<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 29, 1999
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
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
UNWIRED PLANET, 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. DAVID M. CAMPBELL
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
</TABLE>
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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
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<S> <C> <C>
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO AGGREGATE AMOUNT OF
BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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Common stock, par value $.001 per share..................... $55,200,000 $15,346
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a) and Rule 457(o) under the Securities Act.
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.
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<PAGE> 2
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 MARCH 29, 1999
Shares
[LOGO]
Common Stock
------------------
Prior to this offering, there has been no public market for the common stock of
Unwired Planet, Inc. The initial public offering price of the common stock is
expected to be between $ and $ per share. We will make application to
list the common stock on The Nasdaq Stock Market's National Market under the
symbol "UNWP."
We have granted the underwriters an option to purchase a maximum of
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
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS UNWIRED PLANET
-------- ------------- --------------
<S> <C> <C> <C>
Per Share.......................................... $ $
Total.............................................. $ $
</TABLE>
Delivery of the shares of common stock will be made on or about
, 1999, against payment in immediately available funds.
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> 3
[INSIDE FRONT COVER]
[COLOR ARTWORK]
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUMMARY............... 4
RISK FACTORS..................... 6
USE OF PROCEEDS.................. 19
DIVIDEND POLICY.................. 19
CERTAIN INFORMATION.............. 19
CAPITALIZATION................... 20
DILUTION......................... 21
SELECTED CONSOLIDATED FINANCIAL
DATA........................... 22
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS...... 23
BUSINESS......................... 36
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
MANAGEMENT....................... 52
CERTAIN TRANSACTIONS............. 63
PRINCIPAL STOCKHOLDERS........... 65
DESCRIPTION OF CAPITAL STOCK..... 67
SHARES ELIGIBLE FOR
FUTURE SALE.................... 69
UNDERWRITING..................... 71
NOTICE TO CANADIAN RESIDENTS..... 73
LEGAL MATTERS.................... 74
EXPERTS.......................... 74
ADDITIONAL INFORMATION........... 74
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS..................... F-1
</TABLE>
-------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
-------------------------
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.
The Unwired Planet logo, "UP.Mail" and "uplanet.com" are registered
trademarks of Unwired Planet, Inc. "Unwired Planet," "UP.Application," "UP.
Browser," "UP.Link," "UP.Organizer," "UP.SDK," "UP.Smart" and "UP.Web" are
trademarks of Unwired Planet, Inc. This prospectus also contains brand names,
trademarks or service marks of companies other than Unwired Planet, Inc., and
such brand names, trademarks and service marks are the property of their
respective holders.
<PAGE> 5
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.
UNWIRED PLANET, 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 gateway that facilitates the exchange of data between the Internet and
mass-market wireless telephones; (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
March 1999, 22 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 AT&T Wireless Services, Bell Atlantic
Mobile, Bell Mobility, SFR/CEGETEL, DDI Corporation, Deutsche Telekom Mobilnet,
France Telecom Mobile, GTE Wireless, IDO Corporation, Nextel, Omnitel, Orange,
Telecom Italia Mobile, Telenor and Telstra.
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 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 March 1999, 22 wireless telephone manufacturers have licensed UP.Browser,
including Alcatel, IGS, LG Information & Communications, Mitsubishi, Motorola,
Panasonic, Qualcomm, Sagem, Samsung Electronics, Siemens and Sony. 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: AT&T Wireless Services, Bell Atlantic Mobile, Bell Mobility,
Citicorp, DDI Corporation, Gemplus, Hikari Tsushin, Itochu Corporation, Kyocera
Corporation, Mitsubishi Communications Industrial, Paribas, Qualcomm, Reuters,
Sema Group and Siemens.
Our principal executive offices are located at 800 Chesapeake Drive,
Redwood City, California 94063, and our telephone number is (650) 562-0200.
