Web server and allows the Web
servers to interact with the ANT Server and the UPI Supported Devices. The
Application Server Software is responsible for the real time translation of HDML
into a compressed format which can be processed by the UPI Supported Devices.
The first version of the Application Server Software will be available for the
Solaris Operating System, with subsequent versions available for Windows NT, and
other versions of the Unix operating system. UPI will design its Application
Server Software so that AT&T is required to use no more than a commercially
reasonable amount and type of hardware to operate such Application Server
Software.
PAGE 1
<PAGE>
EXHIBIT D
Specifications (continued)
3. Specific Technical Requirements
The specific technical requirements necessary to implement the UPI Software
and the Application Server Software as described above shall be determined with
reference to the designs, definitions, and specifications as presented to AT&T
and the following documents, copies of which have been previously provided to
AT&T:
. UPI ANT Scalability Performance Characteristics (April 22, 1996, and
subsequent updates delivered to AT&T)
. UPI Uplink Gateway Specification (April 22, 1996, and subsequent updates
delivered to AT&T)
. UPI Gateway Protocol UGP Overview (April 22, 1996, and subsequent
updates delivered to AT&T)
. UPI Software Developer's Kit Specification (April 22, 1996, and
subsequent updates delivered to AT&T)
4. UPI Software Performance Requirements
The UPI Software will meet the following minimum performance
characteristics, with such characteristics being subject to acceptance by AT&T
pursuant to Exhibit C and Exhibit H:
The environment under which the UPI Software will perform is as follows:
. Support at least [****] Subscribers at the initial installation site on
or before the Launch Date, and [****] Subscribers on or before [******
******].
. Be compatible with providing electronic mail boxes (addresses and email
store and forward capability) to at least [****] Subscribers at the
initial installation site on or before the Launch Date, and to [****]
Subscribers on or before [*************].
. Provide maximum user response times (independent of non-UPI licensed
software constraints) of no greater than [******] from user input to
system response (with non-UPI licensed software latencies removed)
during peak utilization periods. Peak utilization periods are defined
as no less than [*] Subscriber utilization (e.g., [***************]
accessing the system at the same time at initial installation). A
Subscriber' accessing the system is hereafter referred to as an "Active
Subscriber." Such response times shall not include device cached
responses. Response must be from the UPI Software (ANT).
. A transaction is defined as:
. An Active Subscriber inputs information into a device which
generates a server request.
PAGE 2
<PAGE>
EXHIBIT D
Specifications {continued)
. This request is received by the ANT Server.
. The ANT Server interprets the request and processes the information
required for a response.
. The response is sent to the Active Subscriber's device.
. The average transaction rate per Active Subscriber is [*******] seconds.
5. Application Server Software [*********] Requirements
The minimum [*********] characteristics of the Application Server Software
are to not add more than [**] seconds of processing time on a Web server hosting
an HDML application during peak utilization periods. Peak utilization periods
are defined as no less than [*] Subscriber utilization (e.g., [***] Subscribers
accessing the system at the same time at initial installation). The utilization
support levels are defined as:
. [****] Subscribers as of the Launch Date
. [****] Subscribers by [***************]
. [*****] Subscribers by [***************]
. [*****] Subscribers by [***************]
PAGE 3
<PAGE>
EXHIBIT E
Support Services
Unless otherwise defined herein, all terms defined in the Agreement will
have the same meanings when used in this Exhibit E with initial letters
capitalized.
The Support Services to be provided by UPI to AT&T include on-going
maintenance of the UPI Software and Application Server Software as well as
system level support to ensure a high level of availability as set forth below.
In the event AT&T notifies UPI of any actual or suspected error or defect
in the UPI Software or Application Server Software, UPI will provide Support
Services and qualified personnel necessary to correct the error or defect in
accordance with the terms of this Agreement. UPI shall use its commercially
reasonable [**] efforts to remedy each error or defect as soon as reasonably
possible with as little disruption to AT&T or the UPI Service. In any event, UPI
will use its commercially reasonable [**] efforts to remedy all program errors
or defects at the following defect classification levels, as determined by AT&T
in its sole discretion, at least as quickly as the following response levels:
SEVERE - This category includes any material defect (or other material
failure of the UPI Software or Application Server Software to function according
to its Specifications) which is demonstrable on the ANT Server or the
Application Server, as applicable, and causes the UPI Software or Application
Server Software to be inoperable, to operate improperly or produces results
materially different from those described in the Documentation that prevents or
seriously impairs the performance of one or more of the UPI Software or
Application Server Software major functions. This category includes, but is not
limited to, the following:
. Overall Performance Standards: A [*] or greater under-performance as
measured against the performance standards set forth in Exhibit D
(e.g., the ability to support only [***] Subscribers by [**********],
rather than the required [****] Subscribers).
. Protocol Stability: Any material failure of user commands attributable
to UPI protocols or software.
. Billing Information Accounting and Transfer: Any material failure to
accurately account for and transfer Customer billing information on a
timely basis.
. User Configuration: Any material rejection by UPI server or software of
attempted changes and/or updates of Customer profiles;
. Server Communications Links: Any material breakdown or failure of
communications between the ANT, Application Server, database server, and
the message storage facility.
. External Communications Links: Any material failure due to UPI Software
or Application Server Software of the internet link or other gateways.
UPI's response to a "SEVERE" defect will be as follows:
Contact - [******]
Workaround - [******]
Solution - [******]
PAGE 1
<PAGE>
EXHIBIT E
Support Services (continued)
MODERATE- This category includes any defect (or other failure of the UPI
Software or Application Server Software to function according to its
Specifications) which is demonstrable on the ANT Server or Application Server,
as applicable, and causes the UPI Software or Application Server Software to be
inoperable, to operate improperly or produces results materially different from
those described in the Documentation that causes erratic or marginally impaired
performance of one or more of the UPI Software or Application Server Software
major functions, but is not a "SEVERE" defect. UPI's response to a "MODERATE"
defect will be as follows:
Contact - [********]
Workaround - [********]
Solution - [********]
MILD - This category includes any defect (or other failure of the UPI
Software or Application Server Software to function according to its
Specifications) which is demonstrable on the ANT Server or Application Server,
as applicable, and causes the UPI Software or Application Server Software to be
inoperable, to operate improperly or produces results materially different from
those described in the Documentation that is not a "SEVERE" defect or a
"MODERATE" defect. UPI's response to a "MILD" defect will be as follows:
Contact - [********]
Workaround - [********]
Solution - [********]
For the purposes of the aforementioned defect classification levels
and response times, the following shall apply:
1. [*******************************************************************
********************************************]
2. "Contact" means a telephone call from a qualified support
specialist of UPI to determine the nature of the problem and to begin
telephone/remote diagnosis and support.
3. "Workaround" means UPI has diagnosed the problem and has determined the
steps required to remedy the problem and has implemented or has enabled AT&T to
implement, a temporary workaround solution that allows the UPI Software or
Application Server Software, as applicable, to regain functionality and
substantial operational status of major functions.
4. "Solution" means that the UPI Software or Application Server Software,
as applicable, functions have been fully restored (including permanent code
fixes, documentation, source code updates and similar information) and the UPI
Software or Application Server Software, as applicable, operates without
material defects.
Notwithstanding the foregoing, if an error, defect or failure is MILD and
does not degrade operation of the AT&T Network in a manner observable or
otherwise noticeable to the user, then UPI will have the option to remedy such
error, defect or failure in the next regular release of the UPI Software or
Application Server Software, as applicable. Program errors, defects or failures
will not include errors, defects or failures resulting from AT&T's improper use
of the UPI Software or
PAGE 2
<PAGE>
Application Server Software, modifications or damage to the UPI Software or
Application Server Software by AT&T, or AT&T's use of the UPI Software or
Application Server Software on or with hardware, an operating system or other
software other than as specified in writing or otherwise approved in writing
by UPI as being compatible with the UPI Software. If UPI is acting diligently
and in good faith, is exercising commercially reasonably best efforts to
remedy such errors, defects or failures, is making real and substantial
progress toward such remedies and there is a reasonable expectation that UPI
will achieve such remedy, then UPI will be deemed to be in compliance with its
obligation to provide the Support Services, provided that such efforts and
progress are sufficient to actually meet the response times for program error
"Solution" specified above.
. Maintenance. UPI shall provide remote maintenance on a 7 day, 24 hour
per day, 365 day per year basis. Should an on-site visit become necessary, UPI
shall provide, [**********************] maintenance personnel to the site where
the UPI Software or Application Server Software is installed; provided that if
the problem or error is not attributable to the UPI Software or Application
Server Software, as applicable, or UPI's instructions on the installation of the
subsequent release, AT&T will reimburse UPI for the costs and expenses
reasonably incurred by UPI for the site visit. This software maintenance may
include, without limitation, software error correction, diagnostic testing (if
such testing can be conducted with the UPI Software or Application Server
Software running and available for use), reconfiguration, reinstallation of
software, and installation of patches (software fixes).
. Upgrades and Enhancements. UPI shall provide, [********************]
software maintenance releases to correct software program errors. Such software
maintenance releases will be provided to AT&T as necessary to meet the response
times for program error "Solution" specified above. Notwithstanding anything in
the Agreement to the contrary, all Enhancements created by or for UPI that are
made available without charge by UPI to its customers generally during the Term
of this Agreement will be provided to AT&T at no additional charge promptly
after the Enhancement is so created, whereas all Enhancements created by or for
UPI that are made available with a charge by UPI to its customers generally
during the Term of this Agreement will be made available to AT&T upon request in
accordance with the provisions of paragraph 5.7 of the Agreement.
. UPI Master Server Updates. UPI shall also provide to AT&T, [****
*****************] [***] updates of all content sites which have become UPI-
capable [****************************************************************] For
those content sites for which access to both the content and the UPI capable
server or application that accesses such site [******************************]
to AT&T customers or the public generally, UPI shall, on a daily basis, provide
an updated address map to be loaded onto the AT&T UPI-capable server(s), [**
*****************************************************************************
*********************************************************]
. Additional Services. UPI will provide to AT&T such additional services
relating to the UPI Software and Application Server Software not otherwise
provided as part of the Services hereunder as may be requested by AT&T from time
to time on terms and conditions and at such rates as may be mutually agreed upon
by the parties in writing. In the event AT&T requests any such additional
services from UPI, the parties will negotiate in good faith with the objective
of agreeing upon a written statement of work that will provide, among other
things, a detailed description of the services and the compensation to be paid
to UPI therefor.
PAGE 3
<PAGE>
EXHIBIT E
Support Services (continued)
. Obligations of AT&T. AT&T will provide UPI with access on an as-needed-
by-AT&T basis to the AT&T ANT Server and AT&T Application Servers to enable UPI
to update such address map and to monitor the proper functioning of the UPI
Software and Application Server Software. The mapping services provided by UPI
will include providing a directory of all available UPI front-ended servers to
AT&T on a no-charge basis, providing this directory registration service at
nominal or no cost to Software Development Kit owners, selective mapping (AT&T's
mapping configuration will not be obliterated by UPI master mapping), and a full
directory of all UPI front-ended servers that have a right to be seen by AT&T
customers (excluding only those that are proprietary to another UPI customer).
General Obligations
. Version Level Support - During the Term of this Agreement, UPI will
continue to provide Support Services hereunder for prior versions of the UPI
Software and Application Server Software used by AT&T in its service offering
for a period of twelve (12) months following the release of the next maintenance
release and for a period of twelve (12) months following the release of the next
major release, or three (3) years if backward compatibility is interrupted for
the installed base of AT&T clients.
. Quality Assurance - UPI will develop and implement quality assurance
measures to insure that all program error corrections and other Support Services
are of workmanlike quality and completed in a timely manner in accordance with
all terms and conditions of this Agreement.
. Staffing of Services - UPI will ensure that only fully experienced and
properly qualified persons perform the Support Services hereunder and that all
Services are staffed adequately with personnel capable of providing the Support
Services. UPI will, if requested by AT&T, remove from performance of the
Services hereunder any person AT&T reasonably determines to be incompetent,
insubordinate, careless, disorderly or otherwise~vise objectionable.
PAGE 4
<PAGE>
EXHIBIT F
[*******************]
[**************************************************************************
****************************************************************************
******************************************************************************]
PAGE 1
<PAGE>
EXHIBIT G
[Superseded by Section 5 of Third AT&T Amendment]
PAGE 1
<PAGE>
EXHIBIT H
Commercial Server Acceptance Criteria
Unless otherwise defined herein, all terms defined in the Agreement will
have the same meanings when used in this Exhibit H with initial letters
capitalized. Further, the terms "Severe," "Moderate" and "Mild" will have the
meanings given them in Exhibit E when used herein.
The UPI Software and the Application Server Software shall not contain any
Severe or Moderate defects, and shall not have more than fifty (50) outstanding
Mild defects. UPI shall notify AT&T of all known defects in the UPI Software or
the Application Server Software at least ten (10) days prior to its scheduled
delivery date. AT&T may challenge the classification of any defect prior to
acceptance. Prior to delivery of the UPI Software and the Application Server
Software, UPI will demonstrate for AT&T the server functions, capabilities and
transaction throughput as specified in Exhibit D. AT&T will issue a first level
approval based on the successful completion of this test to AT&T's satisfaction.
Full and final acceptance of the UPI Software and the Application Server
Software by AT&T will occur when AT&T's Quality Assurance Group completes final
testing of the UPI Software and the Application Server Software and issues
written acceptance of the UPI Software and the Application Server Software based
on the test results. Such test results will be made available to UPI upon
request.
PAGE 1
<PAGE>
EXHIBIT I
Designated Information Services
[Exhibit I has been completed, sealed and deposited with Perkins Cole,
counsel for AT&T, and will be released to UPI at such time as AT&T gives Perkins
Cole notice that AT&T has obtained the consent of the designated Content
Providers to the release of this Exhibit I to UPI]
PAGE 1
<PAGE>
FIRST AMENDMENT TO THE
May 1, 1996 SOFTWARE LICENSE AND SUPPORT AGREEMENT
BETWEEN
UNWIRED PLANET, INC. and AT&T WIRELESS SERVICES, INC.
This FIRST AMENDMENT ("the Amendment")is made as of this 25th day of
---------
November 1996 (the "Effective Date"), by and between UNWIRED PLANET, INC.
--------------
("UPI"), a Delaware corporation having a principal office at 390 Bridge Parkway,
---
Redwood City, CA 94065; and AT&T Wireless Services, Inc. ("AT&T"), a Delaware
corporation, having a principal office at 10230 N.E. Points Drive, Kirkland, WA
98033.
This Agreement amends that SOFTWARE LICENSE AND SUPPORT AGREEMENT (the
"Master Agreement"), dated May l, 1996, by and between UPI and AT&T. Unless
- -----------------
otherwise defined herein, capitalized terms used herein shall have the meanings
ascribed to them in the Master Agreement.
1. UPI EMAIL APPLICATION LICENSE
1.1 As provided under Exhibit 2C to the Master Agreement, UPI hereby
grants to AT&T and its Affiliates that operate or utilize an AT&T Network a
nonexclusive, worldwide, license for UPI's electronic mail application (the "UPI
---
Email Application") to do the following until such time as the license granted
- -----------------
herein terminates in the manner described in paragraphs 8.2.2 of the Master
Agreement or AT&T and its Affiliates discontinue the UPI Email Application
pursuant to Section 5 of this Amendment:
(a) install and use the UPI Email Application on any servers situated
at the site or sites identified on the Exhibit F of the Master
Agreement and any other sites designated from time to time by AT&T;
(b) copy and reproduce the UPI Email Application in connection with
the exercise of the fights granted in (a) above;
(c) make and keep a reasonable number of copies of the UPI Email
Application for archival or backup purposes, provided that AT&T keeps
such copies securely stored in a locked area with access restricted to
employees who need such access in order to operate or maintain the UPI
Email Application; and
(d) use, reproduce and distribute internally the UPI Email Application
Documentation, as defined herein, in connection with the exercise of
any rights granted under this Section 1;
<PAGE>
provided that all such copies of the UPI Email Application programs and related
UPI Email Application Documentation will remain subject to the provisions of
Section 10.2 of the Master Agreement. The UPI Email Application Documentation
shall include all then-current documentation related to the UPI Email
Application made available to any UPI customer, including but not limited to,
the design and product specifications, configuration requirements, user manuals,
installation and operating instructions, and test results.
1.2 UPI will deliver to AT&T one (1) copy of the UPI Email Application and
one (1) copy of the current UPI Email Application Documentation no later than
fifteen (15) days after entering into this Amendment.
1.3 UPI will deliver all Upgrades and all Enhancements to the UPI Email
Application as those Upgrades and Enhancements are created by UPI at no
additional charge to AT&T All Upgrades and Enhancements provided to AT&T will be
deemed a part of the UPI Email Application.
2. LICENSE FEES
2.1 In consideration of the license granted herein to the UPI Email
Application, AT&T shall pay to UPI the one-time license fees in the amount and
in accordance with the payment terms as follows:
<TABLE>
<CAPTION>
No. of Seats Price (per seat)
------------ ----------------
<S> <C> <C>
Per Seat License [******] [******]
[******] [******]
[******] [******]
</TABLE>
2.2 UPI will invoice AT&T upon shipping the UPI Email Application for the
initial block of [*******************] seats. Additional seats may be purchased
in blocks of [*******************] each.
2.3 [*********************************************************************
*******************************************************************************
********************************************************************]
3. SUPPORT SERVICES AND FEES
3.1 UPI will, with respect to the UPI Email Application, furnish AT&T and
its affiliates the software maintenance and support services described in
Schedule 1 hereto (the "UPI Email Support Services") for the term of the UPI
--------------------------
Email Application license.
3.2 AT&T shall pay to UPI an annual fee for the performance of the UPI
Email Support Services in the amount of one dollar and sixty cents ($1.60) per
each seat of the UPI Email Application purchased by AT&T.
2
<PAGE>
3.3 UPI will invoice AT&T for the first calendar year of Email Support
Services for a block of UPI Email Application seats upon shipping such block of
seats. UPI will invoice AT&T for subsequent calendar years of Email Support
Services on the anniversary date of the issuance of such block of seats.
4. OBLIGATIONS OF UPI
4.1 The UPI Email Application 2.0 release will [************************
********************************************] to communicate with the ANT
Server. UPI will cooperate with and assist agents and representatives of AT&T in
integrating the UPI Email Application licensed hereunder with the ANT Server
located on AT&T premises. The UPI Email Application will [**********
******************************************************************] in the
integration of the UPI Email Application.
4.2 UPI will ensure that the UPI Email Application meets the requirements
set forth in the Documentation and in Schedule 2 hereto.
4.3 UPI shall provide the UPI Email Application software integration
services set forth in Schedule 3 hereto. UPI will commence and use commercially
reasonable efforts to perform and complete the UPI Email Application software
integration and testing services in accordance with the schedule mutually agreed
upon by the parties in writing.
5. [*********************]
[*****************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
**************************************************]
6. OWNERSHIP
6.1 Except for the license granted under Section 1 of this Amendment, UPI
reserves all of its Proprietary Rights in the UPI Email Application, and no
title to or ownership of the UPI Email Application is transferred to AT&T or its
Affiliates under this Amendment or the Master Agreement.
3
<PAGE>
6.2 UPI reserves any and all trade names and trademarks which UPI uses in
connection with the UPI Email Application. AT&T may market, promote, distribute,
provide, operate and otherwise deal with the UPI Email Application using their
own private labels, trade names, logos, trademarks, notices (e.g., copyright or
otherwise) and other identifications, and may remove any private label, trade
name, trademark, notice or other identification of UPI from the UPI Email
Application that would be observable or physically apparent to a user of the UPI
Email Application, including any UPI copyright notice. The parties agree that
the UPI copyright notice appearing in the initial flash screen of the UPI Client
Software is intended to provide UPI copyright notice to users of the UPI Email
Application, which is activated at the same time as the UPI Client Software.
7. SOURCE CODE ESCROW
Within ten (10) days after the Effective Date of this Amendment, the
parties and the Escrow Agent will enter into an amendment to the Escrow
Agreement to provide for the delivery of the UPI Email Application source code
to the Escrow Agent to be held in escrow, and UPI will deliver to the Escrow
Agent under the Escrow Agreement a complete, current and accurate copy of the
UPI Email Application source code. Thereafter, UPI will deliver to the Escrow
Agent all source code for each Upgrade and Enhancement provided to AT&T
hereunder within [********] days after such Upgrade or Enhancement is delivered
to AT&T. UPI will resubmit the UPI Email Application source code to the Escrow
Agent promptly after the occurrence of every Upgrade and Enhancement provided to
AT&T hereunder to such code, and will ensure that the UPI Email Application held
in escrow will at all times match the UPI Email Application code which is then
being using by AT&T. All relevant versions of the supporting UPI Email
Application source code (as it relates to the hardware platforms, operation
systems, utilities, database management systems and any other supporting code
necessary to run the system) will also be delivered to and held in escrow by the
Escrow Agent. The UPI Email Application source code will be delivered to AT&T in
the event of a Minor Release Event or a Major Release Event as follows: (I)
following a Minor Release Event relating to the UPI Email Application source
code, UPI grants to AT&T and its Affiliates a license to use, [***************]
the UPI Email Application source code and to take such other actions with
respect thereto as may be necessary to use, correct, maintain and otherwise
support the UPI Email Application; and (ii) following a Major Release Event
relating to the UPI Email Application source code, UPI grants to AT&T and its
Affiliates a license to use, [********************************************] the
UPI Email Application source code, and to take such other actions with respect
thereto as may be necessary to use, correct, maintain, [***********************
*********] and otherwise support the UPI Email Application. Not withstanding the
foregoing, if a default or other reason giving rise to the release of the UPI
Email Application source code is cured by UPI, then AT&T will return all copies
of such source code to the Escrow Agent to be held in escrow under the Escrow
Agreement and the license granted under this First Amendment with respect to
such source code will terminate until such time as there is a
4
<PAGE>
subsequent occurrence of a default or other reason giving rise to the release of
the UPI Email Application source code.