4
<PAGE> 6
THE OFFERING
Common stock offered.................... shares
Common stock to be outstanding after
this offering........................... shares
Use of proceeds......................... Working capital and general
corporate purposes
Proposed Nasdaq National Market
symbol.................................. UNWP
This table is based on shares outstanding as of December 31, 1998. This table
excludes:
- 3,065,778 shares subject to outstanding options at a weighted average
exercise price of $1.16 as of December 31, 1998,
- 31,486 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $3.81 per share as of December 31,
1998,
- an aggregate of 5,699,306 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 15, 1999, and
- 2,458,543 shares of common stock issuable on conversion of shares of
preferred stock that we sold to certain investors in a private placement
transaction in March 1999.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 16, 1994 YEAR ENDED JUNE 30, DECEMBER 31,
(INCEPTION) TO ---------------------------- -----------------
JUNE 30, 1995 1996 1997 1998 1997 1998
----------------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Licenses......................................... $ -- $ -- $ 80 $ 522 $ 175 $ 266
Maintenance and support services................. -- -- 212 1,683 316 2,332
Consulting services.............................. -- -- -- -- -- 587
------ ------- ------- -------- ------- -------
Total revenues............................... -- -- 292 2,205 491 3,185
------ ------- ------- -------- ------- -------
Gross profit (loss)................................ -- -- (61) 1,047 41 1,853
------ ------- ------- -------- ------- -------
Operating loss..................................... (103) (2,666) (8,455) (11,605) (5,127) (9,103)
------ ------- ------- -------- ------- -------
Net loss........................................... $ (103) $(2,470) $(7,991) $(10,623) $(4,955) $(8,323)
====== ======= ======= ======== ======= =======
Basic and diluted net loss per share............... $(0.02) $ (0.53) $ (1.67) $ (2.03) $ (0.97) $ (1.49)
====== ======= ======= ======== ======= =======
Shares used in computing basic and diluted net loss
per share........................................ 4,671 4,704 4,776 5,221 5,098 5,578
====== ======= ======= ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------
ACTUAL AS ADJUSTED
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<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments......... $29,261 $
Total assets.............................................. 34,627
Equipment loan and capital lease obligations, less current
portion................................................. 712
Total stockholders' equity................................ 20,595
</TABLE>
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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 offering price of $ 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 (1) the conversion of all outstanding shares of our convertible preferred
stock into shares of common stock upon completion of this offering, (2) a
two-for-three reverse stock split to be completed prior to this offering and (3)
the filing of our amended and restated certificate of incorporation upon
completion of this offering. See "Description of Capital Stock" and
"Underwriting."
5
<PAGE> 7
RISK FACTORS
You should carefully consider the following risks before making an
investment decision. The risks described below are not the only ones that we
face. Additional risks not presently known to us or that we currently deem
immaterial 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.
WE HAVE A LIMITED OPERATING HISTORY.
We were incorporated and commenced operations in December 1994 and
commercially released the first versions of our UP.Link and UP.Browser products
in June 1996. Accordingly, we only have a limited operating history on which you
can base your evaluation of our business and prospects. 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 Internet
software industries. These risks include, among others:
- 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.
We cannot be certain that our business strategy will be successful or that
we will successfully address these risks. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Overview."
WE HAVE A HISTORY OF LOSSES AND EXPECT TO CONTINUE TO EXPERIENCE LOSSES.
We incurred net losses of $8.0 million and $10.6 million for the fiscal
years ended June 30, 1997 and 1998, respectively, and a net loss of $8.3 million
for the six months ended December 31, 1998. As of December 31, 1998, we had an
accumulated deficit of $29.5 million. We expect to continue to incur significant
product development, sales and marketing, and administrative expenses. As a
result, we will need to generate significant revenues to become profitable and
sustain profitability on a quarterly or annual basis. We cannot assure you that
our revenues will continue to grow or that we
6
<PAGE> 8
will achieve profitability in the future. Our ability to increase revenues and
achieve or sustain profitability also 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.