8. WARRANTY
UPI represents and warrants that (a) it has sufficient fight, title and
interest in and to the UPI Email Application to grant the license described in
Section 1 and 7, (b) the UPI Email Support Services and software integration
services will be performed by UPI in a professional, workmanlike and skillful
manner; (c) the UPI Email Application will comply in all material respects with
the applicable Documentation and the Master Agreement and Amendment; and (d) the
UPI Email Application does not and will not infringe or misappropriate any
Proprietary Right of any third party. OTHER THAN THE WARRANTIES EXPRESSLY SET
FORTH IN THIS AGREEMENT, THERE ARE NO EXPRESS OR IMPLIED WARRANTIES RELATING TO
THE UPI EMAIL APPLICATION OR THE SERVICES COVERED BY THIS AMENDMENT, AND UPI
EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
9. OTHER TERMS
All other terms and conditions of the Master Agreement shall remain in full
force and effect. The following terms and conditions set forth in the Master
Agreement shall apply to the UPI Email Application, and are hereby amended to
include the UPI Email Application, as relevant: Sections 1, 2.3, 4.2, 5.4, 5.6,
5.7, 6.1, 7.2, 8, 9, and 10.. This First Amendment shall be coterminous with the
Master Agreement; provided, however, that a breach of any term or condition of
this Amendment relating to the UPI Email Application shall not provide a basis
for terminationof the Master Agreement or any other amendments thereto.
Each party hereby represents to the other that the undersigned has full and
binding authority to execute this Amendment.
ACCEPTED AND AGREED:
UNWIRED PLANET, INC. AT&T WIRELESS SERVICES, INC.
Signature: /s/ Charles M. Parrish Signature: /s/ Kendra VanderMeulen
------------------------ ------------------------
Printed Name: Charles M. Parrish Printed Name: Kendra VanderMeulen
Title: President Title: VP & GM, Wireless Data Div.
------------------------ ----------------------------
5
<PAGE>
Schedule 1
Email Support Services
The Support Services to be provided by UPI to AT&T with respect to the UPI
Email Application include on-going maintenance of the UPI Email Application
software to ensure a high level of availability as set forth below.
In the event AT&T notifies UPI of any actual or suspected error or defect
in the UPI Email Application, UPI will provide Support Services and qualified
personnel necessary to correct the error or defect in accordance with the terms
of this Agreement. UPI shall use its commercially reasonable best efforts to
remedy each error or defect as soon as reasonably possible with as little
disruption to AT&T or the UPI Email Application service as possible. In any
event, UPI will use its commercially reasonable best efforts to remedy all
program errors or defects at the following defect classification levels, as
determined by AT&T in its sole discretion, at least as quickly as the following
response levels:
SEVERE - This category includes any material defect (or other material
failure of the UPI Email Application to function according to the UPI Email
Application Documentation) which causes the UPI Email Application to be
inoperable, to operate improperly or to produce results materially different
from those described in the UPI Email Application Documentation that prevents or
seriously impairs the performance of one or more of the UPI Email Application
functions. This category includes, but is not limited to, the following:
. [******************************************************************
*********************************************************************
*********************************************************************
*********************************]
. Protocol Stability: Any material failure of user commands attributable to
UPI protocols or software.
. User Configuration: Any material rejection by UPI server or software of
attempted changes and/or updates of Customer profiles.
. Server Communications Links: Any material breakdown or failure of
communications between the ANT, Application Server, database server, the
message storage facility, and the UPI Email Application server.
. External Communications Links: Any material failure due to UPI Email
Application software of the internet link or other gateways.
UPI response to a "SEVERE" defect will be as follow:
6
<PAGE>
Contact [*******]
Workaround [*******]
Solution [*******]
MODERATE - This category includes any defect (or other failure of the UPI
Email Application to function in accordance with the UPI Email Application
Documentation) which causes the software to be inoperable, to operate improperly
or to produce results materially different from those described in the UPI Email
Application Documentation that causes erratic or marginally impaired performance
of one or more of the UPI Email Application major functions, but is not a
"SEVERE" defect. UPI response to a "MODERATE" defect will be as follows:
Contact [*******]
Workaround [*******]
Solution [*******]
MILD - This category includes any defect (or other failure of the UPI
Email Application to function according to the UPI Email Application
Documentation) which causes the software to be inoperable, to operate improperly
or to produce results materially different from those described in the UPI Email
Application Documentation that is not a "SEVERE" defect or a "MODERATE" defect.
UPI's response to a "MILD" defect will be as follows:
Contact [*******]
Workaround [*******]
Solution [*******]
For the purpose of the aforementioned defect classification levels and
response time, the following shall apply;
1. [************************************************************
*******************]
2. "Contact" means a telephone call from a qualified support
specialist of UPI to determine the nature of the problem and to begin te
lephone/remote diagnosis and support.
3. "Workaround" means UPI has diagnosed the problem and has determined
the steps required to remedy the problem and has implemented or has enabled
AT&T to implement, a temporary workaround solution and supporting
documentation that allows the UPI Email Application to regain functionality
and substantial operational status of major functions.
4. "Solution" means that the UPI Email Application functions have been
fully restored and permanent code fixes, documentation, source code updates
7
<PAGE>
and similar information have been provided to AT&T in writing and the UPI
Email Application operates without material defects.
Notwithstanding the foregoing, if an error, defect or failure is "MILD" and
does not degrade operation of the AT&T Network in a manner observable or
otherwise noticeable to the user, then UPI will have the option to remedy such
error, defect or failure in the next regular release of the UPI Email
Application. Program errors, defects or failures will not include errors,
defects or failures resulting from AT&T's improper use of the UPI Email
Application, modifications or damage to the UPI Email Application by AT&T, or
AT&T's use of the UPI Email Application on or with hardware, an operating system
or other software other than as specified in writing or otherwise approved in
writing by UPI as being compatible with the UPI Email Application. If UPI is
acting diligently and in good faith, is exercising commercially reasonable best
efforts to remedy such errors, defects or failures, is making real and
substantial progress toward such remedies and there is a reasonable expectation
that UPI will achieve such remedy, then UPI will be deemed to be in compliance
with its obligation to provide the Support Services, provided, that such efforts
and progress are sufficient to actually meet the response times for program
error "Solution" specified above.
UPI shall provide remote maintenance on a 7 day, 24 hour per day, 365 day
per year basis. Should an on-site visit become necessary, UPI shall provide, [**
********************] maintenance personnel to the site where the UPI Email
Application is installed; provided, however, that if the problem or error is not
attributable to the UPI Email Application, or UPI's instructions on the
installation of any subsequent release, AT&T will reimburse UPI for the costs
and expenses reasonably incurred by UPI for the site visit. This software
maintenance may include, without limitation, software error correction,
diagnostics testing (if such testing can be conducted with the UPI Email
Application Software running and available for use), reconfiguration,
reinstallation, of software and installation of patches (software fixes).
UPI shall provide, [**********************] software maintenance releases
to correct software program errors. Such software maintenance releases will be
provided to AT&T as necessary to meet the response times for program error
"Solution" specified above.
UPI will provide to AT&T such additional services relating to the UPI Email
Application software not otherwise provided as part of the Services hereunder as
may be requested by AT&T from time to time on terms and conditions and at such
rates as may be mutually agreed upon by the parties in writing. In the event
AT&T requests any such additional services from UPI, the parties will negotiate
in good faith with the objective of agreeing upon a written statement of work
that will provide, among other things, a detailed description of the services
and the compensation to be paid to UPI therefor.
UPI will continue to provide Support Services hereunder for prior versions
of the UPI Email Application used by AT&T in its service offering for a period
of twelve (12)
8
<PAGE>
months following the latest maintenance release, but in no event less than two
(2) years from the date UPI Email is first offered to its customers, unless AT&T
has discontinued the UPI Email Application pursuant to paragraph 5 of the
Amendment.
UPI will develop and implement quality assurance measures to insure that
all program error corrections and other Support Services are of workmanlike
quality and completed in a timely manner in accordance with all terms and
conditions of this Agreement.
UPI will ensure that only fully experienced and properly qualified persons
perform the Support Services and that all Support Services are staffed
adequately with personnel capable of providing the Support Services. UPI will,
if requested by AT&T, remove from performance of the Support Services any person
AT&T reasonably determines to be incompetent, insubordinate, careless,
disorderly or otherwise objectionable.
9
<PAGE>
Schedule 2
Requirements
The UPI Email application will provide maximum average user response times
(independent of non-UPI licensed software constraints) of no greater than one
(1) second from the time the ANT Server makes a request of the UPI Email
Application to the time the UPI Email Application responds to such request (with
non-UPI licensed software latencies removed) during peak utilization periods.
Peak utilization periods are defined as no less than [*] Subscriber utilization
(e.g., [***] Subscribers accessing the system at the same time at initial
installation) under normal email usage. Such response times shall not include
device cached responses. Response must be from the UPI Email Application server.
In addition, performance levels for [****] users will achieve the
following:
[*******************]
Assumptions
[******************************************]
[******************************************]
[******************************************]
[******************************************]
[******************************************]
[******************************************]
[******************************************]
[******************************************]
[******************************************]
[******************************************]
[******************************************]
[******************************************]
[******************************************]
[******************************************]
Assumptions
[******************************************]
[******************************************]
[******************************************]
[******************************************]
[******************************************]
[******************************************]
10
<PAGE>
[********************************************]
[********************************************]
[********************************************]
[********************************************]
[********************************************]
[********************************************]
[********************************************]
11
<PAGE>
Schedule 3
UPI Email Application Software Integration Services
UPI will, in conjunction with AT&T, define specifications for and integrate
the hardware, operating systems, and Oracle database versions for the UPI Email
Application engine/package. Upon receipt of such specifications from UPI, AT&T
will establish its computer or computers on which the UPI Email Application will
run, along with all other hardware and software necessary to operate the UPI
Email Application on the AT&T Network. In connection with AT&T's initial
installation of the computers to be used as the UPI Email Application server,
UPI will provide the following services:
1. Installation of the UPI Email Application on the AT&T computers to
establish a UPI Email Application server on the AT&T Network to support an
initial user/client population of [****] on the Launch Date, [****] by [**
************************], [*****] by [***************************], and
[*****] by [****************************]
2. Cooperation with and provision of assistance to agents and
representatives of AT&T and AT&T's other software and hardware suppliers
which supply elements of the interface with the UPI Email Application
server, in the appropriate initial configuration of the other software and
hardware elements to support an initial user/client population of [*****]
3. Cooperation with and provision of assistance to agents and
representatives of AT&T in the initial configuration of AT&T's customer
care and provisioning procedures to support an initial user/client
population of [*****]
UPI representatives will be present at the site of the installation of the
UPI Email Application on the first computer configurations to serve as a UPI
Email Application server, and will provide training to an AT&T team with the
understanding that at the conclusion of the installation of the UPI Email
Application, the team will be capable of conducting a similar installation on
the next AT&T computer to be designated as a UPI Email Application server. The
visit will be at UPI's cost and expense. In the second such installation, UPI
representative will be present at the site and will not conduct the
installation, but will act as advisors to AT&T staff conducting the
installation. This visit will be at UPI's cost and expense. In the third and all
subsequent installations, UPI representatives will provide remote telephone and
fax assistance until each installation is formally accepted by AT&T according to
installation standards established at the time of the first installation by the
UPI/AT&T installation team. If the installation of the UPI Email Application
cannot be accomplished with remote assistance, representatives of UPI will
appear on site to assist in such installation. Such visits will be at UPI's cost
and expense; provided that if the problem or error is not attributable to the
UPI Email Application or UPI's instructions on the installation of subsequent
updates or releases,
12
<PAGE>
AT&T will reimburse UPI for such costs and expenses. AT&T will retain for the
AT&T Network, including responsibility for procuring necessary hardware,
operating systems and software scheduling, planning, and coordinating other
third party suppliers, and other similar activities.
In connection with the installation of Upgrades and subsequent releases of
the UPI Email Application to which AT&T is entitled under the Agreement as
amended, UPI will provide AT&T with disks or other media counting such updates
and releases, instructions on appropriate installation of such updates and
releases, and release notes indicating outstanding problems, explanation of new
features, and a list of problems fixed in the release, and shall confirm in
writing that the UPI Email Application will operate and is compatible with other
elements of the ANT Server, the Application Server and the AT&T Network (such as
the Oracle database or the platform operating system). Representatives of UPI
will be available by telephone to assist in such installation and if such
installation cannot be accomplished with remote assistance in conformity with
ordinary and routine procedures, practices and response times, representatives
of UPI will appear on site to assist in such installation. [******************
******************************************************************************
******************************************************************************
****************************************]
13
<PAGE>
SECOND AMENDMENT TO THE
MAY 1, 1996 SOFTWARE LICENSE AND SUPPORT AGREEMENT
BETWEEN
UNWIRED PLANET, INC. and AT&T WIRELESS SERVICES, INC.
This SECOND AMENDMENT (the "Second Amendment") is made as of this 7 day of
---------------- --
August, 1997 (the "Second Amendment Effective Date"), by and between: UNWIRED
-------------------------------
PLANET, INC. ("UPI"), a Delaware corporation having a principal office at 390
---
Bridge Parkway, Redwood City, CA 94065; and AT&T Wireless Services, Inc.
("AT&T"), a Delaware corporation, having a principal office at 10230 N.E. Points
----
Drive, Kirkland, WA 98033.
This Second Amendment amends that SOFTWARE LICENSE AND SUPPORT AGREEMENT,
effective as of May 1, 1996, by and between UPI and AT&T (the "Master
------
Agreement"), including the First Amendment thereto, dated November 25, 1996 (the
- ---------
"First Amendment", collectively, the "Software License Agreement"). Unless
--------------- --------------------------
otherwise defined herein, capitalized terms used herein shall have the meanings
ascribed to them in the Master Agreement.
1. DEFINITIONS.
"UP.Organizer Application" shall mean UPI's personal information management and
- -------------------------
organization application software, in machine readable (object code) form.
[**************************************************************************
*****************************************************************************
*********************************]
2. UP.ORGANIZER LICENSE.
2.1 License Grant. Subject to the terms and conditions of the Software
-------------
License Agreement, as herein amended, UPI hereby grants to AT&T and its
Affiliates that operate or utilize an AT&T Network a non-exclusive, worldwide,
license for UPI's UP.Organizer Application to do the following until such time
as the license granted herein terminates in the manner described in paragraphs
8.2.2 of the Master Agreement or AT&T and its Affiliates discontinue the
UP.Organizer Application pursuant to Section 11 hereof:
(a) install and use the UP.Organizer Application on any servers
situated at the site or sites identified on Exhibit F of the Master
---------
Agreement and any other sites designated from time to time by AT&T;
(b) copy and reproduce the UP.Organizer Application in connection
with the exercise of the rights granted in (a) above;
1
<PAGE>
(c) make and keep a reasonable number of copies of the
UP.Organizer Application for archival or backup purposes; provided,
--------
however, that AT&T " keeps such copies securely stored in a locked
-------
area with access restricted to employees who need such access in
order to operate or maintain the UP.Organizer Application; and
(d) use, reproduce and distribute internally the UP.Organizer
Application Documentation, as defined herein, in connection with the
exercise of any fights granted under this Section 1; provided,
--------
however, that all such copies of the UP.Organizer Application programs
-------
and related Documentation remain subject to the provisions of Section
10.2 of the Master Agreement. The UP.Organizer Application
Documentation shall include all then-current documentation related to
the UP.Organizer Application made available to any UPI customer,
including but not limited to the design and product specifications,
configuration requirements, user manuals, installations and operating
instructions, and test results.
2.2 UPI will deliver to AT&T one (1) copy of the UP.Organizer Application,
and one (1) copy of the current UP.Organizer Application Documentation no later
than fifteen (15) days after entering into this Second Amendment.
2.3 All use of the UP.Organizer shall be subject to a license agreement
that is downloaded by the user or Subscriber, and that is substantially in the
form set forth in Schedule 1 attached hereto. AT&T shall not be required to take
----------
any action to (i) ensure that users or Subscribers comply with the terms of the
license agreement, or (ii) assist UPI in enforcing the terms of such license
agreement.
3. UPGRADES AND ENHANCEMENTS.
UPI will deliver all Upgrades and Enhancements to the UP.Organizer
Application as those are created by UPI [******************************]
provided, however, and only so long as AT&T is current in its payments to UPI
- --------- -------
for UP.Organizer Support Services as set forth in Section 5.2 of this Second
Amendment. All Upgrades and Enhancements provided to AT&T will be deemed to be
part of the UP.Organizer Application hereunder.
4. UP.ORGANIZER LICENSE FEE.
4.1 License Fee. In consideration of the license granted herein to the
-----------
UP.Organizer Application, AT&T shall pay to UPI, the one-time license fees in
the amount and in accordance with the payment terms as follows:
No. of Seats Price (per seat)
------------ ---------------
Per Seat License [****************************]
[****************************]
2
<PAGE>
[***************************]
4.2. Assignment of Seats. Seats shall be assigned to Subscribers at AT&T's
-------------------
sole discretion. [************************************************************
********************************************************************************
**************************]
5. UP.ORGANIZER SUPPORT SERVICES AND FEES.
5.1 UP.Organizer Support Services. UPI will, with respect to the
-----------------------------
UP.Organizer Application, furnish AT&T the software maintenance and support
services described in Schedule 2 hereto (the "UP.Organizer Support Services")
-----------------------------
for the term of the Second Amendment.
5.2 UP.Organizer Support Services Fee. AT&T shall pay to UPI an annual fee
---------------------------------
for the UP.Organizer Support Services in the amount of [***] per seat of the
UP.Organizer Application purchased by AT&T.
6. [****] FEE.
In consideration of the [*********] and fights granted hereunder, AT&T
shall pay to UPI the amount of [********************************] for [*******
******************************************************************************
********************************************]. Accordingly the sum of [***
******************************************************] is payable by AT&T to
UPI as follows: (i) [*******************************************************
************************************************] and (ii) [**************
*******************************************************]. Upon [****************
**********], AT&T will [****************************************************
**********] licenses [********************************************************
************************]
7. [****] FEES.
7.1 [*******] Email Application Fees. The Per Seat License fee set forth
--------------------------------
in Section 2 and the UPI Email Support Services fees set forth in Section 3 of
the First Amendment for the Email Application shall not apply to sale or license
of seats of the UPI Email Application to Subscribers [*************************
****************************************************************]. After [**
---------------------
***********] AT&T shall [****] payment to UPI of the UPI Email Support Services
fees [***********************************************************************
*********************************]. [******************] shall [******] any and
all fees due for UPI Email Application [***************************************
***********************************]
7.2 [*******] UP.Organizer Application Fees. The Per Seat License fee set
---------------------------------------
forth in Section 5 and the UP.Organizer Application Support Services fees set
forth in Section 4 of this Second Amendment for the UP.Organizer Application,
shall [******************************************] UP.Organizer Application to
Subscribers [*****************************************************]. [********
**********] AT&T shall [****] payment to UPI of the UP.Organizer
3
<PAGE>
Application Support Services fees set forth in Section 4 of this Second
Amendment. [*********************************] any and all fees [*****]
UP.Organizer Application [**************************************************
************************]
7.3 [*******] Monthly Usage Fees. [*********************] the Monthly
----------------------------
Usage Fees set forth in Exhibit G of the Master Agreement, [********************
---------
*************************]
7.4 [*****************] for Support Services. [******************], the
-----------------------------------
parties agree that the fees for the Support Services [*********************
***************************].
8. OWNERSHIP
8.1 Ownership by UPI in UP.Organizer Application. Except for the license
--------------------------------------------
granted under Section 2 of this Second Amendment, UPI reserves all of its
Proprietary Rights in the UP.Organizer Application, and no title to or ownership
of the UP.Organizer Application is transferred to AT&T or its Affiliates under
this Second Amendment or the Software License Agreement.
8.2 Trademarks in UP.Organizer Application. UPI reserves all fights in
--------------------------------------
and to any and all trade names and trademarks which UPI uses in connection with
the UP.Organizer Application. AT&T may market, promote, distribute, provide,
operate, and otherwise deal with the UP.Organizer Application using its private
labels, trade names, logos, and trademark, subject to the obligations of AT&T
pursuant to Section 8.3.
8.3 Proprietary Rights Notices. AT&T agrees not to remove, alter, cover,
--------------------------
obfuscate or otherwise deface any copyright notices of UPI contained on or in
UP.Organizer Installer program or the UP.Organizer Application splash screen.
AT&T may include proprietary notices, in addition to the UPI notices, as AT&T
deems necessary to protect its interests therein.
8.4 Attribution. AT&T shall use its [**] efforts to include the UPI logo,
-----------
in the form provided by UPI to AT&T, in a location and size comparable to co-
branding with AT&T content providers and as mutually agreed by the parties
hereto, on all furore printings of the external packaging of all AT&T-purchased
wireless devices that include the UP.Organizer.
9. SOURCE CODE ESCROW
Within ten (10) days after the Effective Date of this Amendment, the
parties and the Escrow Agent will enter into an amendment to the Escrow
Agreement to provide for the delivery of the UP.Organizer Application source
code to the Escrow Agent to be held in escrow, and UPI will deliver to the
Escrow Agent under the Escrow Agreement a complete, current and accurate copy of
the UP.Organizer Application source code. Thereafter, UPI will deliver to the
Escrow Agent all source code for each Upgrade and Enhancement provided to AT&T
hereunder within [*******] days after such Upgrade or Enhancement is delivered
to AT&T. UPI will resubmit the
4
<PAGE>
UP.Organizer Application source code to the Escrow Agent promptly after the
occurrence of every Upgrade and Enhancement provided to AT&T hereunder to such
code, and will ensure that the UP.Organizer Application held in escrow will at
all times match the UP.Organizer Application code which is then being used by
AT&T. All relevant versions of the supporting UP.Organizer Application source
code (as it relates to the hardware platforms, operating systems, utilities,
database management systems and any other supporting code necessary to run the
system) will also be delivered to and held in escrow by the Escrow Agent. The
UP.Organizer Application source code will be delivered to AT&T in the event of a
Minor Release Event or a Major Release Event as follows' (i) following a Minor
Release Event relating to the UP.Organizer Application source code, UPI grants
to AT&T and its Affiliates a license to use, [****************] the UP.Organizer
Application source code and to take such other actions with respect thereto
solely as may be necessary to use, correct, maintain, and otherwise support the
UP.Organizer Application; and (ii) following a Major Release Event relating to
the UP.Organizer Application source code. UPI grants to AT&T and its Affiliates
a license to use, [********************************************] the
UP.Organizer Application source code, and to take such other actions with
respect thereto as may be necessary to use, correct, maintain, [************
********************] and otherwise support the UP.Organizer Application.
Notwithstanding the foregoing, if a default or other reason giving rise to the
release of the UP.Organizer Application source code is cured by UPI, then AT&T
will return all copies of such source code to the Escrow Agent to be held in
escrow under the Escrow Agreement and the license granted under this First
Amendment with respect to such source code will terminate until such time as
there is a subsequent occurrence of a default or other reason giving rise to the
release of the UP.Organizer Application source code.
10. WARRANTY
UPI represents and warrants that: (a) it has sufficient fight, title and
interest in and to the UP.Organizer Application to grant the license described
in Section 2 and 9; (b) the UP.Organizer Support Services and software
integration services will be performed by UPI in a professional, workmanlike and
skillful manner; (c) the UP.Organizer Application will comply in all material
respects with the applicable Documentation and the Software License Agreement
and this Second Amendment; and (d) the UP.Organizer Application does not and
will not infringe or misappropriate any Proprietary Right of any third party.
OTHER THAN THE WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, THERE ARE NO
EXPRESS OR IMPLIED WARRANTIES RELATING TO THE UP.ORGANIZER APPLICATION OR THE
SERVICES COVERED BY THIS AMENDMENT, AND UPI EXPRESSLY DISCLAIMS ANY IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
11. [*********************]
[*******************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
************************************************************************]
5
<PAGE>
****************************************************************************
****************************************************************************
****************************************************************************
****************************************************************************
****************************************************************************
****************************************************************************
****************************************************************************
****************************************************************************
*********]
12. SOFTWARE INTEGRATION SERVICES
UPI shall provide the UP.Organizer Application software integration
services set forth in Schedule 3 hereto. UPI will commence and use commercially
reasonable efforts to perform and complete the UP.Organizer Application software
integration and testing services in accordance with the schedule mutually agreed
upon by the parties in writing.
13. APPLICATION SERVER SOFTWARE
13.1 Paragraph 2.2.1 (a) of the Master Agreement is hereby amended to read
as follows:
(a) install and use the Application Server Program on any AT&T
Application Server.
13.2 Paragraph 2.2.2 of the Master Agreement is hereby deleted in its
entirety.
14. OTHER TERMS.
14.1 Enhancements. The parties agree that the term "Enhancements" as
------------
defined in the Master Agreement includes the UP.Web and the facsimile capability
technology delivered to AT&T in version 2.0 of the ANT Server [***************
********************] Accordingly, the parties agree that the terms and
provisions of the Master Agreement apply to such UP.Web and facsimile capability
technology.
14.2 Terms of Software License Agreement. All other terms and conditions of
-----------------------------------
the Software License Agreement shall remain in full force and effect in
accordance with the terms of such Software License Agreement. The following
terms and conditions set forth in the Master Agreement shall apply to the
UP.Organizer Application, and are hereby amended to include the UP.Organizer
Application, as relevant: Sections 1, 2.3, 4.2, 5.4, 5.6, 5.7, 6.1, 7.2, 8,9,
and 10. Unless earlier expired or terminated, this Second Amendment shall
terminate upon termination or expiration of the Master Agreement; provided,
---------
however, that a breach of any term or condition of this Second Amendment shall
- ---------
not provide a basis for termination of the Master Agreement or of any other
amendments, including the First Amendment, thereto.
14.3 Conflicting Terms. In the event of any conflict between the terms of
-----------------
this Second Amendment and the terms of the Software License Agreement, the terms
of this Second Amendment shall control solely with respect to the subject matter
herein contained.
6
<PAGE>
14.4 Survival. In the event of termination of this Second Amendment, the
--------
provisions of Sections 8, 10, 14.1, 14.3 and 14.4 shall survive, and all
relevant provisions of the Master Agreement as provided in Paragraph 8.5 hereto.
15. REPRESENTATIONS
Each party hereby represents to the other that the undersigned has full and
binding authority to execute this Second Amendment.
ACCEPTED AND AGREED:
UNWIRED PLANET, INC. AT&T WIRELESS SERVICES, INC.
Signature: /s/ Charles M. Parrish Signature: /s/ D. Hesse
---------------------- ------------------------
Printed Name: Charles M. Parrish Printed Name: D. Hesse
-------------------- -----------------------
Title: President Title: President & CEO
--------------------------- -------------------------------
7
<PAGE>
Schedule 1
to the
SECOND AMENDMENT
License Agreement
-----------------
It is important that you read this entire agreement before deciding whether you
agree its terms.
Your use of the PocketNet/TM/ personal organizer on a single handheld device is
subject to the terms and conditions of this Agreement. You agree not to reverse
engineer, compile, &compile, or disassemble the PocketNet personal organizer.
POCKETNET PERSONAL ORGANIZER IS PROVIDED TO YOU "AS IS", AND NEITHER UNWIRED
PLANET, 1NC. ("UPI") NOR AT&T WIRELESS SERVICES, INC. ("AT&T') MAKES ANY
WARRANTIES, EXPRESS OR IMPLIED, AND EXPRESSLY DISCLAIMS ALL SUCH WARRANTIES,
WITH RESPECT TO THE POCKETNET PERSONAL ORGANIZER.
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, NEITHER UPI NOR AT&T SHALL BE
LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, PUNITIVE, OR
CONSEQUENTIAL DAMAGES, ARISING OUT OF THIS AGREEMENT OR CAUSED BY THE USE,
MISUSE OR INABILITY TO USE THE POCKETNET PERSONAL ORGANIZER.
The laws of the State of California, U.S.A., exclusive of its choice of law
principles, shall govern this binding legal agreement. You agree that you will
not distribute, transmit, export, reexport, or transfer the PocketNet personal
organizer except in compliance with the most current U.S. export laws and
regulations. If any provision of this Agreement is held to be void, invalid,
unenforceable, or illegal, the other provisions shall continue in full force and
effect.
BY CLICKING THE "ACCEPT" BUTTON, YOU AGREE TO THE TERMS OF THIS AGREEMENT.
1
<PAGE>
Schedule 2
to the
SECOND AMENDMENT
UP.Organizer Support Services
The Support Services to be provided by UPI to AT&T with respect to the
UP.Organizer Application includes ongoing maintenance of the UP.Organizer
Application software to ensure a high level of availability as set forth below.
In the event AT&T notifies UPI of any actual or suspected error or defect
in the UP.Organizer Application, UPI will provide Support Services and qualified
personnel necessary to correct the error or defect in accordance with the terms
of this Agreement. UPI shall use its commercially reasonable best efforts to
remedy each error or defect as soon as reasonably possible with as little
disruption to AT&T or the UP.Organizer Application service as possible. In any
event, UPI will use its commercially reasonable best efforts to remedy all
program errors or defects at the following defect classification levels, as
determined by AT&T in its sole discretion, at least as quickly as the following
response levels:
SEVERE - This category includes any material defect (or other material
failure of the UP.Organizer Application to function according to the
UP.Organizer Application Documentation) which causes the UP.Organizer
Application to be inoperable, to operate improperly or to produce results
materially different from those described in the UP.Organizer Application
Documentation that prevents or seriously impairs the performance of one or more
of the UP.Organizer Application functions. This category includes, but is not
limited to the following:
. [************************************************************
***************************************************************************
************]
. Protocol Stability: Any material failures of user commands
attributable to UPI protocols or software.
. User Configuration: Any material rejection by UPI server or software
of attempted changes and/or updates of Customer profiles.
. Server Communications Links: Any material breakdown or failure of
communications between the ANT, Application Server, database server, the message
storage facility and the UP.Organizer Application server.
. External Communications Links: Any material failure due to
UP.Organizer Application software of the Internet link or other gateways.
1
<PAGE>
UPI response to a "SEVERE" defect will be as follows:
- Contact [*********]
- Workaround [*********]
- Solution [*********]
MODERATE- This category includes any defect (or other failure of the
UP.Organizer Application to function in accordance with the UP.Organizer
Application Documentation) which causes the software to be inoperable, to
operate improperly or produces results materially different from those described
in the UP.Organizer Application Documentation that causes erratic or marginally
impaired performance of one or more of the UP.Organizer Application major
functions, but is not a "SEVERE" defect. UPI response to a "MODERATE" defect
will be as follows:
- Contact [*********]
- Workaround [*********]
- Solution [*********]
MILD - This category includes any defect (or other failure of the
UP.Organizer Application to function according to the UP.Organizer Application
Documentation) which causes the software to be inoperable, to operate improperly
or to produce results materially different from those described in the
UP.Organizer Application Documentation that is not a "SEVERE" defect or a
"MODERATE" defect. UPI's response to a "MILD" defect will be as follows:
- Contact [*********]
- Workaround [*********]
- Solution [*********]
For the purpose of the aforementioned defect classification levels and
response time, the following shall apply:
1. [****************************************************************
****************************************]
2. "Contact" means a telephone call from a qualified support specialist
-------
of UPI to determine the nature of the problem and to begin telephone/remote
diagnosis and support.
3. "Workaround" means UPI has diagnosed the problem and has determined
----------
the steps required to remedy the problem and has implemented or has enabled AT&T
to implement, a temporary workaround solution that allows the UP.Organizer
Application, to regain functionality and substantial operational status of major
functions.
2
<PAGE>
4. "Solution" means that the UP.Organizer Application functions have
--------
been fully restored (including permanent code fixes, documentation, source code
updates and similar information) and the UP.Organizer Application operates
without material defects.
Notwithstanding the foregoing, if an error, defect, or failure is "MILD"
and does not degrade operation of the AT&T Network in a manner observable or
otherwise noticeable to the user, then UPI will have the option to remedy such
error, defect or failure in the next regular release of the UP.Organizer
Application. Program errors, defects or failures will not include errors,
defects or failures resulting from AT&T's improper use of the UP.Organizer
Application, modifications or damage to the UP.Organizer Application by AT&T, or
AT&T's use of the UP.Organizer Application on or with hardware, an operating
system or other software other than as specified in writing or otherwise
approved in writing by UPI as being compatible with the UP.Organizer
Application. If UPI is acting diligently and in good faith, is exercising
commercially reasonable best efforts to remedy such errors, defects or failures,
is making real and substantial progress toward such remedies and there is a
reasonable expectation that UPI will achieve such remedy, then UPI will be
deemed to be in compliance with its obligation to provide the Support Services,
provided, that such efforts and progress are sufficient to actually meet the
response times for program error "Solution" specified above.
UPI shall provide remote maintenance on a 7 day, 24 hour per day, 365 day
per year basis. Should an on-site visit become necessary, UPI shall provide, at
no additional charge, maintenance personnel to the site where the UP.Organizer
Application is installed; provided, however, that if the problem or error is not
attributable to the UP.Organizer Application, or UPI's instructions on the
installation of any subsequent release, AT&T will reimburse UPI for the costs
and expenses reasonably incurred by UPI for the site visit. This software
maintenance may include, without limitation, software error correction,
diagnostics testing (if such testing can be conducted with the UP.Organizer
Application Software running and available for use), reconfiguration,
reinstallation, of software and installation of patches (software fixes).
UPI shall provide, [**********************] software maintenance releases
to correct software program errors. Such software maintenance releases will be
provided to AT&T as necessary to meet the response times for program error
"Solution" specified above.
UPI will provide to AT&T such additional services relating to the
UP.Organizer Application software not otherwise provided as part of the Services
hereunder as may be requested by AT&T from time to time on terms and conditions
and at such rates as may be mutually agreed upon by the parties in writing. In
the event AT&T requests any such additional services from UPI, the parties will
negotiate in good faith with the objective of agreeing upon a written statement
of work that will provide, among other things, a detailed description of the
services and the compensation to be paid to UPI therefor.
UPI will continue to provide Support Services hereunder for prior versions
of the UP.Organizer Application used by AT&T in its service offering for a
period of twelve (12) months following the latest maintenance release, [********
*************************************]
3
<PAGE>
[***] UPI Email is first offered to its customers, unless AT&T has discontinued
the UP.Organizer Application pursuant to paragraph 5 of the First Amendment.
UPI will develop and implement quality assurance measures to insure that
all program error corrections and other Support Services are of workmanlike
quality and completed in a timely manner in accordance with all terms and
conditions of this Agreement.
UPI will ensure that only fully experienced and properly qualified persons
perform the Support Services and that all Support Services are staffed
adequately with personnel capable of providing the Support Services. UPI will,
if requested by AT&T, remove from performance of the Support Services any person
AT&T reasonably determines to be incompetent, insubordinate, careless,
disorderly or otherwise objectionable.
4
<PAGE>
Schedule 3
to the
SECOND AMENDMENT
UP.Organizer Application Software Integration Services
UPI will, in conjunction with AT&T, define specifications for and integrate
the hardware, operating systems, and Oracle database versions for the
UP.Organizer Application engine/package. Upon receipt of such specifications
from UPI, AT&T will establish its computer or computers on which the
UP.Organizer Application will run, along with all other hardware and software
necessary to operate the UP.Organizer Application on the AT&T Network. In
connection with AT&T's initial installation of the computers to be used as the
UP.Organizer Application server, UPI will provide the following services:
1. Installation of the UP.Organizer Application on the AT&T
computers to establish a UP.Organizer Application server on the AT&T
Network to support an initial user/client population of [*****] on
the Launch Date, [******] by [****************************] [*****]
by [***************************] and [*****] by [******************
*********]
2. Cooperation with and provision of assistance to agents and
representatives of AT&T and AT&T's other software and hardware
suppliers which supply elements of the interface with the
UP.Organizer Application server, in the appropriate initial
configuration of the other software and hardware elements to support
an initial user/client population of [*****]
3. Cooperation with and provision of assistance to agents and
representatives of AT&T in the initial configuration of AT&T's
customer care and provisioning procedures to support an initial
user/client population of [*****]
UPI representatives will be present at the site of the installation of the
UP.Organizer Application on the first computer configurations to serve as a
UP.Organizer Application server, and will provide training to an AT&T team with
the understanding that at the conclusion of the installation of the UP.Organizer
Application, the team will be capable of conducting a similar installation on
the next AT&T computer to be designated as a UP.Organizer Application server.
The visit will be at UPI's cost and expense. In the second such installation,
UPI representative will be present at the site and will not conduct the
installation, but will act as advisors to AT&T staff conducting the
installation. [******************************************] In the third and all
subsequent installations, UPI representatives will provide remote telephone and
fax assistance until each installation is formally accepted by AT&T according to
installation standards established at the time of the first installation by the
UPI/AT&T installation team. If the installation of the UP.Organizer Application
cannot be accomplished with remote assistance, representatives of UPI will
appear on site to assist in such installation. [********************************
*****************************************************************************
********************************************************************************
************************************************************************] AT&T
will retain for the
1
<PAGE>
AT&T Network, including responsibility for procuring necessary hardware,
operating systems and software scheduling, planning, and coordinating other
third party suppliers, and other similar activities.
In connection with the installation of Upgrades and subsequent releases of
the UP.Organizer Application to which AT&T is entitled under the Agreement as
amended, UPI will provide AT&T with disks or other media counting such updates
and releases, instructions on appropriate installation of such updates and
releases, and release notes indicating outstanding, problems, explanation of new
features, and a list of problems fixed in the release, and shall confirm in
writing that the UP.Organizer Application will operate and is compatible with
other elements of the ANT Server, the Application Server and the AT&T Network
(such as the Oracle database or the platform operating system). Representatives
of UPI will be available by telephone to assist in such installation and if such
installation cannot be accomplished with remote assistance in conformity with
ordinary and routine Procedures, practices and response times, representatives
of UPI will appear on site to assist in such installation. [******************
************************************************************************
***************************************************************************
********************************************************************************
******************]
2
<PAGE>
THIRD AMENDMENT TO THE
MAY 1, 1996 SOFTWARE LICENSE AND SUPPORT AGREEMENT
BETWEEN
UNWIRED PLANET, INC. and AT&T WIRELESS SERVICES, INC.
This THIRD AMENDMENT (the "Third Amendment") is made as of this _____
---------------
day of February, 1999 (the "Third Amendment Effective Date"), by and between:
------------------------------
UNWIRED PLANET, INC. ("UPI"), a Delaware corporation having a principal office
---
at 800 Chesapeake Drive, Redwood City, Ca 94063; and AT&T Wireless Services,
Inc. ("AT&T"), a Delaware corporation having a principal office at 10230 N.E.
Points Drive, Kirkland, WA 98033.
This Third Amendment amends that SOFTWARE LICENSE AND SUPPORT AGREEMENT,
effective as of May 1, 1996 by and between UPI and AT&T (the "Master
------
Agreement"), including the First Amendment thereto, dated November 25, 1996 (the
- ---------
"First Amendment") and the Second Amendment thereto, dated August 7, 1997 (the
---------------
"Second Amendment"), collectively, the "Software License Agreement." Unless
---------------- --------------------------
otherwise defined herein, capitalized terms used herein shall have the meaning
ascribed to them in the Software License Agreement.
1. Definitions. Paragraph 1 ("Definitions") of the Master
-----------
Agreement is hereby amended to include the following definitions:
1.1 [***********] shall mean the right of AT&T or any of its
Affiliates to grant a license to [*****************************] to access or
use a UPI Program [******] through an Enabled Device.
1.2 [*****************] shall mean a Subscriber that is
Provisioned to use or access a particular UPI Program
[*******************************************************************************
***********].
1.3 [*****************************************************
******************************************************************************
*******************************************]
1.4 [******************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************]
1.5 [******************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*********************
1
<PAGE>
[***************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
**********************************]
1.6 "Enable Device" shall mean any wireless device used by a
Subscriber which has the ability to execute UPI's browser software or a third
party's microbrowser.
1.7 "Provision" (and other forms of the verb) shall mean to
make a UPI Program [**********] accessible or usable by a Subscriber.
1.8 "Revenues" shall mean all amounts for which Subscribers
are invoiced by AT&T and its Affiliates for access to or use of the UPI Programs
[*******], not including any taxes or regulatory fees imposed thereon which are
charged to Subscribers, less an amount equal to the revenues as described above
multiplied by AT&T's average Subscriber bad debt rate.
1.9 "Subscriber," as used in the Third Amendment shall mean
any individual with an Enabled Device or an entity with an Enabled Device, which
Enabled Device can be used to access or use any UPI Program [******] by means of
the AT&T Network.
1.10 "UPI Programs" shall mean the UP Link Server Software,
the UPI Email Application, the UP Organizer Application and the UP Mail Synch
Application, and such other UPI software as the parties may mutually agree in
writing in the future to include in this Software License Agreement as a UPI
Program.
1.11 "UPI Support Services" shall mean the Support Services,
the UPI Email Support Services, the UP Organizer Support Services, the UP Mail
Synch Support Services, [************************], and such other support and
maintenance services for UPI software added to the definition of "UPI Programs;
as the parties may mutually agree in writing to include in this Software
License Agreement.
1.12 "UP Link Server Software" shall mean the UPI Air Network
Translator Server Software.
1.13 "UP Mail Synch Application" shall mean UPI's electronic
mail synchronization applications software, in machine readable (object code)
form.
2. Addition of UP Mail Synch Application License
---------------------------------------------
2.1 Same Terms as for UP Organizer. Subject to the terms
------------------------------
and conditions of the Software License Agreement, as herein amended, UPI hereby
grants to AT&T and its Affiliates that operate or utilize an AT&T Network a
non-exclusive, worldwide license to UPI's UP Mail Synch Application on the same
terms and conditions as for the UP Organizer Application license set forth in
Sections 2.1 ("License Grant"), 2.3.3 ("Upgrades and
2
<PAGE>
Enhancements"), 4.1 ("License Fee") (except that the pricing and payment terms
shall be as set forth in this Third Amendment), 4.2, 5.1 ("UP Organizer Support
Services") (such support services for the UP Mail Synch Application referred to
herein as "UP Mail Synch Support Services"), 5.2 ("UP Organizer Support Services
------------------------------
Fees") (except that the pricing shall be as set forth in this Third Amendment),
8.1 ("Ownership by UPI in UP Organizer Application"), 8.2 ("Trademarks in UP
Organizer Application"), 8.3 ("Proprietary Rights Notices") (except that UP Mail
Synch has no splash screen), 8.4 ("Attribution"), 9 ("Source Code Escrow"), 10
("Warranty"), 11 ("Discontinuation by AT&T") and 12 ("Software Integration
Services") (except that the quantities of user populations and implementation
dates will be mutually agreed by the parties) of the Second Amendment. For the
purposes of this Third Amendment, AT&T's Affiliates will include those entities
covered by the definition of "Affiliate" in the Master Agreement in addition to
those entities set forth in Schedule 3 to this Third Amendment, as may be
amended by AT&T from time to time upon written notice to UPI; provided that such
entity listed on Schedule 3 (a) uses AT&T's UP Link server, or (b) uses its own
UP Link server and uses AT&T as the point of contact to UPI for all customer
care support issues. In the event an entity listed on Schedule 3 uses its own
UP Link server and uses UPI directly for customer care support issues, such
entity will not be included as an Affiliate under this Third Amendment.
2.2 Delivery. UPI will deliver to AT&T one (1) copy of each
--------
UPI Program and one (1) copy of the current documentation for each UPI Program
upon commercial release of the applicable UPI Program. UPI will deliver all
Upgrades and Enhancements to the UPI Programs as those are created by UPI at no
additional charge to AT&T so long as AT&T is current in its payments for the
applicable UPI Program. All Upgrades and Enhancements to a UPI Program will be
deemed part of such UPI Program.
2.3 [*******] License. The first sentence of Section 8.2.2
-----------------
and Section 8.4 of the Master Agreement is hereby deleted. Subject to the
remaining portions of Section 8.2.2 of the Master Agreement, the licenses
granted under this Third Amendment [*****************************************
*************************************************************************].
3. [************************] License. Notwithstanding any other
----------------------------------
provision in the Software License Agreement to the contrary, AT&T agrees and
acknowledges that the licenses granted by UPI to AT&T and its Affiliates under
the Software License Agreement do not include the right to use the UP Link
Server Software [**************************************]. In the event AT&T
wishes to use the UP Link Server Software [**********************************
************], AT&T will so notify UPI. UPI will, within ten (10) days of such
notice, grant AT&T and its Affiliates a license [****************************
*********************************] under the same terms and conditions set forth
for the license of the UPI Software set forth in Section 2. Upon the grant of
such license, AT&T will pay to UPI the [******************] Fee set forth in
Schedule 1 ("Pricing") for each Subscriber [********************]. UPI will,
[*******************] furnish to AT&T software maintenance and support services
comparable to those described in Schedule 2 of the Second Amendment [***********
*****************].
- ----------------
4. Number of [***********]at [***********************]; and Support
----------------------------------------------------------------
Therefor. The last sentence of Section [**************] of the Second
- --------
Amendment is hereby deleted in its
3
<PAGE>
entirety and replaced by the following sentence: "Upon expiration of [*********
***] AT&T will have purchased (i) the number of [**********] for the UP
Organizer Application, the UP Link Server Software and the UPI Email Application
equivalent to the number of [*****************************************] each
such UPI Program up to [********************************************************
***] and (ii) additionally, (subject to expiration in accordance with Section
6.3 ("Expiration [********]) of this Third Amendment and upon payment in full of
the associated fees) the number of [********************************] of the UPI
Email Application, the UP Mail Synch Application and the UP Link Server Software
purchased pursuant to Section 6 ("Purchase of Additional [*************]) of the
Third Amendment (collectively, the "Purchased Licenses"). Support fees for the
[**********] under the preceding subsection (i) that [*************************
*****************] shall be as set forth in Schedule 1 ("Pricing") of the Third
--------
Amendment. Upon payment in full AT&T of the fees [***********************]. AT&T
will be deemed to have [******************************] and will retain the
license granted herein for the [********************************]. The [********
*******************************] will [**************************************]
the Master Agreement or this Third Amendment."