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.
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.
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 revenue increases. 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, you should not rely on our quarterly revenue and operating
results to predict our future performance. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Quarterly Results
of Operations."
7
<PAGE> 9
OUR SALES CYCLE IS LONG.
Because the purchase of our products involves significant capital
investment decisions by prospective customers, we must educate our prospective
customers regarding the use and benefits of our products. As a result, we expect
that the typical sales cycle of our products will be lengthy, generally between
nine and twelve months, and unpredictable. Further, 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 such products and services. As a result, our
customers spend a substantial amount of time performing internal reviews and
obtaining capital expenditure approvals before purchasing our products. We
cannot be certain that our sales cycle will not lengthen in the future. 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. Any delay in sales of
our products could cause our operating results to vary significantly from
quarter to quarter. 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.
To date, a majority of our revenues have come from annual support service
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 products and services to new and existing
network operator 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. While we attempt to license our products
to network operators in a manner such that our future revenues are not dependent
upon the election by their wireless subscribers to use Internet-based services
that utilize our products, we anticipate that agreements in which we bear the
risk of subscriber adoption may become more prevalent over time. We cannot
assure you that we will be able to increase sales of our products and services.
In addition, our network operator customers face certain 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. 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. These and other challenges may slow their rate of
adoption or implementation of the services our products enable. 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 materially harm
our business. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Overview."
FAILURE TO RETAIN CUSTOMERS OR ADD NEW CUSTOMERS MAY HAVE A MATERIAL ADVERSE
EFFECT ON 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. For example, during the
year ended June 30, 1998, AT&T Wireless Services and Matsushita Communications
Industrial accounted for approximately 22% and 18%, respectively, of our total
revenues. We believe that we will continue to be dependent upon a limited number
of
8
<PAGE> 10
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.
THE MARKET FOR OUR PRODUCTS AND SERVICES IS UNDEVELOPED, AND MARKET ACCEPTANCE
OF OUR PRODUCTS AND SERVICES IS UNCERTAIN.
We have focused our efforts on mass-market wireless telephones as the
principal means of delivery of Internet-based services using our products. The
market for Internet-based services via wireless telephones is unproven, has only
recently begun to develop, 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. There are
currently many competing products used by mobile individuals to remotely access
the Internet and email, including portable computers and personal digital
assistants. 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. 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 such services and the future size
and growth rate of this market.
Furthermore, we have agreements with certain network operators under which
our future revenues are dependent upon the elective adoption of Internet-based
services by their wireless subscribers. We anticipate that agreements in which
we bear the risk of subscriber adoption may become more prevalent over time. If
the market for Internet-based services via wireless telephones fails to develop
or develops more slowly than expected, our business could suffer materially. 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. 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 Incorporated, have announced their intention to introduce products
that may compete directly with our UP.Link, UP.Browser and UP.Application
products. In addition, Microsoft has announced that it intends to port its
Windows CE operating system to wireless handheld devices, including wireless
telephones, and to develop and market its own browser for such devices. If
network operators were to adopt a solution other than one based on the
specifications promulgated by the WAP Forum, our business could be adversely
affected. Furthermore, if the specifications promulgated by the WAP Forum were
to change, and if we are unable to develop and market products and services that
are compliant with these new or alternative specifications in a timely manner,
our business could suffer materially. See "Business -- Technology."
OUR BUSINESS DEPENDS HEAVILY ON WIRELESS TELEPHONE MANUFACTURERS.
Our UP.Link Server Suite software offers enhanced features and
functionality that are not currently covered by the specifications promulgated
by the WAP Forum. As a result, subscribers currently must use UP.Browser-enabled
wireless telephones in order to fully utilize these features and functionality.
Thus, our business strategy relies to a significant extent on the widespread
propagation
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<PAGE> 11
of UP.Browser in wireless telephones through our relationships with network
operators and wireless telephone manufacturers. 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
such 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. If for
any reason we fail to achieve widespread embedding of our UP.Browser in wireless
telephones, our business would suffer materially. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Overview."