5. New Fee Structure. Effective as of the Third Amendment
-----------------
Effective Date, AT&T and UPI agree to amend the Software License Agreement to
create a new fee structure. Specifically, the parties agree to replace the
[****************] described in Paragraph 5.2 ("[**************************
*******]") of the Master Agreement with a one-time license fee for [**********
**********************************************] (as defined below) and to
replace the [*********************************************************] ("Fees
for Support Services") of the Master Agreement with [************************
***********************************]. The terms of this revised payment
structure are set forth in this Section 5 ("New Fee Structure") and Schedule 1
----------
("Pricing"). Furthermore, the parties agree that the amounts of the fees set
forth in Schedule 1 ("Pricing") hereto shall apply to [********************
********************************] and future purchases of additional [*********
****] (collectively, "New Licenses") and to the support services therefor. The
------------
amounts of the [****************************] and [**************************]
set forth in Paragraph 3 of Exhibit 2C ("Email Services") of the Master
Agreement, Sections 2.1 and 3.2 of the First Amendment, and Sections 4.1
("License Fee") and 5.2 ("Up Organizer Support Services Fee") of the Second
Amendment respectively, shall not apply to any New Licenses. Exhibit G [*******
---------
*****] of the Master Agreement is hereby deleted in its entirety. AT&T will
ensure that the Affiliates' use of UPI's software is consistent with all of the
terms and conditions imposed on AT&T under this Software License Agreement, and
AT&T [****************************] of its Affiliates in connection therewith.
[*****************************************************************************
******************************************************************************
**********************].
5.1 License Fee. In consideration of the licenses granted
-----------
under the Software License Agreement with respect to each UPI Program [*******]
AT&T shall pay to UPI the [*****************************************************
***] Fee") for each UPI Program [*******] in the amounts set forth in Schedule 1
("Pricing") attached hereto and in accordance with the payment terms set forth
herein. [**********************************************************************
***********************************].
4
<PAGE>
5.2 [****]. In the event [******************] terminates its
-----
use of and access to, or otherwise becomes unable to use to access, any
particular UPI Program [******], AT&T may Provision a different [**************
*******************************************] to access or use such UPI Program
[*****************************************************].
5.3 Support Fee. In consideration for the UPI Support
-----------
Services, AT&T shall pay to UPI [************************] (the "Support Fee")
-----------
per [******************************************************] for each UPI
Program [*******] in the amounts set forth in Schedule 1 ("Pricing") attached
----------
hereto and in accordance with the payment terms set forth herein.
5.4 [*****************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
*************************************].
5.5 [***************]. In further consideration of the
-----------------
licenses granted to each UPI Program under the Software License Agreement, AT&T
shall pay to UPI [**************************************************************
**********] for each UPI Program in the amounts set forth in Schedule 1
("Pricing") attached hereto and in accordance with the payment terms set forth
herein.
5.6 [********] Fees [*******************************]. The
[*********] Fees shall apply to: [**********************************************
********************************************************************************
*****************************************************]; [***********************
**************] through [***********], [****************************************
***************************] (for each UPI program) existing [******************
**********************] and (only for the relevant UPI Programs) in excess of
[****************]; and [*********************************************] in
excess [*********************************] for each UPI Program existing [******
*******]. Notwithstanding the foregoing, AT&T shall pay all amounts due for the
[************], the UP Mail Synch Application [*******] as provided elsewhere in
this Third Amendment.
6. Purchase of Additional [************].
-------------------------------------
6.1 [************]. AT&T agrees to purchase from UPI
[***************************************************************] for [*******
**] of the UP Link Server Software; [*****************************************
*****] for the UPI Email Application; and [***********************************
***********] for the UP Mail Synch Application (collectively, the [***********
******], individually, a [**************].
6.2 Payment. AT&T will pay UPI for [****************] as
-------
follows: (i) [************************************] Fees set forth in Schedule
1 ("Pricing") attached hereto upon
5
<PAGE>
delivery to AT&T of the first office application ("FOA") version of [*********]
of the UP Link Server Software (herein, "FOA Delivery") and (ii) [************
******************] of such license fees upon the earlier of [***************]
or (y) the commercial launch by AT&T [*******************] UP Link Server
Software. Accordingly, the aggregate [**************] owed by AT&T for each
[***********] shall be as follows: [**************************************
*******************] for the UP Link Server Software [***************]; [***
******************************************************] for the UPI Email
Application [***********], and [**************************************] for the
UP Mail Synch Application [***********]. For purposes of clarity, the Support
Fees, [***************], and [***********] shall apply to the [************] in
accordance with the terms set forth herein.
6.3 Expiration of [************************] with the
--------------------
exception of the number of [**********] of each [***********] equal to the
maximum number of [****************] existing as of any [*******************
*************************] with respect to the associated UPI Program [****
***********************], excluding from the [******************************
*****************] up to the [********************], the [**********] purchased
pursuant to such [************] shall expire.
7. Extension of Initial Term. The first sentence of Paragraph 8.1
-------------------------
("Term") of the Master Agreement is hereby deleted and replaced in its entirety
by the following sentence:
"The term of this Agreement will commence on
the date of this Agreement and, unless earlier
terminated in accordance with Paragraph 8.2 or
renewed as provided in this Paragraph 8.1, will
end on [****************]"
8. [*******] Supplier. AT&T agrees to Provision [*************]
------------------
with the Up Link Server Software and shall allow [******************************
********] Provisioned. AT&T also agrees [***********************************
*************************************] the terms and conditions described in
Schedule 2 ("[******] Supplier Provisions") attached hereto.
- ----------
9. Other Terms.
-----------
9.1 Terms of Software License Agreement. All other terms
-----------------------------------
and conditions of the Software License Agreement shall remain in full force and
effect in accordance with the terms of such Software License Agreement. The
following terms and conditions set forth in the Master Agreement shall apply to
the UP Mail Synch Application, and are hereby amended to include the UP Mail
Synch Application, as relevant; Paragraphs 2.3, 4.2, 5.4, 5.7, 7.2, 8 (except as
modified in Section 2.3 above), 9 and 10. Unless earlier expired or terminated,
this Third Amendment shall terminate upon termination or expiration of the
Master Agreement; provided, however, that a breach of any term or condition of
-------- -------
this Third Amendment, other than a breach of any payment obligation or Section 8
[*******] Supplier"), shall not provide a basis for termination of the Master
Agreement or of any other amendments, including the First Amendment and Section
Amendment thereto.
6
<PAGE>
9.2 Conflicting Terms. In the event of any conflict between
-----------------
the term of this Third Amendment and the terms of the Software License Agreement
the terms of this Third Amendment shall control solely with respect to the
subject matter herein contained.
9.3 Survival. In the event of termination of this Third
--------
Amendment, the provisions of Sections 1, 4, 5, 6, 7, 8 and 9 shall survive, and
all relevant provisions of the Master Agreement as provided in Section 9.1
("Terms of Software License Agreement") hereof.
9.4 Representations. Each party hereby represents to the
---------------
other that the undersigned has full and binding authority to execute this Third
Amendment.
ACCEPTED AND AGREED:
UNWIRED PLANET, INC. AT&T WIRELESS SERVICES, INC.
Signature: /s/ Alain Rossmann Signature: /s/ K.A. Van der Meulin
------------------------ -----------------------
Printed Name: Alain Rossmann Printed Name: K.A. Van der Meulin
--------------------- -------------------
Title: CEO and Chairman Title: SVP, Product Strategy &
--------------------------- Development
--------------------------
7
<PAGE>
Schedule 1
to the
THIRD AMENDMENT
Pricing
1. License Fees.
a. Per [****************************] Fee). The [*******
**********] Fees are calculated on [*************************************]
separately for each UPI Program [*******], as follows:
If [****************************************], then
[**********************************************************]
(Note: If [************************] is [***********************************]
----
then [***************************])
where:
-----
"Licensed Seats" = [***************************************************
*******] to date.
[*************] Subscribers" = number of [*****] Subscribers [**********
**************************].
[**************] = the number by which [*****************] in the
following chart is [***********************************************************
****************************************************] for the particular UPI
Program [*****************************************].
[*********] Fee Table*:
Number of [***** UP Link UP Email UP Mail UP [*****
*****] Server Application Synch Organizer
Purchased** Software*** Application Application
[********** [***** [***** [***** [***** *****
******************* ***** ***** ***** ***** *****
***************] *****] *****] *****] ***** *****]
* [*******] license fees.
** as calculated cumulatively over the entire term of this Agreement for each
UPI Program [***********************] and excluding [*************************
********************************************************].
8
<PAGE>
*** pricing excludes [*****]
b. [*******************************************************
********************************************************************************
******************************************************
**********************************************************************
**********************************************************************
*****************************************************************************
***************************************************
******
**************************************************************************
********
**********************************************************************
************************
**********************************************************************
******************************************************************************
*******************************************************************
************************
******** ********** ********* ************ ********
*************** ************* ******* **********
************
******* ***** ***** ***** ***** *****
****
*************************]
2. Support Fee [********] fee per [*******************] Support).
The Support Fee listed in the following chart shall be paid [******************]
for each [*********] for which support fees shall be required to be paid (herein
referred to as [********************] Support"). The Support Fees owed for each
-----------------------------
[**************] are calculated separately for each UPI Program [*******], on
[********************************************]. The number of [*************
********] Support each [***********] be defined as [**************************
**********] that have been Provisioned (for a particular UPI Program [********]
as of any [******************] date through [*********************].
9
<PAGE>
[*******************] Support Fee Table:
UP Link UP Email UP Mail Synch UP Organizer [*****]
Server Application Application Application
Software
[*****] [*****] [*****] [*****] [*****]
3. [***************************************************************
***********************************************
**************************** ***********************
**************************** ***********************
****************************
****************************
*********
************ *****************
******************** *****************
************** *****************
*****************************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
*********************************************************************
****************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
********************************]
10
<PAGE>
Schedule 2
to the
THIRD AMENDMENT
[****************************]
1. [**********************************]
-----------------------------------
1.1 Evolution of the UP Link Server Software. The UP Link
-----------------------------------------
Server Software (also referred to herein at "UP Link") may be improved and
-------
expanded by UPI from time to time through the addition of new capabilities
and/or functionalities which are integrated by UPI into the UP Link Server
Software (hereinafter referred to as "Features") as part of UPI's routine
--------
commercial release process.
1.2 [********] Supplier. AT&T hereby designates UPI as
------------------
[**************] supplier of UP Link Server Software functionality [*****] by
AT&T for AT&T's browser-enabled service subject to the procedures and
requirements outlined in these [********] Supplier Provisions. [**************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*********************************************************************
******************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
****************************
**************************************************************
******************************************************************************
******************************************************************************
*********************************************]
11
<PAGE>
[*****************************************************************************
*********************]
**************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
******************************************************************************]
12
<PAGE>
Schedule 3
To the
THIRD AMENDMENT
AT&T Listed Affiliates
[***********
*****************
************
******************
****************************]
13
<PAGE>
AMENDMENT NO. 1
TO
Escrow Agreement
Dated July 24, 1996
between
Unwired Planet, Inc.
and
Data Securities International, Inc.
and
AT&T Wireless Services, Inc.
DATED AS OF December 3, 1996
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
AMENDMENT NO. 1
TO
Escrow Agreement
This Amendment No. 1, dated as of December 3, 1996, is made to the Escrow
Agreement (the "Agreement"), dated July 24, 1996, between Unwired Planet, Inc.,
a Delaware corporation ("UPI), Data Securities International, Inc., a
_____________ corporation ("Agent"), and AT&T Wireless Services, Inc., a
Delaware corporation ("AT&T"). Except as otherwise indicated, all terms defined
in the Agreement shall have the same meanings when used in this Amendment No. 1.
The parties agree as follows:
1. The following provision is hereby added to the Agreement as a new
paragraph C:
"UPI and AT&T have entered into a First Amendment To The May 1, 1996
Software License and Support Agreement Between UPI And AT&T, dated
November 25, 1996 ("Amendment to Software Agreement"). All terms defined
in the Amendment to Software Agreement shall have the same meanings when
used in this Escrow Agreement with initial letters capitalized."
2. The following provision is hereby added to the Agreement as a new
paragraph D:
"Pursuant to Section 7 of the Amendment to Software Agreement, within
ten (10) days of the Amendment to Software Agreement UPI will deliver to
the Escrow Agent to be held in escrow a complete, current and accurate
copy of the UPI Email Application source code."
3. Paragraph E of the Agreement is hereby amended to read in its entirety
as follows:
"UPI and AT&T desire to appoint Agent to Act as the Escrow Agent to
receive, hold and release the (i) UPI Software Source Code and the
Application Server Software Source Code pursuant to the Software
Agreement and (ii) UPI Email Application source code pursuant to the
Amendment to Software Agreement in accordance with the terms, conditions
and provisions set forth in this Escrow Agreement."
4. Section 2 of the Agreement is hereby amended to read in its entirety as
follows:
"(a) Upon execution of this Escrow Agreement and thereafter within [****
**] days after any Enhancement is delivered to AT&T, UPI shall deposit
with Agent, and Agent shall except from UPI, for storage purposes only,
a complete, current copy of all UPI Software Source Code and Application
Server Software Source Code to be held in escrow pursuant to this Escrow
Agreement. Further, if UPI thereafter makes any material revision,
supplement, improvement, addition, update or new version to any UPI
Software Source Code or the Application Server Software Source Code, as
the case may be, during the Term relating to an executable version that
is generally provided to licensees of the UPI Software or Application
Server Software without additional charge, UPI shall promptly deposit
with Agent, and Agent shall accept from UPI, for storage purposes only,
a complete, current copy of the same to be held in escrow pursuant to
this Escrow Agreement, whereupon UPI may remove from the Deposit any UPI
Software Source Code or Application Server Software Source Code, as the
case may be, that is replaced or superseded by newly deposited items.
UPI shall also promptly deposit with Agent, and Agent shall accept from
UPI, for storage purposes only, all other UPI Software or Application
Server Software code required to be deposited in escrow by UPI under
paragraph 6.2 of the Software Agreement.
PAGE 1
<PAGE>
(b) Upon execution of the Amendment to Software Agreement and
thereafter, UPI will deliver to the Escrow Agent all source code for
each Upgrade and Enhancement provided to AT&T under the Amendment to
Software Agreement within three (3) days after such Upgrade or
Enhancement is delivered to AT&T. UPI will resubmit the UPI Email
Application source code to the Escrow Agent promptly after the
occurrence of every Upgrade and Enhancement provided to AT&T hereunder
to such code, and will ensure that the UPI Email Application held in
escrow will at all times match the UPI Email Application code which is
then being used by AT&T. All relevant versions of the supporting UPI
Email Application source code (as it relates to the hardware platforms,
operation systems, utilities, database management systems and any other
supporting code necessary to run the system) will also be delivered to
and held in escrow by the Escrow Agent.
(c) The items deposited in escrow under this Escrow Agreement are
sometimes individually or collectively referred to herein as the
"Deposit"."
5. Section 5 of the Agreement is hereby amended to read in its entirety as
follows:
"Agent shall hold in safekeeping and preserve in confidence the Deposit
during the Term and shall release or disclose the applicable portion of
the Deposit only in accordance with the terms of this Agreement."
6. The amendments made to the Agreement by this Amendment No. 1 shall be
effective as of the date of this Amendment No. 1. The Agreement, as
amended by this Amendment No. 1, remains in full force and effect.
Unwired Planet. Inc.: Data Securities International, Inc.:
- --------------------- ------------------------------------
Title: /s/ Rick ^^ Title: /s/ ^^ ^^
--------------------------- ----------------------------
By: CFO By: Contract Administrator
------------------------------- -------------------------------
Date Signed: 12/20/96 Date Signed: 1/20/97
---------------------- ----------------------
AT&T Wireless Services, Inc.:
- -----------------------------
Title: ^^ ^^
---------------------------
By: V.P. & General Manager
------------------------------
Date Signed: 1/10/97
---------------------
PAGE 2
<PAGE>
ESCROW AGREEMENT
between
Unwired Planet, Inc.,
AT&T Wireless Services, Inc.,
and
Data Securities International, Inc.
Dated as of July 24, 1996
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
<S> <C> <C>
1. Appointment.................................................... 1
2. Deposit........................................................ 1
3. Deposit List................................................... 2
4. Responsibility for Accuracy and Completeness................... 2
5. Retention and Release of Deposit............................... 2
6. Release of Deposit............................................. 2
7. Release Events................................................. 3
7.1 Release Events................................................... 3
7.2 Release Notice................................................... 3
7.3 Agent's Notice to UPI............................................ 3
7.4 Dispute.......................................................... 3
7.5 Agent's Notice to AT&T........................................... 3
7.6 Withdrawal of Notice............................................. 3
8. Arbitration.................................................... 3
8.1 General.......................................................... 3
8.2 Notice........................................................... 4
8.3 Arbitration...................................................... 4
8.4 No Ex Parte Discussions.......................................... 4
8.5 Procedures....................................................... 4
8.6 Decision......................................................... 4
8.7 Location......................................................... 5
8.8 Jurisdiction..................................................... 5
8.9 Costs............................................................ 5
</TABLE>
PAGE i
<PAGE>
<TABLE>
<S> <C> <C>
9. Interpleader.................................................... 5
10. Fees............................................................ 5
11. No Duty to Inquire into Truth, Authenticity or Authority;
Right to Require Additional Documents........................... 5
12. Indemnification................................................. 5
13. Termination..................................................... 6
13.1 Termination by Agent.............................................. 6
13.2 Termination by AT&T............................................... 6
13.3 No Other Termination.............................................. 6
14. Miscellaneous................................................... 6
14.1 Entire Agreement.................................................. 6
14.2 Notices........................................................... 6
14.3 Changes........................................................... 7
14.4 Severability...................................................... 7
14.5 Facsimile......................................................... 7
14.6 Counterparts...................................................... 7
14.7 Headings.......................................................... 7
14.8 Specific Performance.............................................. 7
14.9 Governing Law..................................................... 7
14.10 Successors and Assigns........................................... 8
</TABLE>
PAGE ii
<PAGE>
ESCROW AGREEMENT
This Escrow Agreement, dated as of July 24, 1996, is made and entered
into by and among: AT&T Wireless Services, Inc., a Delaware corporation
("AT&T"); Unwired Planet, Inc., a Delaware corporation ("UPI"); and Data
Securities International, Inc., a _____________ corporation ("Agent").
RECITALS
A. UPI and AT&T have entered into a Software License and Support
Agreement, dated as of May 1, 1996 (the "Software Agreement"). All terms defined
in the Software Agreement shall have the same meanings when used in this Escrow
Agreement with initial letters capitalized.
B. Pursuant to paragraph 6.2 of the Software Agreement, UPI must prepare
and deliver to the Escrow Agent to be held in escrow a complete, current and
accurate copy of all the UPI Software Source Code and the Application Server
Software Source Code.
E. UPI and AT&T desire to appoint Agent to act as the Escrow Agent to
receive, hold and release the UPI Software Source Code and the Application
Server Software Source Code pursuant to the Software Agreement in accordance
with the terms, conditions and provisions set forth in this Escrow Agreement.
AGREEMENT
UPI, AT&T and Agent therefore agree as follows:
1. Appointment
UPI and AT&T hereby appoint Agent, and Agent hereby accepts appointment,
to act as the "Escrow Agent" contemplated by the Software Agreement.
2. Deposit
Upon execution of this Escrow Agreement and thereafter within [*******]
days after any Enhancement is delivered to AT&T, UPI shall deposit with Agent,
and Agent shall accept from UPI, for storage purposes only, a complete, current
copy of all UPI Software Source Code and Application Server Software Source Code
to be held in escrow pursuant to this Escrow Agreement. Further, if UPI
thereafter makes any material revision, supplement, improvement, addition,
update or new version to any UPI Software Source Code or the Application Server
Software Source Code, as the case may be, during the Term relating to an
executable version that is generally provided to licensees of the UPI Software
or Application Server Software without additional charge, UPI shall promptly
deposit with Agent, and Agent shall accept from UPI, for storage purposes only,
a complete, current copy of the same to be held in escrow pursuant to this
Escrow Agreement, whereupon UPI may remove from the Deposit any UPI Software
Source Code or Application Server Software Source Code, as the case may be, that
is replaced or superseded by newly deposited items. UPI shall also promptly
deposit with Agent, and Agent shall accept from UPI, for storage purposes only,
all other UPI Software or Application Server Software code required to be
deposited in escrow by UPI under paragraph 6.2 of the Software Agreement. The
items deposited in escrow under this Escrow Agreement are sometimes collectively
referred to herein as the "Deposit".
PAGE 1
<PAGE>
3. Deposit List
Upon each deposit under paragraph 2, UPI shall furnish to Agent a complete,
current list ("Deposit List"), identifying all of the items contained in the
Deposit, together with a written certification by an authorized agent of UPI
that: (a) the Deposit List is accurate; and (b) a complete master, reproducible
copy Of each item on the Deposit List is in the Deposit. Each time that UPI
deposits any items pursuant to paragraph 2, Agent shall prepare and deliver to
UPI a written receipt for the same. Promptly after each deposit, Agent shall
deliver to AT&T a copy of the Deposit List and certification furnished by UPI
and a copy of the receipt prepared by Agent.
4. Responsibility for Accuracy and Completeness
Agent shall not be required to determine the accuracy or completeness of
any deposit under paragraph 2 or any Deposit List furnished by UPI under
paragraph 3. Further, Agent shall not be responsible for any items not actually
deposited with it, whether or not such items were required to be deposited under
the terms of this Escrow Agreement, the Software Agreement or any other
agreement.
5. Retention and Release of Deposit
Agent shall hold in safekeeping and preserve in confidence the Deposit
during the Term and shall release or disclose the Deposit only in accordance
with the terms of this Agreement.
6. Release of Deposit
Agent shall release the Deposit only as follows:
(a) Agent shall release the Deposit to UPI or AT&T upon Agent's
receipt of written instructions to do so signed by an officer of each of
UPI and AT&T; provided that all fees payable to Agent for performance of
its services hereunder have been fully paid.
(b) Agent shall release the Deposit to UPI at any time that Agent
ceases doing business or is unable to hold the Deposit in accordance with
the terms of this Agreement due to forces beyond its reasonable control;
provided that all fees payable to Agent for performance of its services
hereunder have been fully paid, and provided further that Agent gives such
advance notice to UPI and AT&T as is reasonably practicable in the
circumstances. Upon such notice, UPI and AT&T shall use their best efforts
to agree upon a substitute escrow agent and enter into an escrow agreement
containing substantially the same terms as this Escrow Agreement pursuant
to which UPI shall deliver the Deposit to the substitute escrow agent.
(c) Agent shall release the Deposit to AT&T on the [**********] day
after Agent gives UPI a written Release Notice therefor pursuant to
paragraph 7.3, provided that Agent does not receive a Dispute Notice from
UPI in the manner and within the time specified in paragraph 7.4.
(d) Agent shall release all or a portion of the Deposit in accordance
with any arbitration award pursuant to Section 8 determining that a Release
Event as to the UPI Software or the Application Server Software, as the
case may be, has occurred, but in no event less than [*********] days
following such award.
PAGE 2
<PAGE>
(e) Agent shall release the Deposit to such persons and in such manner
as may be directed by order of any court of competent jurisdiction pursuant
to Section 9 or otherwise.
(f) Upon the termination or expiration of the Term pursuant to Section
13, Agent shall release the Deposit to UPI or, if directed in writing
signed by an officer of UPI and an officer of AT&T, to a substitute escrow
agent.
7. Release Events
7.1 Release Events
AT&T shall be entitled to release of the Deposit upon the occurrence of a
Release Event.
7.2 Release Notice
Upon the occurrence of any Release Event, AT&T may deliver to Agent a
written notice (the "Release Notice") of the Release Event and requesting
release of the Deposit as provided for in paragraph 7.1. The Release Notice must
contain a statement, verified by an officer of AT&T, that the applicable Release
Event has occurred and that the Deposit is to be released.
7.3 Agent's Notice to UPI
Upon receipt of a Release Notice, Agent shall promptly give UPI written
notice of such receipt and transmit with such notice a copy of the Release
Notice.
7.4 Dispute
UPI may dispute a Release Notice at any time within [*****] days after UPI
receives written notice thereof pursuant to paragraph 7.3, by giving written
notice to Agent specifically denying the occurrence of such Release Event and
setting forth a description of any facts that indicate that the Release Event
did not occur (the "Dispute Notice").
7.5 Agent's Notice to AT&T
Upon receipt of a Dispute Notice, Agent shall promptly give AT&T notice of
such receipt and transmit with such notice a copy of the Dispute Notice.
7.6 Withdrawal of Notice
AT&T may withdraw its Release Notice at any time by giving Agent and UPI
written notice of such withdrawal. UPI may withdraw its Dispute Notice at any
time by giving Agent and AT&T written notice of such withdrawal.
8. Arbitration
8.1 General
Any dispute of a Release Notice pursuant to paragraph 7.4 shall be settled
by final and binding arbitration in accordance with the provisions of this
section. The sole issue to be decided in any such arbitration shall be whether
any Release Event has occurred.
PAGE 3
<PAGE>
8.2 Notice
If, within fifteen (15) days after receipt of any notice from Agent that it
has received a Dispute Notice, the dispute has not been resolved in a mutually
acceptable manner, either party may initiate the arbitration procedure under
this section by giving the other party written notice demanding arbitration of
the dispute.
8.3 Arbitration
Unless otherwise agreed by UPI and AT&T, any dispute submitted to
arbitration under this section shall be presented to a panel of three
arbitrators. The party demanding arbitration under paragraph 8.2 shall appoint
and specify one of the arbitrators in its notice demanding the arbitration. The
other party shall appoint a second arbitrator and give the demanding Party
written notice of such appointment within thirty (30) days after the notice
demanding the arbitration. The two arbitrators so appointed shall appoint a
third arbitrator who shall act as chairman of the arbitration panel, if the two
arbitrators appointed by the parties do not agree upon the third arbitrator
within thirty (30) days after appointment of the second arbitrator, then, upon
request of UPI or AT&T, the third arbitrator shall be appointed in accordance
with the Arbitration Rules of the Judicial Arbitration and Mediation Services,
Inc. (J.A.M.S.). If any arbitrator is unable to serve as an arbitrator, then a
substitute arbitrator shall be promptly designated by the person or persons who
appointed the arbitrator who is unable to serve.
8.4 No Ex Parte Discussions
No party may discuss the dispute to be arbitrated with any arbitrator after
such arbitrator is appointed and prior to the arbitration panel's determination,
without providing the other party with reasonable advance notice and the
opportunity to participate in such discussions.
8.5 Procedures
The arbitration shall be conducted in accordance with the Arbitration Rules
of J.A.M.S. Additional rules of procedure for the conduct of the arbitration may
be determined by a majority of the arbitrators. Such rules of procedures shall
direct the expeditious evaluation of the merits of the dispute and rendering of
a decision consistent with the complexity of the dispute being arbitrated. In
any arbitration, each party shall have:
(a) full access to the records of the other parties that pertain to
the dispute;
(b) the power to call for testimony of any director, officer,
employee, agent or representative of the other parties; and
(c) all other rights of discovery accorded to parties in civil actions
under the Federal Rules of Civil Procedure (or rules or laws applicable to
court proceedings adopted in lieu thereof) applicable in proceedings before
the court specified in section 9.8.
8.6 Decision
Unless otherwise agreed by UPI and AT&T, the arbitrators shall render a
decision determining whether the Release Event has occurred within thirty (30)
calendar days after completion of the arbitration proceeding. The decision of
the arbitration panel shall be made by a majority of the arbitrators and shall
be binding upon the parties.
PAGE 4
<PAGE>
8.7 Location
Any arbitration hearings under this Agreement shall be held at a mutually
acceptable location in or near San Francisco, California, U.S.A.
8.8 Jurisdiction
The Superior Court of the State of California in and for the City and
County of San Francisco, shall be the forum for any court supervision of any
arbitration under this section.
8.9 Costs
Each party shall pay for the services and expenses of the arbitrator
appointed by it. The costs for the services and expenses of the third arbitrator
and all administration costs of the arbitration shall be paid by the non-
prevailing party.
9. Interpleader
Notwithstanding any other provision of this Agreement, if Agent receives a
Release Notice and Agent is uncertain whether the Release Notice was timely or
otherwise effective, then Agent may, in its sole discretion, begin an
interpleader action and deposit the Deposit with the clerk of the court or
withhold release of the Deposit until instructed otherwise by court order. In
connection with any such deposit, Agent shall seek an appropriate order to seal
the deposit so as to prevent release or disclosure to third parties.
10. Fees
AT&T shall pay to Agent the initial and annual fees prescribed on the
attached Exhibit 1 for performance of services by Agent during the Term. Agent
may change its rates from time to time by providing at least sixty (60) days'
advance written notice of such change to AT&T.
11. No Duty to Inquire Into Truth, Authenticity or Authority; Right to Require
Additional Documents
Agent shall not be required to inquire into the truth of any statements or
representations contained in any notices, certificates or other documents
required or otherwise provided hereunder, and shall be entitled to assume that
the signatures on such documents are genuine, that the persons signing on behalf
of any party thereto are duly authorized to execute the same, and that all
actions necessary to render any such documents binding on the party purportedly
executing the same have been duly undertaken. Without in any way limiting the
foregoing, Agent may in its discretion require from UPI or AT&T additional
documents which it deems to be necessary or desirable in the course of
performing its obligations hereunder.
12. Indemnification
Agent shall be responsible to perform its obligations under this Agreement
and to act in a reasonable and prudent manner with regard to the escrow
arrangement set forth herein. Provided Agent has acted in the manner stated in
the preceding sentence, AT&T and UPI each agree to indemnify, defend and hold
harmless Agent from any and all claims, actions, damages, arbitration fees and
expenses, costs, attorney's fees and other liabilities incurred by Agent
relating in any way to the escrow arrangement set forth in this Agreement.
PAGE 5
<PAGE>
13. Termination
13.1 Termination by Agent
Agent may, at any time, terminate the term of this Agreement by resigning
as escrow agent hereunder. Agent shall provide UPI and AT&T ninety (90) days'
advance written notice of its intention to resign. Further, Agent may terminate
the term of this Agreement upon written notice to UPI and AT&T if AT&T defaults
in the payment of the fees payable to Agent under section 10 and fails to cure
such default within ten (10) days after its receipt of written notice of default
from Agent.
13.2 Termination by AT&T
AT&T may, at any time, terminate the term of this Agreement by providing
Agent fourteen (14) days advance written notice of such termination, signed by
an officer of AT&T; provided that all fees payable to Agent for performance of
its services hereunder have been fully paid.
13.3 No Other Termination
Except as provided in paragraphs 13.1 and 13.2, this Escrow Agreement may
not be terminated or modified except in writing signed by Agent, UPI and AT&T;
provided, however, that this Agreement will terminate and all items held in
escrow hereunder will be returned to UPI upon any termination of the license
granted to AT&T under Section 2 of the Software Agreement.
14. Miscellaneous
14.1 Entire Agreement
This Escrow Agreement constitutes the final and entire agreement among the
parties with respect to the subject matter hereof and supersedes all prior
arrangements or understandings.
14.2 Notices
All notices, requests, consents and other communications provided for
herein to any party shall be deemed to be sufficient if contained in a written
instrument either: (a) delivered in person or by facsimile or telex; or (b) sent
by first-class registered or certified mail postage prepaid, addressed to the
party at the address set forth below, or such other address as may be hereafter
be designated in writing by the party. Notices will be effective only upon
actual receipt.
If to UPI: Unwired Planet, Inc.
390 Bridge Parkway
Redwood Shores, CA 94065
Attn: President
If to AT&T: AT&T Wireless Services, Inc.
Wireless Data Division
10230 N.E. Points Dr.
Kirkland, Washington 98033
Attn: WDD General Counsel
PAGE 6
<PAGE>
If to Agent: Data Securities International, Inc.
425 California Street, Suite 1450
San Francisco, CA 94104
Attn: ______________________
14.3 Changes
The terms of this Escrow Agreement may not be modified or amended, or any
of the provisions hereof waived, temporarily or permanently, except pursuant to
the written consent of the parties.
14.4 Severability
If any term or provision of this Escrow Agreement or the application
thereof as to any person or circumstance shall to any extent be invalid or
unenforceable, the remaining terms and provisions of this Escrow Agreement or
the application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected
thereby and each term and provision of this Escrow Agreement shall be valid and
enforceable to the fullest extent permitted by law.
14.5 Facsimile
This Escrow Agreement may be executed by facsimile signature.
14.6 Counterparts
This Escrow Agreement may be executed in any number of counterparts, and
each such counterpart shall be deemed to be an original instrument. All such
counterparts together shall constitute but one agreement.
14.7 Headings
The headings of the various sections of this Escrow Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Escrow Agreement.
14.8 Specific Performance
In the event of any breach of or default under this Agreement by any party,
other than a breach or default of a monetary obligation, the other party may
suffer irreparable harm and have no adequate remedy at law. Consequently, in the
event of such breach or default, or any threat of such breach or default, by any
party, then the other parties will be entitled to temporary or permanent
injunctive relief, specific performance and such other equitable relief as may
be appropriate in he circumstances in order to restrain or enjoin the breach or
default. This paragraph will not be interpreted or construed to require the
release of the Deposit pursuant to a Release Notice that has been disputed in
good faith by UPI in accordance with paragraph 7.4, prior to resolution of the
dispute pursuant to Section 8. The rights and remedies under this paragraph are
in addition to, and not in lieu of, any other right or remedy afforded under any
other provision of this Agreement, by law or otherwise.
14.9 Governing Law
This Escrow Agreement shall be governed by and construed in accordance with
the laws of the State of California without regard to the principles of
conflicts of laws.
PAGE 7
<PAGE>
14.10 Successors and Assigns
This Agreement shall inure to the benefit of, be binding upon and be
enforceable by each of the parties and their respective successors and assigns.
The assignment and delegation rights of the Parties with respect to this
Agreement are set forth in Section 10.5 and 10.6 of the Software Agreement.
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as of
the date set forth above.
UPI: Unwired Planet, Inc.
By /s/ Rick Smith
-----------------------------
Title CFO
-------------------------
AT&T: AT&T Wireless Services, Inc,
By ^^ ^^
-----------------------------
Title Vice President
--------------------------
Agent: Data Securities International, Inc.
By ^^ ^^
------------------------------
Title Western Regional Manager
--------------------------
PAGE 8
<PAGE>
EXHIBIT 1 TO ESCROW AGREEMENT
Fee Schedule
------------
See Attached.
PAGE 1
<PAGE>
[Page cannot be done. Hard copy is completely illegible]
<PAGE>
EXHIBIT B
DESCRIPTION OF DEPOSIT MATERIALS
Depositor Company Name
_________________________________________________________
Account Number
_________________________________________________________________
PRODUCT DESCRIPTION:
Product Name __________________________________ Version ______________________
Operating System
_______________________________________________________________
________________________________________________________________________________
Hardware Platform
_____________________________________________________________
________________________________________________________________________________
DEPOSIT COPYING INFORMATION:
Hardware required:
______________________________________________________________
________________________________________________________________________________
Software required:
_____________________________________________________________
________________________________________________________________________________
DEPOSIT MATERIAL DESCRIPTION:
Qty Media Type & Size Label Description of Each Separate Item
(excluding documentation)
_____ Disk 3.5" or ____
_____ DAT tape ____ mm
_____ CD-ROM
_____ Data cartridge tape
_____ TK 70 or ____ tape
_____ Magnetic tape ____
_____ Documentation
_____ Other _________________________
I certify for Depositor that the DSI has inspected and accepted
above described deposit materials materials (any exceptions are
have been transmitted to DSI: noted above):
Signature _________________________ Signature ____________________________
Print Name _______________________ Print Name __________________________
Date ______________________________ Date Accepted ________________________
Exhibit B# ___________________________
Send materials to: DSI, 9555 Chesapeake Dr. #200, San Diego, CA 92123
<PAGE>
Exhibit 10.17
CLIENT LICENSE AGREEMENT
Agreement No.: 000164
This CLIENT LICENSE AGREEMENT (the "Agreement") is entered into as of
January 1, 1999 (the "Effective Date"), by and between UNWIRED PLANET, INC., a
Delaware corporation, having a principal place of business at 800 Chesapeake
Drive, Redwood City, CA 94063 ("UPI"), and MATSUSHITA COMMUNICATION INDUSTRIAL
CO., LTD., a Japanese corporation having a principal place of business at 4-3-1
Tsunasima-higashi, Kouhoku-ku, Yokohama 223-8639 Japan.
RECITALS
WHEREAS, UPI has developed certain proprietary software that enables data
capable wireless telecommunications devices to access certain interactive
applications that provide information and perform certain other functions for
the wireless device end-user. The UPI proprietary software resides in part in
the wireless device as "client" software and in part on a central server
computer in the form of "server" software that is accessed by wireless devices
enabled by UPI proprietary software.
WHEREAS, Licensee desires to obtain license rights to the UPI "client"
software to reside on certain of its wireless mobile telephones and other data
capable wireless devices as herein provided.
NOW, THEREFORE, in consideration of their mutual promises and other
valuable consideration, UPI and Licensee agree as follows:
AGREEMENT
ARTICLE 1: DEFINITIONS
Unless the context otherwise requires, the following terms, for all
purposes of this Agreement, shall have the meanings specified in this Article 1:
"Affiliate" shall mean an entity or entities directly or indirectly
controlling, controlled by, or under common control with, a party to this
Agreement. The term "control" as used in the immediately preceding sentence
means the right to exercise, directly or indirectly, in the case of corporate
entities, fifty percent (50%) or more, or in jurisdictions other than the United
States and Japan, the maximum percentage that a foreign investor may own if less
than fifty percent (50%), pursuant to local laws and regulations, of the stock
or participating shares entitled to vote for the election of directors; and in
the case of non-corporate entities, fifty percent (50%) or more or, in
jurisdictions other than the United States and Japan, the maximum percentage
that a foreign investor may own if less than fifty percent (50%), pursuant to
local laws or regulations, of the equity interest with the power to direct
management policies of such non-corporate entity.
"Airlink Protocol(s)" shall mean the airlink protocol(s) identified in
Exhibit A.
"Client Porting Agreements" shall mean the Client Porting Agreement
entered
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
1
<PAGE>
into by the parties dated September 30, 1997 and the Client Porting
Agreement dated December 30, 1997.
"Confidential Information" shall mean any information, including, without
limitation, the terms of this Agreement, technical information, specifications,
trade secrets, Source Code, confidential information and supporting
documentation, owned by or licensed to a party and its Affiliates hereto that
(i) if in tangible form, is conspicuously labeled as proprietary and/or
confidential at the time of disclosure, and (ii) if in intangible form, is
designated by the Disclosing Party as confidential at the time of disclosure.
Without limiting the generality of the foregoing, "Confidential Information" of
UPI shall include the UPI Client Software and related documentation without any
need for further labeling as confidential, except any UPI Client Software
embedded in Object Code form in Enabled Devices (except to the extent that such
software is covered by an exception set forth in Article 6.2) produced or
distributed by Licensee or its distributors. UPI Client Software embedded in
Object Code form in Enabled Devices shall not be Confidential Information.
Without limiting the generality of the foregoing, the following Licensee
information shall be deemed to be Licensee's Confidential Information (except to
the extent that such information is covered by an exception set forth in Article
6.2) without any need for labeling as confidential or reduction to writing: (1)
Licensee's proprietary software and other technology comprised within an Enabled
Device (other than UPI Client Software embedded in Object Code form in an
Enabled Device), and (2) the existence and nature of Licensee's relationship and
nature of Licensee's relationship with third party suppliers, distributors and
customers.
"Core Modules" shall mean the portion of the UPI Client Software that is
client independent and does not vary materially for different Enabled Devices.
The Core Modules are separate and apart from the Interface Modules.
"Deliverables" shall mean: (i) Object Code version of UPI Client Software
Core Modules (Exportable and Non-Exportable versions); (ii) Source Code version
of UPI Client Software Interface Modules; (iii) documentation for UPI Client
Software; and (iv) UP.Browser Porting Guide.
"Enabled Device(s)" shall mean any wireless device manufactured by, or on
behalf of, Licensee and which has the ability to execute the UPI Client Software
through inclusion of such software in Object Code form or through a hardware or
firmware implementation thereof.
"End User" shall mean any third party user of any Enabled Device
manufactured, sold, or distributed by or for Licensee.
"Exportable" shall mean the Deliverables which may be exported pursuant to
U.S. Government export control licensing restrictions, including U.S. Commerce
Department controls on encrypted technology.
"Improvements" shall mean any modifications, enhancements, patch releases,
updates or improvements after commercial release to any UPI Client Software that
UPI incorporates into any generally available new release or new version of the
UPI Client Software during the Term of the Agreement, except optional
------
enhancements or new
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or add-on products that are priced and sold separately by UPI.
"Interface Modules" shall mean the portion of the UPI Client Software that
directly interfaces between the Core Modules and the operating environment of
the Enabled Devices as set forth in the UPI Client Porting Guide.
"Licensee" shall mean Matsushita Communication Industrial Co., Ltd. and its
Affiliates.
"Maintenance Agreement" shall mean the Software Maintenance and Support
Agreement attached hereto as Exhibit B.
"Non-Exportable" shall mean the Deliverables which may not be exported
outside the United States or Canada pursuant to U.S. Government export control
licensing restrictions, including U.S. Commerce Department controls on encrypted
technology.
"Object Code" shall mean any form of computer program which is suitable for
direct execution by a computer and unsuitable to be read and understood by a
person.
"Port" shall mean the incorporation of the UPI Client Software into an
Enabled Device.
"Proprietary Rights" shall mean: (i) any U.S. or foreign patents or any
division, continuation or extension thereof; (ii) all rights, title and interest
in and to all trade secrets and trade secret rights arising under the common
law, state law, federal law and laws of foreign countries; (iii) all copyrights,
and all other literary property and author rights whether or not copyrightable;
and all rights, title and interest in and to all copyrights and copyrighted
interests throughout the world; and (iv) all trademarks, tradenames and service
marks, whether registered or arising under the common law, state law, federal
law and laws of foreign countries and all registration thereof and interests
therein throughout the world and all associated goodwill.
"RSA Software" shall mean software licensed by UPI from RSA Data Security,
Inc. ("RSA") and provided by UPI to Licensee hereunder.
"Source Code" shall mean a presentation of a computer program, regardless
of the form in which it is stored, from which it is possible to discern the
logic, algorithms, internal structure, operating features and any other design
characteristics of such computer program.
"Support Availability Period" shall have the meaning set forth in Article
5.1.
"Term" of the Agreement shall mean the period of time during which this
Agreement is in effect, as set forth in Article 10.1.
"Territory" shall mean worldwide, except for those countries to which
------
export or re-export of UPI Client Software is prohibited under the applicable
United States and Japanese export control laws.
"UPI Client Porting Guide" shall mean a text document describing the
interfaces and implementation between the Core Modules and the operating
environment of the Enabled Devices, as such document may be amended from time to
time at UPI's sole discretion.
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"UPI Client Software" shall mean (i) the software, commercially known as
"UP.Browser", which is the portion of software developed by UPI for execution by
a wireless device which interprets instructions received by such device from a
server, which transmits instructions to a server and which interfaces with such
device hardware to perform functions such as writing output to a screen and
receiving input from a keypad, in compliance with the UPI Client Specifications,
and (ii) Improvements to the software described in (i). [**********************
*******************************************************************************
***********************] UPI Client Software shall also include any releases
prior to UP.Browser Release 4.0 provided to Licensee to facilitate Licensee's
Porting efforts.