WE EXPECT TO RELY ON SALES OF ONE PRODUCT FAMILY.
Although revenues related to our UP.Browser product represent substantially
all of our revenues to date, we expect revenues derived from licensing of our
UP.Link Server Suite software and delivery of related services to account for a
substantial majority of our future revenues. As a result, factors adversely
affecting the pricing of, or demand for, the UP.Link Server Suite software and
related services, such as competition or technological change, could harm our
business. In addition, if we are unable to develop, introduce and establish
customer acceptance of new and enhanced versions of the UP.Link Server Suite
software, our business could materially suffer. See "Business -- Products and
Services."
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, 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 who are our existing and potential customers.
- Microsoft and Wireless Knowledge, a joint venture of Microsoft and
Qualcomm, which have announced their intention to introduce products 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 port its Windows CE operating system to wireless handheld devices,
including wireless telephones, and to develop and market its own browser
for such devices.
- Systems integrators, such as CMG plc and APiON Ltd., and software
companies, such as Oracle Corporation, 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
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<PAGE> 12
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. See "Business -- Competition."
OUR MARKETS ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGE.
The telecommunications and Internet software markets in which we compete
are characterized by rapid technological change, frequent new product and
service introductions, changes in customer requirements and evolving industry
standards. Existing products and services can become obsolete and unmarketable
when new technologies are introduced or new industry standards emerge. As a
result, the life cycle of our products is difficult to estimate. To be
successful, we will need to develop and introduce new products, services and
enhancements that respond to technological changes or evolving industry
standards on a timely basis. We cannot be certain that we will develop these
types of products, services and enhancements or that our products or services
will achieve market acceptance. In particular, we are currently developing our
first products that will be compatible with the WAP Forum's specifications.
These products are currently expected to be commercially available in the second
half of 1999. If we are unable to develop and market new products, services and
enhancements in a timely and cost-effective manner, our business could suffer
materially. See "Business -- Research and Product Development."
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
certain versions of our products until software problems were corrected. Our
products may not be free from errors or defects after 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 materially and
adversely affect our business. "Business -- Research and Product Development."
OUR SUCCESS DEPENDS ON KEY MANAGEMENT AND TECHNICAL PERSONNEL.
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. In addition, we are
currently 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 such persons. Competitors and
others have in the past, and may in the future, attempt to recruit our
employees. If we cannot hire and retain key personnel, our business could suffer
materially. See "Business -- Employees."
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<PAGE> 13
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. 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. If we fail to
manage our growth effectively, our business could suffer materially. See
"Business -- Employees."
OUR SUCCESS 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.
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, under certain 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. 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. 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. See "Business -- Research and
Product Development" and "-- Sales and Marketing."
WE MUST INTEGRATE OUR PRODUCTS WITH THIRD-PARTY TECHNOLOGY.
Our products are integrated with network operators' systems and wireless
telephones. If, as a result of technology enhancements or upgrades of such
systems or telephones, we are unable
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<PAGE> 14
to integrate our products with such 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. If we are unable to
integrate our platform products with third-party technology, our business could
suffer materially. 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 certain
third parties, such as RSA Data Security, Inc. and other companies. Any
significant interruption in the supply of any licensed software could materially
and adversely affect our sales, unless and until we are able to replace the
functionality provided by such licensed software. Because our products
incorporate software developed and maintained by third parties, we depend on
such 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 OR MAY BE SUED BY
THIRD PARTIES FOR INFRINGEMENT OF THEIR 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 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. 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 now pending of which we are unaware, which will cause us to
be infringing when it issues in the future. To address such 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, could 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
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<PAGE> 15
registration of the "Unwired Planet" mark, we would have to rely solely on
common law protection for this mark.