"UPI Client Specification(s)" shall mean those specifications for the UPI
Client Software which will be attached as Exhibit A after they have been
defined, and which may be modified from time to time at UPI's sole discretion;
provided, that UPI agrees that it will not modify such specifications solely in
order to avoid having to resolve a substantive warranty or software maintenance
problem.
"UPI Server" shall mean a server computer or interconnected server
computers which is capable of executing the UPI Server Software.
"UPI Server Software" shall mean the software of UPI that resides on the
back-end data processing system that interacts with and supports Enabled Devices
using the UPI Client Software.
ARTICLE 2: LICENSE OF UPI CLIENT SOFTWARE
2.1 License. Subject to the terms and conditions of this Agreement and
the Maintenance Agreement, UPI grants to Licensee a non-exclusive, royalty-free
right and license, in the Territory, to: (i) manufacture, or have manufactured
on Licensee's behalf, Enabled Devices that include all (but not less than all)
of the UPI Client Software in Object Code form or as otherwise implemented in
hardware or firmware incorporated in such Enabled Devices; (ii) use, market,
sublicense and otherwise distribute the Object Code version of the UPI Client
Software solely when embedded or otherwise incorporated into Enabled Devices and
solely for the Airlink Protocol(s); (iii) modify and make derivative works of
the Interface Modules, solely for Porting the UPI Client Software to Enabled
Devices; and (iv) Port the UPI Client Software to Enabled Devices and solely for
the Airlink Protocol(s). The foregoing rights shall not include the right to
modify or create derivative works of the Core Modules. Licensee may grant the
rights set forth in Article 2.1(ii) to distributors, including the right to
license such rights to further distributors.
2.2 Trademarks License. Subject to the terms and conditions of this
Agreement, UPI grants to Licensee a non-exclusive, non-royalty bearing license
to use the trademarks and/or logos set forth in Exhibit D (the "Trademarks") in
the Territory, solely in connection with Licensee's compliance with Article 5.6
of this Agreement and with the marketing of Licensee's Enabled Devices, and
solely in accordance with the terms set forth in Exhibit D. Licensee shall not
remove or
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alter any Trademarks or other proprietary markings of UPI or its suppliers and
licensors. Except as set forth in this Article 2.2 and Exhibit D, Licensee shall
have no right, title or interest in the Trademarks or other trademarks of UPI or
its suppliers and licensors. At no time during or after the term of this
Agreement shall Licensee challenge or assist others to challenge the Trademarks
or the registration thereof or attempt to register any trademarks confusingly
similar to those licensed hereunder.
2.3 Prohibited Activities. Except as expressly permitted under this
Agreement or applicable law, Licensee shall not modify, translate, reverse
engineer, de-compile or disassemble the UPI Client Software or any part thereof
and shall (i) in the event that Licensee distributes Enabled Devices directly to
End Users, notify such End Users of Enabled Devices that they are prohibited
from doing the same, and (ii) in the event that Licensee distributes Enabled
Devices to End Users through third parties, ensure in its agreements with such
third parties that such third parties are prohibited from doing the same, and
that such third parties are required to notify such End Users that such End
Users are prohibited from doing the same.
ARTICLE 3: PORTING
Licensee shall be responsible for Porting the UPI Client Software, and all
Improvements thereto provided by UPI, to Enabled Devices. Provided that
Licensee pays the fees set forth in the Maintenance Agreement in the manner set
forth therein, UPI shall provide the Porting support set forth in Attachment A
to the Maintenance Agreement. The Client Porting Agreements shall terminate as
of the Effective Date of this Agreement.
ARTICLE 4: OWNERSHIP
Licensee acknowledges and agrees that the UPI Client Software, any
Improvements to the foregoing, and any other Confidential Information of UPI,
and any copies thereof, including, without limitation, any Proprietary Rights
relating thereto, are and shall remain the sole property of UPI, its suppliers
and licensors, as applicable; provided, however, that modifications made by
-------- -------
Licensee to the UPI Client Software by Licensee pursuant to Article 2.1 (iii)
hereto, shall be owned by Licensee and Licensee shall have unlimited rights to
use such modifications separately from the UPI Client Software, subject to UPI's
ownership of the underlying UPI Client Software and other Confidential
Information of UPI. Licensee further acknowledges and agrees that title and
full ownership rights in the UPI Client Software and other Confidential
Information of UPI are reserved to and remain with UPI, its suppliers and
licensors, as applicable. Possession of any tangible materials (such as copies
of Object Code, Source Code, or related documentation) by Licensee shall not
convey upon Licensee any right or license under, or any ownership interest in,
any Proprietary Rights owned or controlled by UPI or its suppliers and licensors
except to the extent any rights are granted hereunder, and Licensee's sole right
to such Proprietary Rights shall be the license rights granted under this
Agreement. Licensee shall not, either during or after the Term of this
Agreement, challenge the validity or ownership by UPI of all Proprietary Rights
in the UPI Client Software, the Deliverables, any Improvements thereto, the UPI
Server, or any Confidential Information of UPI,
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except in the event that Licensee believes in good faith that UPI has violated
UPI's obligations under Article 6.
ARTICLE 5: OBLIGATIONS
5.1 Maintenance and Support. Commencing on the Effective Date, UPI shall
provide software maintenance and support services as described in the
Maintenance Agreement, with respect to the UPI Client Software. Provided
Licensee is current on all fees due under this Agreement and the Maintenance
Agreement, and is otherwise not in breach of the Maintenance Agreement, UPI
shall make at a minimum, Ongoing Support (as defined in the Maintenance
Agreement) available to Licensee for a licensed release of the UPI Client
Software for a period of four (4) years from the date that such release is
superseded by a new release from UPI (the "Support Availability Period" for such
release of the UPI Client Software). After the Support Availability Period for a
licensed release of the UPI Client Software, UPI will either continue to provide
maintenance and support for such release to Licensee under the terms defined in
this Agreement, or UPI will provide Licensee, at no charge, with a copy of the
Source Code of such release of the UPI Client Software, which may be used by
Licensee solely in order to provide maintenance and support to customers of the
Enabled Devices incorporating such release.
5.2 Server Compatibility. UPI undertakes to provide carriers that license
the UPI Server Software, and which are under a current maintenance contract,
with the necessary UPI Server Software and support such that those carriers can
offer compatibility between the version of the UPI Client Software licensed
under this Agreement and applications targeted at this version of the UPI Client
Software for a period of four (4) years from the time that UPI makes a new
release of the UPI Client Software generally available for commercial
deployment.
5.3 UPI Server. Licensee will be entitled to make use of a fully
functional UPI Server situated at UPI's facilities through the UPI Client
Software on Enabled Devices for the sole purpose of testing in connection with
Porting activities contemplated under Article 3.
5.4 Delivery. UPI agrees to use commercially reasonable efforts to
deliver the non-Object Code Deliverables for the UPI Client Software, [*******
***] to Licensee no later than [****************]. As part of the engineering
support services provided with Premium Support as defined in Attachment A of
Exhibit B, UPI will provide Object Code Deliverables to Licensee for integration
on a target device only after Licensee has (i) ported the Interface Modules to
that target device; and (ii) provided to UPI certain information or tools
necessary to create the Object Code Deliverables for integration with the
Interface Modules.
5.5 Compliance Verification. After each Port of the UPI Client Software
to an Enabled Device, Licensee shall send a copy of such Ported UPI Client
Software, a prototype of Licensee's Enabled Device with the Ported UPI Client
Software, and any tools, software, and equipment necessary for verification and
testing to UPI for verification and testing for compliance of such Ported UPI
Client Software with UPI internal standards. UPI will complete such
verification and testing within [**********] days after UPI's receipt of the
foregoing materials. In the event that UPI determines
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that the Ported UPI Client Software does not comply with then-current UPI
standards, then UPI shall provide to Licensee in writing a description of any
non-compliance, and Licensee shall correct such non-compliance prior to
manufacturing Enabled Devices for sale or distribution to End Users. If Licensee
does not receive a written description of an Enabled Device's non-compliance
with UPI's then-current standards within [*********] days after UPI's receipt of
such Enabled Device, then Licensee may manufacture, sell and distribute such
Enabled Device according to the terms of this Agreement. Licensee acknowledges
and agrees that Licensee's license rights under Article 2.1 are subject to
Licensee's compliance with the provisions of this Article 5.5. In no event shall
Licensee undertake the sale or distribution of Enabled Devices that do not
satisfy the compliance verification requirements of this Article 5.5.
5.6 Proprietary Rights Notice.
(a) Splash Screen and Proprietary Notice Requirement. [******************
------------------------------------------------
**********************], Licensee shall, at all times, display UPI's copyright
notice and RSA's copyright notice on either a single screen or two (2) screens
as contained in the portable Source Code layer of the UPI Client Software
(collectively, the "Copyright Notices") for up to 0.5 seconds upon the first
invocation of the UPI Client Software following each power cycle of the Enabled
Devices (such invocation, including the Copyright Notices, being referred to
herein as the "Splash Screen"). In addition, Licensee shall include UPI's
proprietary notices, and those of UPI's suppliers and licensors, as set forth in
and according to the terms of Exhibit D.
[*************************************************************************
*******************************************************************************
********************************************************
*************************************************************************
****************************************************************************
************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
*************************************************************************
****************************************************************************
****************************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
******************************************************************************
*******************************************************************************
*******************************************************************************
****************************************************************************
*******************************************************************************
****************************************************************************
***********************]
(d) Reports. Within thirty (30) days after the end of each six (6) month
-------
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period following initial shipment of one (1) or more Enabled Devices [***
************************], Licensee shall furnish to UPI a complete and accurate
statement, with sums denominated in U.S. currency, specifying the total units of
Enabled Devices [*****************************] distributed during such period
and showing all computations of [*********************************] UPI
hereunder. Payments due to UPI for a six (6) month calendar period shall be paid
by Licensee to UPI in U.S. dollars on or before the statement date for such
period.
(e) Audit. Licensee agrees to keep accurate books of account and records
-----
covering all transactions relating to this Agreement at Licensee's principal
place of business for not less than two (2) years after the expiration or
termination of this Agreement or until any dispute relating to this Agreement
shall have been finally determined, whichever shall be later. No more
frequently than twice each year, an auditor, mutually agreed to by the parties,
operating under a mutually agreeable nondisclosure agreement that protects the
confidentiality of Licensee's information, may upon UPI's written notice to
Licensee and during Licensee's usual business hours audit said books of account
and records and make copies thereof. All audits shall be at the expense of UPI,
except that if the audit reveals that UPI's royalties for all periods covered by
such audit shall have been under-reported by more than five percent (5%) of the
true amount thereof, then Licensee shall pay the cost of the audit in addition
to an amount equal to twice such under-reported amount due.
(f) Licensee understands and agrees that any payments by Licensee pursuant
to this Article 5.6 are [********************************] and will not, either
explicitly or implicitly, convey to Licensee any interest in or to the UPI
Client Software or any other proprietary property of UPI and/or its licensors
beyond the limited license expressly granted herein.
(g) [************************************************] Licensee in all
cases will display the Copyright Notices in the so-called "About Box" on all
Enabled Devices manufactured by or for Licensee hereunder.
5.7 Public Announcements.
(a) License. No later than ninety (90) days after the signing of this
-------
Agreement, Licensee will issue a press release, in a form which has been
approved by both parties, announcing that Licensee has licensed the UPI Client
Software from UPI.
(b) Compatibility. Prior to the first commercial shipment of any Enabled
-------------
Device hereunder, Licensee will issue a press release, in a form which has been
approved by both parties, announcing that such Enabled Device is compatible with
UPI's UP.Link Server Suite.
ARTICLE 6: CONFIDENTIALITY
6.1 Non-disclosure and Non-use. Each party hereto agrees not to use any
Confidential Information of the other party for any purpose or disclose any
Confidential Information of the other party to any third party for any purpose,
other than to enforce or exercise its rights under this Agreement and perform
its obligations hereunder. Each party hereto shall use the same degree of care,
but no less than reasonable care, to avoid disclosure or use of the Confidential
Information of the other party as such party
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employs with respect to its own Confidential Information of like importance. The
party receiving Confidential Information ("Receiving Party") will restrict the
possession, knowledge, development and use of Confidential Information to its
employees, agents, and subcontractors and its Affiliates' employees, agents, and
subcontractors (collectively, the "Personnel") who have (i) a need to know the
Confidential Information in connection with performing under this Agreement
and/or the Maintenance Agreement, and (ii) entered into written agreements with
the Receiving Party that provide for the protection of the Confidential
Information in a manner consistent with this Agreement. The Receiving Party will
ensure that its Personnel comply with the nondisclosure obligations set forth in
this Agreement. Each party may only use the Confidential Information and other
Proprietary Rights of the disclosing party ("Disclosing Party") as expressly
permitted under this Agreement, and no other license, express or implied, is
otherwise granted to such Confidential Information and Proprietary Rights.
6.2 Exceptions. The provisions of Article 6.1 will not apply to any
information that (i) is or becomes publicly available without breach of this
Agreement; (ii) can be shown by documentation to have been known to the
Receiving Party at the time of its receipt from the Disclosing Party; (iii) is
rightly received from a third party who did not acquire or disclose such
information by wrongful or tortious act; (iv) can be shown by documentation to
have been independently developed by the Receiving Party without reference to
any Confidential Information; or (v) is approved in writing for public release
by the Disclosing Party. Unless expressly permitted hereunder, (A) prior to the
first commercial sale of an Enabled Device, UPI may not, without Licensee's
prior written approval (which shall not be unreasonably withheld), disclose the
fact that this Agreement pertains to operation in a Licensed Airlink Protocol
environment, and (B) neither party may disclose the terms of this Agreement
without the other party's prior written approval, which shall not be
unreasonably withheld. UPI may also disclose the terms of this Agreement to any
prospective investor in or acquirer of UPI; provided, however, that (a) prior to
-------- -------
the first commercial sale of an Enabled Device, such disclosure shall require
Licensee's prior consent, which shall not be unreasonably withheld, and (b) the
prospective investor or acquirer shall sign a nondisclosure agreement. If the
Receiving Party becomes legally obligated to disclose Confidential Information
by any governmental entity with jurisdiction over it, the Receiving Party will
give the Disclosing Party prompt written notice sufficient to allow the
Disclosing Party to seek a protective order or other appropriate remedy. The
Receiving Party will disclose only such information as is legally required upon
advice of the Receiving Party's legal counsel and will use its reasonable
efforts to obtain confidential treatment for any Confidential Information that
is so disclosed.
6.3 [*********] Nondisclosure Agreement. UPI and Affiliate of the
Licensee have entered into a [*********] Nondisclosure Agreement with [****
*******************************************************************************
****]. The [*********] NDA shall remain in full force and effect with respect
to trade secret and confidential information disclosed [********], Licensee and
UPI. In the event of a conflict between the terms and conditions of Article 6
and the terms and
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conditions of the [*********] NDA, the [*********] NDA shall govern and control
with respect to Confidential Information disclosed to or from [**]; provided
however, that the terms and conditions of Article 6 shall govern and control
with respect to disclosure of confidential or trade secret information that is
not disclosed to or from [**].
ARTICLE 7: REPRESENTATIONS AND WARRANTIES
7.1 Product Warranty. UPI warrants that, for a period of ninety (90) days
after delivery of the commercially released version of the UPI Client Software
to Licensee, such version of the UPI Client Software (excluding any
---------
modifications of the Interface Modules by Licensee pursuant to Article 2.1(iii)
hereto) will comply with the applicable UPI Client Specifications published by
UPI and be compatible with the current version release of the UPI Server
Software at the time of delivery of such version of the UPI Client Software to
Licensee.
7.2 Limited Warranty. TO THE MAXIMUM EXTENT PERMITTED BY LAW, AND EXCEPT
AS EXPRESSLY STATED IN THIS AGREEMENT, UPI, ITS SUPPLIERS AND LICENSORS,
DISCLAIM ALL WARRANTIES AND REPRESENTATIONS, WHETHER EXPRESSED OR IMPLIED,
STATUTORY OR OTHERWISE, WITH RESPECT TO THE UPI CLIENT SOFTWARE, THE
DELIVERABLES, OR THE PORTED SOFTWARE, INCLUDING, WITHOUT LIMITATION, THE
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WARRANTIES
ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICE, OR WARRANTIES
CONCERNING THE NON-INFRINGEMENT OF THIRD PARTY RIGHTS. ANY SOFTWARE SECURITY
FEATURES INCLUDED IN THE UPI CLIENT SOFTWARE OR DELIVERABLES ARE PROVIDED "AS
IS" WITHOUT ANY WARRANTY WHATSOEVER. UPI, ITS SUPPLIERS AND LICENSORS EXPRESSLY
DISCLAIM ALL WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AS TO ANY
SUCH SECURITY FEATURES, INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT OF THIRD PARTY RIGHTS.
UPI DOES NOT WARRANT THAT USE OF THE UPI CLIENT SOFTWARE WILL BE UNINTERRUPTED
OR ERROR FREE.
7.3 Additional Warranty. UPI warrants that to its knowledge as of the
Effective Date, the UPI Client Software does not infringe any third party's
Proprietary Rights. If, after the Effective Date, UPI offers a third party
licensing UPI Client Software with [*******************************************
*******************************************************************************
******************************************************************************
*****************************************************************************
****************************************************************************
*************************************************************************
******************]
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ARTICLE 8: INDEMNIFICATION
8.1 Indemnification by UPI. UPI agrees to indemnify Licensee from and
against any claim, suit, or proceeding and any damages, liability, or other
expenses (including, but not limited to, reasonable attorneys' fees and court
costs) which arise out of or result from: (i) negligence or wrongful acts of
employees or contractors of UPI while performing the services of UPI hereunder;
(ii) infringement of any third party copyright, trade secret, patent or
trademark rights by the UPI Client Software as delivered to Licensee by UPI, or
[******************************************************************************
******************************************************************************]
provided, however, that such indemnification shall not apply to any claims which
- -------- -------
arise out of or result from any infringement claim made by any person to the
extent that such claim is based upon: (x) modifications to the UPI Client
Software or RSA Software made by any person or entity other than UPI, its
employees, consultants and agents; or (y) any combination of the UPI Client
Software and/or RSA Software with products of Licensee or any third party, which
combination is the basis for such claim. To the extent that UPI is obligated to
indemnify Licensee under this Article 8.1, Licensee shall (a) notify UPI in
accordance with Article 12.9, immediately upon knowledge of any claim, suit,
action, or proceeding for which it may be entitled to indemnification under this
Agreement; (b) permit UPI to control the defense and settlement of any such
claim; (c) provide reasonable assistance to UPI at UPI's expense, in the defense
of same; and (d) not enter into any settlement agreement or otherwise settle any
such claim without UPI's express prior written consent or request. [**********
*******************************************************************************
*******************************************************************************
********************************************************************************
***************************************************************************
******************************************************************************
*****] Furthermore, should UPI decide to integrate another security software
other than the RSA Software, UPI agrees to (y) indemnify Licensee to the same
extent it indemnifies Licensee hereunder; and (z) extend any additional third
party intellectual property rights indemnification offered by such new security
supplier.
8.2 Indemnification by Licensee. Except to the extent that UPI is
obligated to indemnify Licensee under Article 8.1, Licensee agrees to indemnify
UPI from and against any claim, suit, or proceeding and any damages, liability,
or other expenses (including, but not limited to, reasonable attorneys' fees and
court costs) which arise out of or result from: (i) negligence or wrongful acts
of employees, contractors, or agents of Licensee; (ii) infringement of any third
party Proprietary Rights by the use, manufacture or distribution of an Enabled
Device; and (iii) any modifications made by Licensee pursuant to Article 2.1.
To the extent that Licensee is obligated to indemnify UPI under this Article
8.2, UPI shall: (a) notify Licensee in accordance with Article 12.9, immediately
upon knowledge of any claim, suit, action, or proceeding for which it may be
entitled to indemnification under this Agreement; (b) permit Licensee to control
the defense and settlement of any such claim; (c) provide reasonable assistance
to Licensee at Licensee's expense, in the defense of same; and (d) not enter
into any
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settlement agreement or otherwise settle any such claim without Licensee's
express prior written consent or request, which consent shall not be
unreasonably withheld. This Article 8.2 represents UPI's exclusive remedy for
breach of third party Proprietary Rights.
8.3 Exclusive Remedy. In the event that UPI receives notification that
the UPI Client Software infringes any Proprietary Right of a third party, UPI
shall, at its option, either: (i) modify the UPI Client Software; or (ii)
obtain a license to such rights as may be required to make the UPI Client
Software non-infringing. If none of the foregoing alternatives are commercially
reasonably available to UPI, or if Licensee is unable, after using its
commercially reasonable efforts, to independently obtain a license as necessary
to avoid such allegedly infringing activity, then Licensee shall discontinue
further manufacture, marketing or distribution of the UPI Client Software and of
Embedded Devices incorporating the UPI Client Software. The provisions of
Article 8.1 and this Article 8.3 represent Licensee's exclusive remedy for
breach of third party Proprietary Rights.
ARTICLE 9: LIMITATION OF LIABILITY
9.1 EXCEPT FOR A BREACH OF ARTICLE 6, IN NO EVENT WILL UPI, ITS SUPPLIERS,
OR LICENSORS BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY
KIND OR NATURE WHATSOEVER, SUFFERED BY LICENSEE, ANY END USER, CUSTOMER, VENDOR
OR ANY DISTRIBUTOR, INCLUDING, WITHOUT LIMITATION, LOST PROFITS, BUSINESS
INTERRUPTIONS, OR OTHER ECONOMIC LOSS ARISING OUT OF THIS AGREEMENT OR THE
MAINTENANCE AGREEMENT OR ANY USE OF OR FAILURE TO BE ABLE TO USE THE
DELIVERABLES, UPI CLIENT SOFTWARE, OR UPI SERVER.
9.2 EXCEPT FOR A BREACH OF ARTICLE 6, IN NO EVENT WILL LICENSEE OR ITS
LICENSORS BE LIABLE TO UPI FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OF
ANY KIND OR NATURE WHATSOEVER, SUFFERED BY UPI, INCLUDING, WITHOUT LIMITATION,
LOST PROFITS, BUSINESS INTERRUPTIONS OR OTHER ECONOMIC LOSS ARISING OUT OF THIS
AGREEMENT OR THE MAINTENANCE AGREEMENT OR ANY USE OF OR FAILURE TO BE ABLE TO
USE THE DELIVERABLES, UPI CLIENT SOFTWARE, OR UPI SERVER. NOTWITHSTANDING ANY
OTHER PROVISIONS OF THIS AGREEMENT, UPI'S AGGREGATE LIABILITY TO LICENSEE UNDER
THIS AGREEMENT AND THE MAINTENANCE AGREEMENT (OTHER THAN WITH RESPECT TO A
BREACH OF ARTICLE 6) SHALL BE LIMITED TO [************************************
***********************] AND/OR THE MAINTENANCE AGREEMENT [********************
********************************************************************]
NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS AGREEMENT, LICENSEE'S AGGREGATE
LIABILITY TO UPI UNDER THIS AGREEMENT (OTHER THAN WITH RESPECT TO BREACHES OF
ARTICLES 2 AND 6 AND ARTICLE
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11.3) AND THE MAINTENANCE AGREEMENT SHALL BE LIMITED TO THE TOTAL AMOUNT TO BE
PAID BY LICENSEE UNDER THIS AGREEMENT AND/OR MAINTENANCE AGREEMENT DURING THE
TWELVE (12) MONTH PERIOD IMMEDIATELY PRECEDING THE FILING OF ANY CLAIM OR
ACTION.
ARTICLE 10: TERM AND TERMINATION
10.1 Term of the Agreement. This Agreement shall become effective as of
the Effective Date and shall remain in effect for a fixed term of four (4) years
(the "Term") thereafter unless terminated earlier pursuant to the provisions of
Article 10. At the end of the Term, this Agreement may be renewed for an
additional one (1) year period upon the mutual written consent of the parties.
Licensee may at any time provide UPI with written notice (the "Licensee Notice")
that Licensee wishes this Agreement to terminate in the manner set forth below
in this Article 10.1. After UPI's receipt of the Licensee Notice, Licensee will
receive Ongoing Support (as defined in the Maintenance Agreement) for the
remainder of the then-current Maintenance Period (as defined in the Maintenance
Agreement), and may elect to receive Ongoing Support during subsequent
Maintenance Periods, subject to the terms and conditions of the Maintenance
Agreement. After UPI's receipt of the Licensee Notice, and provided that
Licensee continues to receive Ongoing Support, (i) Licensee's rights under
Article 2.1 with respect to each release of the UPI Client Software provided by
UPI to Licensee prior to the date on which Licensee sent the Licensee Notice
shall remain in effect for the remainder of the Support Availability Period for
such release, (ii) Licensee shall have no rights under this Agreement to any
future versions or releases of the UPI Client Software (other than rights to
error corrections and other materials provided to Licensee as part of Ongoing
Support), and (iii) after the Support Availability Period for a licensed release
of the UPI Client Software, UPI will, at its option, either continue to provide
maintenance and support for such release to Licensee under the terms defined in
this Agreement for an additional three (3) years, or UPI will provide Licensee,
at no charge, with a copy of the Source Code of such release of the UPI Client
Software, which may be used by Licensee solely in order to provide maintenance
and support to customers of the Enabled Devices incorporating such release.
Notwithstanding the foregoing, (A) this Agreement can be earlier terminated in
accordance with Article 10.2 or as otherwise expressly set forth herein, and (B)
regardless of whether Licensee has sent the Licensee Notice to UPI, this
Agreement shall terminate in the event that Licensee elects to cease receiving
any support under the Maintenance Agreement, or if the Maintenance Agreement is
otherwise terminated pursuant to its terms. Licensee's license rights under
Article 2.1 shall terminate upon termination of this Agreement.
10.2 Termination with Cause. This Agreement may be terminated immediately
by either party (the "Terminating Party") in the event: (i) the other party
breaches any material provision of this Agreement and does not remedy such
breach within sixty (60) days following written notice of such breach from the
Terminating Party; or (ii) the other party enters bankruptcy proceedings,
becomes insolvent, or otherwise becomes generally
13
<PAGE>
unable to meet its obligations under this Agreement.
10.3 Return of Confidential Information. Upon the expiration of this
Agreement pursuant to Articles 10.1 or 10.2, each party shall: (i) return to
the other party or destroy, as requested by the Disclosing Party, the original
and all copies of any Confidential Information of the Disclosing Party and any
summaries or analyses thereof or studies or notes thereon; and (ii) at the
Disclosing Party's request, have one of the officers of the Receiving Party
certify in writing that it: (a) shall not make any further use of such
Confidential Information of the Disclosing Party; (b) shall comply with the
terms of Article 6.1 regarding prohibited use of Confidential Information of the
Disclosing Party; and (c) has complied with its obligations under this Article
10.3. Notwithstanding the foregoing, Licensee shall have the right to keep one
(1) copy of each version of the UPI Client Software (and associated
documentation) provided to Licensee under this Agreement prior to the date of
such expiration or termination, in Object Code form, solely in order to exercise
its rights under Article 10.4(ii) below.
10.4 Survival. The provisions of Articles 1, 4, 5.1 (provide the
applicable fees have been paid), 11 (provided the applicable fees have been
paid), 7, 8, 9, 10.3, 10.4, and 12 of this Agreement shall survive any
expiration or termination of this Agreement; provided, however, that upon such
-------- -------
expiration or termination (i) any End User sublicenses granted pursuant to
Article 2.1, shall remain in effect, and (ii) Licensee shall have a non-
exclusive, non-sublicensable, royalty-free license in the Territory to use one
(1) copy of each version of the UPI Client Software (and associated
documentation) provided to Licensee under this Agreement prior to the date of
such expiration or termination, in Object Code form, solely for the purpose of
supporting such End Users of Enabled Devices, (iii) for a period of six (6)
months after the expiration or termination of Licensee's rights under Article
2.1 to distribute a particular release of the UPI Client Software (other than as
a result of termination of this Agreement by UPI pursuant to Article 10.2),
Licensee and its distributors shall have a nonexclusive, royalty-free license in
the Territory to use, market, sublicense and otherwise distribute Enabled
Devices incorporating such release of the UPI Client Software that are in
Licensee's or its distributors' inventories at the time of such expiration or
termination of Licensee's rights under Article 2.1 to distribute such release,
and (iv) except as set forth above in this Article 10.4, all licenses granted
hereunder shall terminate immediately. Article 6 shall (a) survive the
expiration or termination of this Agreement with respect to the source code of
the UPI Client Software, and (b) survive the expiration or termination of this
Agreement for five (5) years, with respect to any other Confidential
Information.
ARTICLE 11: SOURCE CODE ESCROW
11.1 Escrow. The Technology Escrow Agreement, Account Number 2114064-00009-
1301205 which was executed by and between UPI, Matsushita Mobile Communications
Development Corporation of U.S.A. and DSI Technology Escrow Services ("Escrow
Agent") effective December 10, 1998 ("Escrow Agreement") shall hereby govern
this section upon the execution of Exhibit C, Assignment of Technology Escrow
14
<PAGE>
Agreement. UPI shall also deliver to the Escrow Agent the Source Code for
Improvements provided to Licensee within thirty (30) days after such
Improvements are provided to Licensee. [*************************************
*********************************************************************]
11.2 Release for Failure to Support. In the event Licensee obtains Source
Code for the UPI Client Software pursuant to the release conditions set forth in
Section 21 of the Escrow Agreement, Licensee may use such Source Code solely for
the purpose of providing support to Licensee's and its distributors' End Users;
provided, that such use is subject to termination as set forth in the last
sentence of Section 22 of the Escrow Agreement. Licensee agrees that all rights
in and to any Improvements or other modifications made to the Source Code by
Licensee under this Article 11.2 shall be owned by UPI.
11.3 Conditions to Use of Source Code. The parties agree that any and all
use by Licensee of any Source Code of the UPI Client Software shall be subject
to the following conditions and obligations: Licensee shall (i) use its best
efforts to protect and keep confidential the Source Code, and may disclose the
Source Code only to its employees, agents, and consultants who have a need-to-
know, and who have executed appropriate written agreements with Licensee
sufficient to enable Licensee to comply with the provisions of this Agreement;
(ii) store the Source Code off-line when it is not being used as contemplated
under this Agreement; (iii) install the Source Code on a single network server
which does not have remote telecommunications access enabled; (iv) use password
protection to limit access to all Source Code files to authorized employees,
agents, and contractors who require access to perform their duties under the
terms of this Agreement; (v) make no copies of the Source Code in machine-
readable or human-readable form except as reasonably required to perform the
------
activities permitted under this Agreement; and (vi) store any human-readable
copy of the Source Code in a locked storage area accessible only to authorized
employees who require such access to perform their duties under the terms of
this Agreement.
ARTICLE 12: MISCELLANEOUS
12.1 Force Majeure. Neither party to this Agreement will be liable for
failure to perform any of its obligations hereunder (other than obligations to
make payments) during any period in which such performance is delayed by fire,
flood, war, riot, embargo, organized labor stoppage, earthquake, acts of civil
and military authorities, or any other acts beyond its reasonable control;
provided, however, that the party suffering such delay immediately notifies the
- -------- -------
other party of the delay; and provided, further, that either party shall have
-------- -------
the right to terminate this Agreement upon [********] days prior written notice
if the delay of the other party due to any of the above-mentioned causes
continues for a period of [*********] days.
12.2 Controlling Law; Language. This Agreement shall be construed and
interpreted according to the laws of the State of [******] and of the United
States of America, and shall in no event be governed by the UN Convention on
Contracts for the International Sale of Goods. All claims, disputes, or
controversies arising under this Agreement not resolved between the parties
shall be
15
<PAGE>
submitted to binding arbitration by the American Arbitration Association (AAA)
under the rules then in effect. Within thirty (30) days of receipt of the notice
of intent to arbitrate, the parties will agree on one (1) arbitrator
knowledgeable of the law applicable to such disputes. If no arbitrator is
appointed within the time herein provided, or any extension of time which is
mutually agreed upon, the AAA will make the appointment of such an arbitrator
within thirty (30) days of such failure. Such appointed arbitrator will have the
experience and knowledge appropriate to the nature of the dispute between the
parties. The foregoing shall not prevent either party from applying for
injunctive relief from a court of competent jurisdiction. This Agreement is in
the English language only, which language shall be controlling in all respects,
and all versions hereof in any other language shall be for accommodation only
and shall not be binding upon the parties hereto. All communications and notices
to be made or given pursuant to this Agreement shall be in the English language.
12.3 Severability. If any provisions of this Agreement, or application
thereof to any person, place, or circumstance, shall be held by a court of
competent jurisdiction to be invalid, unenforceable, or void, the remainder of
this Agreement and such provisions as applied to other persons, places, and
circumstances shall remain in full force and effect.
12.4 Entire Agreement. This Agreement, including its Exhibits and
Schedules hereto, all of which are incorporated herein, the [*********] NDA as
amended by Amendment No. 1 effective [**********], and the Confidentiality
Agreement dated June 17, 1997, collectively constitute the entire agreement and
understanding between the parties with respect to the subject matter and
supersedes all prior agreements and negotiations, including but not limited to
the Client License Agreement between Matsushita Mobile Communications
Development Corporation of U.S.A. and Unwired Planet, Inc. dated March 30, 1998,
and the Client Porting Agreement between Matsushita Mobile Communications
Development Corporation of U.S.A. and Unwired Planet, Inc. dated December 30,
1997, except prior nondisclosure or confidentiality agreements, which shall
remain in force to the extent consistent therewith.
12.5 Amendment. This Agreement may be amended or supplemented only by a
writing that refers specifically to this Agreement and is signed by duly
authorized representatives of both parties.
12.6 Waiver. Except as otherwise provided in this Agreement, any failure
of any of the parties to comply with any obligation, covenant, agreement or
condition herein may be waived by the party entitled to the benefit thereof only
by a written instrument signed by the party granting such waiver. Such waiver
or failure to insist upon strict compliance with such obligation,
representation, warranty, covenant, agreement or condition shall not operate as
a waiver of, or estoppel with respect to, any subsequent or other failure.
12.7 Export. Licensee acknowledges and agrees that the Deliverables are
subject to certain U.S. export control licensing restrictions, including U.S.
Commerce Department controls on encrypted technology. THIS AGREEMENT IS
EXPRESSLY MADE SUBJECT TO ANY LAWS,
16
<PAGE>
REGULATIONS, ORDERS OR OTHER RESTRICTIONS ON THE EXPORT FROM THE U.S. OF ANY
SOFTWARE THAT INCLUDES OR INCORPORATES ANY ENCRYPTION TECHNOLOGY, INCLUDING THE
UPI CLIENT SOFTWARE AND DELIVERABLES. Licensee agrees to comply at all times
with all applicable United States and foreign government laws and regulations
relating to the exportation of the Deliverables and with all applicable foreign
laws and regulations relating to the importation of the Deliverables, and shall
not export or re-export the Non-Exportable version of the Deliverables from the
U.S. except in strict compliance with U.S. export control laws, including,
------
as applicable, obtaining appropriate licensing authority from the U.S. Commerce
Department prior to any export or re-export of the Non-Exportable version of the
Deliverables, and Licensee shall (i) in the event that Licensee distributes
Enabled Devices directly to End Users, impose the same terms on such End Users,
and (ii) in the event that Licensee distributes Enabled Devices to End Users
through third parties, ensure in its agreements with such third parties that
such terms are imposed upon such third parties, and that such third parties in
turn impose such terms upon End Users. Licensee agrees that its obligations
pursuant to this Article 12.7 shall survive and continue after any termination
or expiration of rights under this Agreement. Upon request from Licensee, UPI
agrees to provide Licensee with reasonable assistance in obtaining the export
approvals required by the U.S. and Japanese government. Furthermore, in the
event Licensee is unable to obtain an export license for any Exportable version
of the Deliverables, UPI will, at no additional fee, provide Licensee with a
modified version of any such Exportable version of the Deliverables that does
not require an export license.
12.8 Federal Government License. Licensee shall in all proposals and
agreements involving Enabled Devices with the United States government or any
contractor of the United States government identify and sublicense the UPI
Client Software as follows: (i) for acquisition on behalf of civilian agencies,
as necessary to obtain protection as "commercial computer software" and related
documentation in accordance with the terms of Licensee's customary license, as
specified in 48 C.F.R. 12.212 of the Federal Acquisition Regulations and its
successor regulations; or (ii) for acquisition by or on behalf of units of the
Department of Defense, as necessary to obtain protection as "commercial computer
software" as defined in 48 C.F.R. 227.7014(a)(I) of the Department of Defense
Federal Acquisition Regulation Supplement (DFARS) and related documentation in
accordance with Licensee's customary license, as specified in 48 C.F.R.
227.7202.1 of DFARS and its successor regulations.
12.9 Notices. All notices required to be sent by either party under this
Agreement shall be deemed given: (i) when sent by confirmed facsimile or
telecopy; (ii) upon receipt, after being sent by commercial overnight courier
with written verification of receipt; or (iii) upon receipt, after being mailed
postage prepaid by certified or registered mail, return receipt requested, to
the party to be notified, at the respective addresses set forth below, or at
such other address which may hereinafter be designated in writing:
Licensee:
Matsushita Communication Industrial Co.,LTD
Personal Communications Division
17
<PAGE>
Software Design Department
4-3-1 Tsunasima-higashi,
Kouhoku-ku, Yokohama 223-8639
Japan
Attention: Mr. Yuuichi Fujii, GM
Phone: +81 45 544 3688
Fax: +81 45 544 3655
UPI:
Unwired Planet, Inc.
800 Chesapeake Drive
Redwood City, CA 94063
USA
Attention: Alan Black, CFO
Phone: (650) 562-0200
Fax: (650) 817-1499
12.10 Independent Contractors. Nothing contained herein or done in
pursuance of this Agreement shall constitute the parties entering upon a joint
venture or partnership, or shall constitute either party the agent for the other
for any purpose or in any sense whatsoever.
12.11 Successors and Assigns. Subject to the provisions of this Article
12.11, this Agreement and the rights and obligations arising hereunder shall be
binding upon and inure to the benefit of the parties and to their respective
successors and assigns. Neither party may assign any of its rights or
obligations hereunder without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, that such consent
shall not be required in the event of any assignment to an acquirer of all or
substantially all of the business or assets pertaining to this Agreement of the
assigning party, or to an Affiliate of the assigning party. Any unauthorized
assignment shall be null and void.
12.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed to be an original, but
all of which taken together shall constitute one and the same instrument.
12.13 Attorneys' Fees. If any action at law or in equity, including
action for injunctive relief, is brought relating to this Agreement or the
breach hereof, the prevailing party in any final judgment or award, or the non-
dismissing party in the event of a dismissal without prejudice, shall be
entitled to the full amount of all reasonable expenses, including all court
costs and actual attorney fees paid or incurred in good faith.
18
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
Effective Date hereof.
MATSUSHITA COMMUNICATION
UNWIRED PLANET, INC. INDUSTRIAL CO., LTD.
By: /s/ ALAIN ROSSMANN By: /s/ YASUO KATSUNA
------------------------- --------------------------
Name: Alain Rossmann Name: Yasuo Katsuna
----------------------- -------------------------
Title: CEO and Chairman Title: Director, MCI
---------------------- ------------------------
19
<PAGE>
EXHIBIT A
---------
UPI CLIENT SOFTWARE SPECIFICATIONS
[See attached document.]
Licensed Airlink Protocols: GSM, PHS, PDC, IS-136 (TDMA), IS-95 (cdmaOne) [and
successor standards]
Summary of Fees (net of any withholding tax):
<TABLE>
<CAPTION>
Number of Airlink Protocols Premium Support Ongoing Support
(US$ per Maintenance Period) (US$ per Maintenance Period)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
[*] [******] [******]
- ------------------------------------------------------------------------------------------
[*] [******] [******]
- ------------------------------------------------------------------------------------------
[*] [******] [******]
- ------------------------------------------------------------------------------------------
[*] [******] [******]
- ------------------------------------------------------------------------------------------
[*] [******] [******]
- ------------------------------------------------------------------------------------------
[*] [******] [******]
- ------------------------------------------------------------------------------------------
[*] [******] [******]
- ------------------------------------------------------------------------------------------
</TABLE>
If Licensee requests to license one additional Airlink Protocol (making the
total number of Airlinks equal to [***], UPI will invoice Licensee for an
additional [********] per Maintenance Period which is the difference between
[******] and [******].
20
<PAGE>
EXHIBIT B
---------
SOFTWARE MAINTENANCE AND SUPPORT AGREEMENT
This SOFTWARE MAINTENANCE AND SUPPORT AGREEMENT (the "Maintenance Agreement") is
entered into by and between UNWIRED PLANET, INC., a Delaware corporation, having
a principal place of business at 800 Chesapeake Drive, Redwood City, CA 94063
("UPI"), and MATSUSHITA COMMUNICATION INDUSTRIAL CO., LTD., a Japanese
corporation, having a principal place of business at 4-3-1 Tsunasima-higashi,
Kouhoku-ku, Yokohama 223-8639 Japan ("Licensee").
RECITALS
WHEREAS, UPI and Licensee have entered into that certain Client License
Agreement dated January 1, 1999 (the "License Agreement") pursuant to which UPI
grants Licensee certain licenses and rights to the UPI Client Software; and
WHEREAS, Licensee desires to obtain, and UPI desires to provide,
development support and software maintenance services upon the following terms
and conditions.
NOW, THEREFORE, in consideration of the foregoing and of the obligations
herein made and undertaken, the parties hereto do hereby covenant and agree as
follows:
AGREEMENT
1.0 Definitions.
-----------
Unless otherwise defined herein, all terms herein shall have the same
meanings as defined in the License Agreement.
"Error(s)" shall mean any verifiable and reproducible failure of the
then-current version of the UPI Client Software, or any superseded version of
the UPI Client Software for which UPI will provide maintenance pursuant to
Article 5.1 of the License Agreement, to materially conform to the functions of
such UPI Client Software as described in the applicable UPI Client Software
Specifications. UPI agrees that it will not modify such specifications solely in
order to avoid having to resolve a substantive software maintenance problem.
Notwithstanding anything contained herein to the contrary, the term "Error"
shall not include any failure of the UPI Client Software to materially conform
to such functions as described and set forth in the applicable UPI Client
Software Specifications that: (i) results from Licensee's misuse or improper use
of the UPI Client Software; (ii) does not materially affect the operation and
use of the UPI Client Software; (iii) results from the modification by Licensee
of the UPI Client Software in a fashion not contemplated by this Maintenance
Agreement and the License Agreement; or (iv) results from Licensee's failure to
implement in a timely manner any relevant Improvement provided to Licensee by
UPI.
"Error Correction(s)" shall mean either: (i) a modification, addition, or
deletion from the UPI Client Software that, when made to such software, shall
materially conform such functions of the UPI Client Software to the UPI Client
Software Specifications, or (ii) a procedure
21
<PAGE>
or routine that, when observed in the regular operation of the UPI Client
Software, eliminates the material adverse effect on Licensee of such Error.
"Maintenance Period" shall mean any period commencing upon the Effective
Date of the License Agreement, or any anniversary of such date, and concluding
upon the earlier of (i) twelve (12) months after the commencement of such
period, or (ii) the expiration or termination of this Maintenance Agreement.
"Priority 1 Error" means a catastrophic Error in the UPI Client Software
which a Workaround has not been made available and which causes: (i) an
important component of the UPI Client Software to be unusable, system or product
malfunction due to deficiency or non-usability has frequent or major user impact
or there is a frequent failure of important service; or (ii) data loss or
corruption.
"Priority 2 Error" means a non-catastrophic Error in the UPI Client
Software that: (i) a major failure for an important product feature causes
significant inconvenience to users, system or product malfunction due to
deficiency or non-usability and which has an infrequent or minor user impact; or
(ii) produces results materially different from those described in the
documentation for a major product feature, but which such Error does not rise to
the level of a Priority 1 Error.
"Priority 3 Error" means an Error in the UPI Client Software that: (i)
has minimal current impact on the user; and (ii) causes a malfunction of a non-
essential product feature.
"Ongoing Support" shall have the meaning set forth in Attachment A to
this Exhibit B.
"Premium Support" shall have the meaning set forth in Attachment A to
this Exhibit B.
"Support Services" means the ongoing software maintenance and support for
the UPI Client Software in the form of Premium Support or Ongoing Support that
is to be performed by UPI under this Maintenance Agreement as set forth in this
Exhibit B.
"Workaround" means that UPI has diagnosed the Error and has implemented,
or enabled Licensee to implement a solution that allows the UPI Client Software
to regain functionality and provide major software functions in accordance with
the UPI Client Software Specifications.