INTERNATIONAL EXPANSION IS AN IMPORTANT PART OF OUR STRATEGY, AND SUCH 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
66% of our total revenues for the six months ended December 31, 1998. 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. To date, almost all of such revenues have resulted
from our direct sales efforts. In international markets, however, we expect that
network operators generally require that our products and support services be
supplied through value-added resellers and systems integrators. Thus, we expect
that in the future a significant portion of such 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. Additionally,
any such relationships may fail to result in increased sales of our products and
services. Success in many international markets is also dependent on development
by us and by third parties of localized applications and content. The failure to
successfully develop certain international markets for our products could
materially and adversely affect our business.
Additional risks inherent in our international business activities, any of
which could potentially harm our business, include:
- fluctuations in foreign currency exchange rates;
- restrictions on the export of encryption and other technologies;
- changes in regulatory requirements;
- costs of localizing our products for foreign markets;
- availability of suitable export financing;
- timing and availability of export licenses;
- tariffs and other trade barriers;
- political and economic instability;
- difficulties in staffing and managing foreign operations;
- potentially adverse tax consequences;
- reduced protection of intellectual property rights in certain foreign
countries;
- the burden of complying with a wide variety of complex foreign laws and
treaties; and
- longer accounts receivable collection time.
Agreements with international customers and others may be governed by foreign
laws, which may differ significantly from domestic laws. Any of these factors
could materially and adversely affect our international sales and operations, as
well as our overall business. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview" and
"Business -- Sales and Marketing."
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<PAGE> 16
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 and organizations 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 ENGAGE IN FUTURE ACQUISITIONS THAT DILUTE OUR STOCKHOLDERS, CAUSE US TO
INCUR DEBT OR ASSUME CONTINGENT LIABILITIES.
As part of our business strategy, we expect to review acquisition prospects
that we believe would be advantageous to the development of our business. While
we have no current agreements or negotiations underway with respect to any such
acquisitions, we may acquire businesses, products or technologies in the future.
In the event of such future acquisitions, we could take any or all of the
following actions, any of which could materially and adversely affect our
financial results and the price of our common stock:
- issue equity securities that would dilute existing stockholders'
percentage ownership;
- incur substantial debt; or
- assume contingent liabilities.
Acquisitions also entail numerous risks, including:
- difficulties in assimilating acquired operations, products and personnel
with our pre-existing business;
- unanticipated costs;
- diversion of management's attention from other business concerns;
- adverse effects on existing business relationships with suppliers and
customers;
- risks of entering markets in which we have limited or no prior
experience; and
- potential loss of key employees from either our pre-existing business or
the acquired organization.
We may not be able to successfully integrate any businesses, products,
technologies or personnel that we might acquire in the future, and our failure
to do so could harm our business.
OUR STOCK PRICE MAY BE VOLATILE.
Prior to this offering, there has been no public market for our common
stock. An active public market for our common stock may not develop or be
sustained after this offering. If you purchase shares of common stock in this
offering, you will pay a price that was not established in a competitive
15
<PAGE> 17
market. Rather, you will pay the price that we negotiated with the
representatives of the underwriters. The price of the common stock that will
prevail in the market after this offering may be higher or lower than the price
you pay.
Many factors could cause the market price of our common stock to rise and
fall. Some of these factors are:
- variations in our quarterly results;
- announcements of technological innovations by us or our competitors;
- introduction of new products or services or new pricing policies by us or
our competitors;
- acquisitions or strategic alliances by us or our competitors;
- hiring or departure of key personnel;
- the gain or loss of a significant customer;
- changes in estimates of our financial performance or changes in
recommendations by securities analysts; and
- market conditions in the industries we serve or the economy as a whole.
In addition, the stock market in general has experienced extreme price and
volume fluctuations. These broad market fluctuations could adversely affect the
market price of our common stock. In particular, the market prices of the common
stock of many companies in the software and Internet industries have experienced
such volatility, which has often been unrelated to these companies' operating
performance.