2.0 Improvements. During such time as Licensee is receiving Premium Support,
------------
all Improvements of the UPI Client Software will be made available by UPI to
Licensee subject to the provisions of the License Agreement and this Maintenance
Agreement; provided, however, that Licensee is current in its Maintenance and
-------- -------
Support Fee payments as set forth in Article 4.0 of this Exhibit B. During such
time as Licensee is receiving Ongoing Support and is in compliance with the
provisions of the License Agreement and this Maintenance Agreement, Licensee
will be entitled to receive those Improvements specified in the definition of
Ongoing Support in Attachment A to this Exhibit B.
22
<PAGE>
3.0 Support Services.
----------------
3.1 Response to Errors. The UPI response to errors described in Articles
3.1 and 3.2 of this Maintenance Agreement is included in Premium Support and
Ongoing Support, as set forth in Attachment A to this Maintenance Agreement.
Notwithstanding anything to the contrary herein, UPI's obligations under Article
3.1 extend only to Errors in commercially released versions of the UPI Client
Software.
3.1.1 Notification of Errors. Licensee agrees to notify UPI as provided
in Article 3.1.2 of this Exhibit B promptly following the discovery of any
Error. UPI agrees to make available to Licensee a listing of known Errors
promptly after execution of the License Agreement and this Maintenance
Agreement, and thereafter to notify Licensee in writing or via electronic mail
promptly following the discovery of any Priority 1 Error or Priority 2 Error.
Further, upon discovery of an Error, Licensee agrees, if requested by UPI, to
submit to UPI a listing of output and any other data that UPI may reasonably
require in order to reproduce the Error and the operating conditions under which
the Error occurred or was discovered. Such listings and data shall be deemed
Licensee's Confidential Information.
3.1.2 UPI Telephone, Electronic and Remote Access Support. During the
term of this Maintenance Agreement, UPI's Technical Assistance Center ("TAC")
shall provide Support Services to Licensee on a twenty-four (24) hour per day,
seven (7) days per week basis. Communications between Licensee and UPI will
include electronic mail, facsimile, telephone and remote access. All urgent
requests for reporting severe Errors as defined hereunder must be submitted to
UPI via the TAC support line, telephone number: [*************]. All non-urgent
requests should be submitted to UPI via electronic mail to: [*************]; or
-
if by facsimile, addressed to: TAC and sent to [*************]. All facsimiles
should be followed-up with an email to confirm receipt by UPI. The foregoing
addresses, telephone numbers and other contact information are subject to change
on reasonable advance notice.
3.1.3 UPI Response to Errors. UPI will provide Support Services to
Licensee to ensure a consistent and high level of operation of the UPI Client
Software. In the event Licensee notifies UPI of an Error in any commercially
released version of the UPI Client Software, UPI will provide Support Services
necessary to correct the Error in accordance with the terms of this Maintenance
Agreement. UPI shall endeavor to correct such Errors using the level of effort
and in accordance with the response times set forth below, and with as little
disruption to Licensee's service as commercially practicable.
a) Priority 1 Errors. UPI shall, within [******] hours of the
-----------------
receipt of notice from Licensee of any Priority 1 Error in a commercially
released version of the UPI Client Software, contact Licensee to verify such
Priority 1 Error and begin a resolution process. Upon UPI's verification of such
Priority 1 Error, UPI will use its commercially reasonable efforts to provide a
Workaround for such Priority 1 Error within [******] business days thereof, and
will use its commercially reasonable efforts to provide an Error Correction for
such Priority 1 Error until such Error Correction is provided. For purposes of
this Maintenance
23
<PAGE>
Agreement, [*****************************************************************
******************************************************************************]
b) Priority 2 Errors. UPI shall, within [*********] hours of the
-----------------
receipt of notice from Licensee of any Priority 2 Error in a commercially
released version of the UPI Client Software, contact Licensee to verify such
Priority 2 Error. Upon UPI's verification of such Priority 2 Error, UPI will
use its commercially reasonable efforts to provide a Workaround for such
Priority 2 Error within [******] business days thereof and will use its
commercially reasonable efforts to provide an Error Correction for such Priority
2 Error for such Priority 2 Error in the next commercial release of the UPI
Client Software.
c) Priority 3 Errors. Within [********************] of UPI's
-----------------
receipt of notice from Licensee of any Priority 3 Error in a commercially
released version of the UPI Client Software and upon UPI's verification of such
Priority 3 Error, UPI will, at its discretion, initiate work to provide an Error
Correction for such Priority 3 Error in the next commercial release of the UPI
Client Software.
3.2 Exclusions from Support Services. Support Services under this Exhibit
B do not cover services for any failure or defect in the UPI Client Software
caused by any of the following:
(i) the improper use, alteration, or damage of the UPI Client
Software by Licensee or persons other than UPI employees; or
(ii) modifications to the UPI Client Software not made by, or on
behalf of, or authorized in writing by UPI.
3.3 Premium Support, Ongoing Support, and Additional Services. During the
first Maintenance Period, Licensee shall receive Premium Support. During each
subsequent Maintenance Period, Licensee shall receive Premium Support, unless at
least thirty (30) days prior to the commencement of such Maintenance Period
Licensee notifies UPI in writing that Licensee wishes to instead receive Ongoing
Support during such Maintenance Period, in which case Licensee shall receive the
requested Ongoing Support during such Maintenance Period. Notwithstanding
anything to the contrary herein, Licensee shall receive Premium or Ongoing
Support hereunder only if Licensee pays all applicable fees as set forth below,
and is not otherwise in breach of the License Agreement or this Agreement. In
addition to the foregoing, UPI will provide to Licensee such additional services
relating to the UPI Client Software not otherwise provided as part of the
Support Services hereunder as may be requested by Licensee from time to time on
terms and conditions and at such rates as may be mutually agreed upon between
the parties.
4.0 Maintenance and Support Fees.
----------------------------=
4.1 Fees. The fees per Maintenance Period, net of any withholding tax,
are set forth in Exhibit A. Notwithstanding anything to the contrary herein,
the fees set forth above in this Article 4.0 of this Maintenance Agreement are
the service fees for the first Maintenance Period, and may be increased by UPI
for any subsequent Maintenance Period by up to [***************] from the
applicable
24
<PAGE>
maintenance fees for the prior Maintenance Period. UPI acknowledges that
Licensee has paid all fees for the first Maintenance Period. Furthermore, UPI
shall apply the [*************************************************************
*******************************************************************************
*********].
4.2 Payment Terms. Payment of the first Maintenance Period's fees are due
within thirty (30) days after the Effective Date. Thereafter, fees for each
Maintenance Period shall be paid by Licensee to UPI no later than the
commencement of such Maintenance Period. Notwithstanding the foregoing, Licensee
shall have the right to withhold payment of fees payable by Licensee for
services during such time as UPI is materially in breach of its obligations
hereunder to provide such services. Except as set forth in Article 5.5 of this
Maintenance Agreement, all payments under this Maintenance Agreement are
nonrefundable.
4.3 Japanese Withholding Taxes. UPI agrees that, if any income taxes are
imposed by the Japanese government on the payment to be made under this
Maintenance Agreement, Licensee shall pay UPI the fees as defined in Exhibit A
(the fees listed in Exhibit A are net fees and do not include withholding taxes)
and Licensee shall withhold such amount of taxes and pay the withheld amount to
the Japanese tax authorities to the extent that Licensee is legally required to
do so. Licensee shall submit to UPI the receipt of the tax payment issued by
appropriate Japanese tax authority to avoid double taxation imposed on UPI.
4.4 Billing Information. All invoices required to be sent under this
Maintenance Agreement shall be deemed given: (i) when sent by confirmed
facsimile or telecopy; (ii) three (3) business days after being sent by
commercial overnight courier with written verification of receipt; or (iii) when
received after being mailed postage prepaid by certified or registered mail,
return receipt requested, to the address set forth below, or at such other
address which may hereinafter be designated in writing:
Licensee:
Matsushita Communication Industrial Co.,LTD
Personal communications Division
Accounting Department
4-3-1 Tsunasima-higashi,
Kouhoku-ku, Yokohama 223-8639
Japan
Attention: Mr. Hisashi Shibuya, Accounting Manager
Phone: +81 45 544 3605
Fax: +81 45 544 3652
Email: [email protected]
5.0 Term and Termination.
---------------------
-
5.1 Term of the Maintenance Agreement. This Maintenance Agreement shall
become effective as of the Effective Date of the License Agreement, and unless
earlier terminated pursuant to Article 5.2 of this Maintenance Agreement, shall
terminate upon [*********] days written notice from Licensee.
5.2 Termination with Cause. This Maintenance Agreement may be terminated
immediately by either party in the event: (i) the other party breaches any
material provision of this Maintenance Agreement or the License Agreement and
does not remedy such breach within [*************] following written notice of
such breach from the non-breaching party; or (ii)
25
<PAGE>
the other party enters bankruptcy proceedings, becomes insolvent, or otherwise
becomes generally unable to meet its obligations under this Maintenance
Agreement or the License Agreement.
5.3 Return of Confidential Information. Upon termination or expiration of
this Agreement pursuant to this Article 5.0 each party shall return the other
party's Confidential Information and other materials as provided in Article 10.3
of the License Agreement.
5.4 Survival. The provisions of Articles 1, 5.3 and 6 of this Maintenance
Agreement shall survive any expiration or termination of this Maintenance
Agreement.
5.5 Refund. [*****************************************************
********************************************************************************
*******************************************************************************
***********************************]
6.0 Miscellaneous.
-------------=
6.1 Other Provisions. The provisions of Articles 1, 4, 5.1, 6, 7, 8, 9,
11, and 12 of the License Agreement shall apply to this Agreement.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date first written above.
MATSUSHITA COMMUNICATION
UNWIRED PLANET, INC. INDUSTRIAL CO., LTD.
By:__________________________ By:____________________________
Name:________________________ Name:__________________________
Title:_______________________ Title:_________________________
26
<PAGE>
ATTACHMENT A
PREMIUM SUPPORT AND ONGOING SUPPORT
Licensee may elect to receive any of the following Support Services:
Premium Support: Premium Support is appropriate when Licensee requires:
1. Production (commercially released) versions of the
UP.Browser which will be Ported to any devices (both
Mature Devices and otherwise)
2. Pre-production versions of the UP.Browser (prior to
commercial release) which will be Ported to any devices
(both Mature Devices and otherwise).
Licensee is responsible for completion of all Porting to
Licensee devices. UPI is responsible for providing the
following Porting support services: (i) initial consultation
and planning for the Port; (ii) consultation on user
interface module design; (iii) device layer support
(Interface Modules); (iv) support for compiling and linking
object or shrouded source code (Core Modules); (v) debugging
support; and (vi) compliance verification.
For each Airlink Protocol, UPI Device Engineering will
provide:
1. Preliminary releases of UP.Browser porting documentation
and porting kits, in addition to Improvements to
UP.Browser versions as they are made commercially
available.
2. Electronic mail, telephonic, remote and facsimile
engineering support, as required, to assist Licensee
completion of the Port(s) with response times based on
phase of Licensee development for up to a total of [****
************] hours per year. For additional support,
Licensee will pay [**************************] per hour.
3. On-site engineering support (not to exceed [***********
***] per year), as required, to assist Licensee
completion of the Port(s).
4. Single engineering point of contact for technical and
Porting issues. [******************************
********************************************]
5. [*******************************************************
*****]
27
<PAGE>
6. Single point of contact in UPI product management for
consultation on product features, planning,
customization, and similar issues.
7. Additional on-site engineering support is available for
time and materials with [***************] advance notice.
In addition to the foregoing, UPI will provide the following
maintenance support through its UPI Technical Assistance
Center for Enabled Devices which have passed UPI compliance
verification in accordance with Article 5.5 of the Agreement
and are made available for sale by Licensee. Maintenance
support is provided on a 24x7 basis and consists of:
1. Access to UP.Link services operated by UPI.
2. Telephonic, electronic and remote access to UPI Technical
Assistance Center for identification and verification of
Errors in the UPI Client Software in such Enabled
Devices.
3. Correction of errors in a commercially released version
of the UPI Client Software with response times based on
specified priority classifications for resolution of
Errors in the UPI Client Software as specified in
Articles 3.1 and 3.2 of the Maintenance Agreement.
4. Notification by UPI of Priority 1 Errors and Priority 2
Errors in the UPI Client software.
Ongoing Support: Ongoing Support is provided by UPI Technical Assistance
Center and is available for Enabled Devices which have
passed UPI compliance verification in accordance with
Article 5.5 of the License Agreement, after Licensee elects
not to receive Premium Support (i.e., porting of UPI Client
Software and upgrades is terminated, but Enabled Devices may
continue to be distributed). Maintenance support is provided
on a 24x7 basis and consists of:
1. Access to UP.Link services operated by UPI.
2. Telephonic, electronic, and remote access to UPI
Technical Assistance Center for identification and
verification of Errors in the UPI Client Software in
Enabled Devices.
3. Correction of Errors in commercially released versions of
the UPI Client Software with response times based on
specified priority classifications for resolution of
Errors in the UPI Client Software in Enabled Devices, as
specified in Articles 3.1 and 3.2 of the Maintenance
Agreement.
4. Notification by UPI of known Priority 1 and Priority 2
Errors in the UPI Client Software.
28
<PAGE>
EXHIBIT C
ASSIGNMENT OF TECHNOLOGY ESCROW AGREEMENT
This assignment is made January 1, 1999 by Matsushita Mobile Communications
Development Corporation of U.S.A. ("Assignor"), Matsushita Communication
Industrial Co., Ltd. ("Assignee") and DSI Technology Escrow Services ("DSI"),
and is made with reference to the following facts:
A. DSI, Unwired Planet, Inc. ("Depositor") and Matsushita Mobile Communications
Development Corporation of U.S.A. ("Preferred Registrant") entered into a
Technology Escrow Agreement ("Agreement"), Account Number: 2114064-00009-
1301205.
B. Pursuant to the Agreement, Depositor deposited with DSI certain proprietary
information and rights for retention and controlled access under conditions
specified therein.
C. Assignor is in the process of, or has transferred its rights in the Agreement
to Assignee.
D. Pursuant to such transfer, Assignor desires to assign all of its rights and
obligations in the Agreement to Assignee.
NOW THEREFORE, in consideration of the mutual promises and covenants to be kept,
maintained and performed by the parties hereto, the parties agree as follows:
1. Assignor does hereby assign to Assignee all of its rights and obligations
arising from and relating to the Agreement.
2. Assignee acknowledges that it has read and understands all of the terms and
conditions of the Agreement and hereby accepts the assignment of all of the
rights and obligations of the Agreement and adopts all of the terms and
provisions thereof.
3. DSI will have the right, but not the obligation, to notify the parties of
this Assignment. If required, Assignor and Assignee may have the obligation to
notify the parties to this Agreement to obtain their consent to this Assignment.
Matsushita Mobile Communications Development By:_____________________________
Corporation of U.S.A.
Title:__________________________
Matsushita Communication Industrial Co., Ltd. By:_____________________________
Title:__________________________
DSI Technology Escrow Services By:_____________________________
Title:__________________________
Unwired Planet, Inc. By:_____________________________
Title:__________________________
29
<PAGE>
EXHIBIT D
UPI AND THIRD PARTY PROPRIETARY NOTICES
[POWERED BY UP & UNWIRED PLANET(TM) LOGOS] Powered By UP
- --------------------------------------------------------------------------------
1.1 GENERAL UPI TRADEMARK REQUIREMENTS
Licensee may use the "Powered By UP" logo as a powerful marketing tool for
Licensee's Enabled Device. The "Powered by UP" logo must be used in accordance
with the following provisions: (i) the "Powered By UP" logo may only be used in
direct connection with the UPI Client Software, and should not be used to claim
general corporate affiliation with UPI, (ii) the size of the logo shall never be
reproduced in sizes less than 0.75 inch wide, (iii) the logo must appear in a
minimum of two colors (Black and UPI Green), (iv) the logo must always be
reproduced from original artwork and in accordance with official reproduction
guidelines, as provided and defined by UPI Marketing Communications, (v) the
(TM) symbol is embedded in the official artwork itself, and may not be removed.
Always use the (TM) symbol with any UPI trademark, (vi) the logo should not
appear on products or services that do not directly pertain to technology
licensed from UPI, (vii) official artwork (in a number of different file
formats--.GIF, .TIFF, .EPS, etc.--and color applications--B&W, PMS, CMYK, etc.)
and reproduction guidelines for the logo trademark may be requested from UPI
Marketing Communications, (viii) any deviation from these requirements, as
outlined herein, must be pre-approved by the UPI Marketing Communications and
Legal departments.
1.2 MANDATORY USE OF THE "POWERED BY UP" LOGO
The "Powered By UP" logo must appear on the exterior of Licensee-defined product
box or packaging (does not apply for custom product box or packaging specified
by a Licensee's customer) for Enabled Devices, and the logo must appear in
product information sheets included in the product box.
1.3 DISCRETIONARY USE OF THE "POWERED BY UP" LOGO
The "Powered By UP" logo may appear: (i) in product information sheets and
product brochures that pertain to Licensee's Enabled Devices, (ii) in product
advertising that pertains directly to
30
<PAGE>
Licensee's Enabled Devices, (iii) in signage and POP displays that pertain
directly to Licensee's Enabled Devices, (iv) in any custom packaging or box
containing the Enabled Device.
[LOGO OF RSA(TM) ENCRYPTION ENGINE]
2.1 GENERAL RSA TRADEMARK REQUIREMENTS
As a licensee of the UPI Client Software, Licensee may use the "Genuine RSA
Encryption" logo, and are required to identify this logo as a trademark of RSA.
The "Genuine RSA Encryption" logo must be used in accordance with the following
provisions: (i) the size of the logo shall never be reproduced in sizes less
than 0.75 inch wide, (ii) the logo must always be reproduced from original
artwork and in accordance with official reproduction guidelines, as provided and
defined by RSA, (iii) the (TM) symbol is embedded in the official artwork
itself, and may not be removed, Licensee must always use the (TM) symbol with
any RSA trademark, (iv) artwork may be requested from Unwired Planet Marketing
Communications department.
2.2 MANDATORY USE OF THE "GENUINE RSA ENCRYPTION" LOGO
If the RSA Software is included in an Enabled Device, then the "Genuine RSA
Encryption" logo must appear on the exterior of Licensee-defined product box or
packaging (does not apply for custom product box or packaging specified by a
Licensee's customer) for such Enabled Devices, and the logo must appear in
product information sheets included in the product box.
2.3 DISCRETIONARY USE OF THE "GENUINE RSA ENCRYPTION" LOGO
The "Genuine RSA Encryption" logo may appear: (i) in product information sheets
and product brochures that pertain to Licensee's Enabled Devices, (ii) in
product advertising that pertains directly to Licensee's Enabled Devices, (iii)
in signage and POP displays that pertain directly to Licensee's Enabled Devices,
(iv) in any custom packaging or box containing the Enabled Device.
31
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use of our form of report included herein and to the
references to our firm under the headings "Experts" and "Selected Consolidated
Financial Data" in the Prospectus.
/s/ KPMG LLP
Mountain View, California
May 3, 1999
<PAGE>
[LETTERHEAD OF GARTNER GROUP]
Exhibit 99.1
Dataquest
April 30, 1999
Matthew L. Warner
Credit Suisse First Boston
2400 Hanover Street
Palo Alto, CA 94304
Dear Mr. Warner,
Per your discussion with Myron Kerstetter, Director of our Research
Management Group, you have approval to use the following statistics as
stated below (in bold) showing Dataquest Estimated Wireless Digital
Handset/Subscribers at the end of 1998 and projected to the end of 2002.
From Phone.com prospectus (page 37, paragraph 3, Growth of Wireless
Telecommunications)
"Advances in technology, changes in telecommunications regulations and
the allocation and licensing of additional radio spectrum have
contributed to this growth worldwide. Dataquest estimates that there
were approximately 187 million digital wireless subscribers worldwide at
the end of 1998 and that the number of such subscribers will grow to 590
million by the end of 2002."
Attached are the Dataquest estimates.
Sincerely,
/s/ Marc C. Litvinoff
Marc C. Litvinoff
Senior Vice President
Worldwide Operations
Attachment
<PAGE>
Table 2
Worldwide--Cellular Telephony Services
Subscribers by Digital Technology Type, 1993-2002
(Thousands of Subscribers)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Technology 1993 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GSM 1,525.0 5,152.9 13,342.9 32,828.1 71,116.5 114,777.3
D-AMPS 182.4 714.7 1,968.1 3,736.6 7,053.7 15,232.3
CDMA 0.0 0.0 10.0 802.2 8,001.0 21,427.9
PDC 0.0 870.0 3,309.6 13,916.4 26,761.7 35,453.6
Other
Digital 0.0 0.0 0.0 0.0 0.0 0.0
Total 1,707.5 6,737.6 18,630.7 51,283.4 112,932.9 186,891.1
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
CAGR CAGR
Technology 1999 2000 2001 2002 1993-1997 1998-2002
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GSM 164,580.5 217,203.7 273,123.7 330,000.6 161.2% 30.3%
D-AMPS 27,140.9 44,337.7 64,628.4 87,390.9 150.3% 54.4%
CDMA 39,099.5 65,160.6 95,405.1 131,935.1 NA 57.3%
PDC 40,147.0 42,452.0 42,300.8 40,579.1 NA 3.4%
Other
Digital 0.0 0.0 0.0 0.0 NA NA
Total 270,967.9 369,154.0 475,458.1 589,905.8 185.2% 33.3%
- ----------------------------------------------------------------------------------------------
</TABLE>
NA = not applicable
Source: Dataquest (January 1999 Estimates)
<PAGE>
Exhibit 99.2
INTERNATIONAL DATA CORPORATION
- -------------------------------------------------------------------------------
May 3, 1999
Per our discussion, you have approval to use the following statistics as
stated below.
International Data Corporation (IDC) estimates that there were approximately
159 million users of the Internet at the end of 1998 and that the number of
users will grow to approximately 410 million by the end of 2002.
The numbers are the most recent update to last year's report (#16569), The
Global Market Forecast for Internet Usage and Commerce.
Below are the actual IDC estimates:
Total WW Internet Users (Adjusted)
<TABLE>
<CAPTION>
Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 1-Dec 2-Dec 3-Dec
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20,818,117 47,750,243 101,725,855 159,334,165 212,083,759 271,614,694 340,886,126 410,436,167 509,834,435
</TABLE>
Signed,
/s/ John F. Gantz
SVP May 3, 1999
5 Speen Street * Framingham, MA 01701
-------------------------------------
(508) 872-8200 * Fax (508) 935-4015
[IDC LOGO]
http://www.Idc.com