In the past, securities class action litigation has often been brought
against a company following a period of volatility in the market price of its
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources, which could materially harm our business.
EXISTING STOCKHOLDERS WILL CONTINUE TO CONTROL THE COMPANY AFTER THIS OFFERING.
Immediately after this offering, our executive officers and directors,
together with entities affiliated with such individuals, will continue to own
approximately % of our outstanding common stock. Accordingly, these
stockholders may, as a practical matter, continue to be able to control the
election of a majority of the directors and the determination of all corporate
actions after this offering. This concentration could have the effect of
delaying or preventing a change in control.
WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE.
Our future capital requirements will depend primarily on our ability to
achieve and sustain profitability, as well as other factors, including the
growth of the market for digital wireless telephone subscribers, the growth of
the market for Internet-enabled wireless telephones, the extent and timing of
the market acceptance of our products and services, the progress of our research
and development efforts and the expansion of our marketing and sales efforts. We
may need to raise additional capital to fund operations, and any such additional
financing may not be available on acceptable terms, or at all, when needed. If
we are unable to obtain additional capital on acceptable terms, our business
could suffer materially.
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<PAGE> 18
OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND DELAWARE LAW CONTAIN PROVISIONS
THAT COULD DISCOURAGE A TAKEOVER.
Certain 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. Such 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 Certain Charter
Provisions."
FUTURE SALE OF COMMON STOCK MAY DEPRESS OUR STOCK PRICE.
After this offering, we will have outstanding shares of common
stock. Sales of a substantial number of shares of common stock in the public
market following this offering could substantially decrease the market price of
our common stock. All of the shares sold in this offering will be freely
tradable. A total of 18,111,259 shares of common stock outstanding after this
offering will become available for sale in the public market beginning 180 days
following the date of this prospectus, upon the expiration of certain 180-day
lock-up agreements between our stockholders and Unwired Planet or the
underwriters. Of these shares, 11,768,289 shares will be subject to certain
volume limitations imposed under federal securities laws. An additional
8,362,796 shares will become eligible for sale in the public market at various
times during the six months following the expiration of the 180-day lock-up
agreements, subject in some cases to volume limitations.
If our stockholders sell substantial amounts of common stock (including
shares issued upon the exercise of outstanding options and warrants) in the
public market, the market price of our common stock could fall. See "Shares
Eligible for Future Sale" and "Underwriting."
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
If you purchase shares of common stock in this offering, you will
experience immediate and substantial dilution, in that the price you pay will be
substantially greater than the net tangible book value per share of the shares
you acquire. This dilution is in large part because the earlier investors in
Unwired Planet paid substantially less than the public offering price when they
purchased their shares of common stock. You will experience additional dilution
upon the exercise of outstanding stock options or warrants to purchase common
stock.
WE HAVE BROAD DISCRETION TO USE THE PROCEEDS OF THIS OFFERING.
We have not designated any specific use for the net proceeds of this
offering. We expect to use the proceeds primarily for working capital and other
general corporate purposes. As a result, our
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<PAGE> 19
management and Board of Directors will have broad discretion in spending the
proceeds of this offering. See "Use of Proceeds."
WE DO NOT INTEND TO PAY DIVIDENDS.
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings, if any, for funding growth and,
therefore, do not expect to pay any dividends in the foreseeable future. See
"Dividend Policy."
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 such forward-looking statements. Such factors include, among other
things, those listed under "Risk Factors" and elsewhere in 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 such
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 such statements. We
are under no duty to update any of the forward-looking statements after the date
of this prospectus to conform such statements to actual results.
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<PAGE> 20
USE OF PROCEEDS
The net proceeds to us from the sale of the shares of common
stock offered by us are estimated to be approximately $ million
(approximately $ million if the underwriters' over-allotment option is
exercised in full) at an assumed public offering price of $ 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
domestic and international sales and marketing expenditures, increased research
and development expenditures and capital expenditures made in the ordinary
course of 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 such 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.
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.
CERTAIN INFORMATION
We were incorporated in Delaware under the name "Libris, Inc." in December
1994. 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.uplanet.com." Information contained on our Web
site shall not be deemed to be a part of this prospectus.
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<PAGE> 21
CAPITALIZATION
The following table sets forth the following information:
- the actual capitalization of Unwired Planet as of December 31, 1998;
- the pro forma capitalization of Unwired Planet after giving effect to the
conversion of all outstanding shares of convertible preferred stock into
shares of common stock; and
- the as adjusted capitalization to give effect to the sale of shares of
common stock at an assumed initial public offering price of $ per
share in this offering after deducting the estimated underwriting
discounts and commissions Unwired Planet expects to pay in connection
with this offering and estimated offering expenses payable by Unwired
Planet.
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 DECEMBER 31, 1998
------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Equipment loan and capital lease obligations, less current
portion................................................. $ 712 $ $
-------- -------- --------
Stockholders' equity:
Convertible preferred stock $0.001 par value, 17,843,550
shares authorized, 17,715,627 shares issued and
outstanding, actual; shares authorized,
none issued or outstanding, pro forma; and 5,000,000
shares authorized, none issued or outstanding, as
adjusted............................................. 18 -- --
Common stock $0.001 par value, 29,333,333 shares
authorized, 6,329,378 shares issued and outstanding,
actual; 29,333,333 shares authorized,
shares issued and outstanding, pro forma; and
100,000,000 shares authorized, shares
issued and outstanding, as adjusted(1)............... 6
Additional paid-in capital.............................. 51,963
Deferred stock-based compensation....................... (1,390)
Treasury stock.......................................... (72)
Notes receivable from stockholders...................... (420)
Accumulated deficit..................................... (29,510)
-------- -------- --------
Total stockholders' equity........................... 20,595
-------- -------- --------
Total capitalization................................. $ 21,307 $ $
======== ======== ========
</TABLE>
- -------------------------
(1) This table excludes the following shares:
- 3,065,778 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $1.16 per share as of December 31,
1998,
- 31,486 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $3.81 per share as of such date,
- an aggregate of 5,699,306 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 15, 1999, and
- 2,458,543 shares of common stock issuable on conversion of preferred
stock sold to certain investors in March 1999. See "Management -- Stock
Plans" and Notes 4, 5 and 9 of the Notes to Consolidated Financial
Statements.
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<PAGE> 22
DILUTION
The pro forma net tangible book value of our common stock on December
31,1998 was $ million, or approximately $ 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 and after deducting the estimated
underwriting discounts and commissions and estimated offering expenses payable
by us, our net tangible book value would have been $ , or approximately
$ per share. This represents an immediate increase in net tangible book
value of $ per share to existing stockholders and an immediate dilution in
net tangible book value of $ per share to new investors.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Net tangible book value per share as of December 31,
1998................................................. $
Increase per share attributable to new investors.......
--------
Pro forma net tangible book value per share after this
offering..................................................
--------
Dilution per share to new investors......................... $
========
</TABLE>
The following table sets forth, as of December 31, 1998, 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 a public offering price of
$ per share.
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION
------------------ ------------------ AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- ------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................ % $ % $
New investors........................
-------- ----- -------- -----
Total...................... 100.0% 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 % 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 % of the total number of shares of our
common stock outstanding after this offering.
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<PAGE> 23
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 consolidated balance sheet data as
of June 30, 1997 and 1998, 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 six months
ended December 31, 1997 and 1998 and the consolidated balance sheet data as of
December 31, 1998 are 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>
SIX MONTHS ENDED
DECEMBER 16, YEAR ENDED JUNE 30, DECEMBER 31,
1994 (INCEPTION) TO ---------------------------- -----------------
JUNE 30, 1995 1996 1997 1998 1997 1998
-------------------- ------- ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
Revenues:
Licenses............................... $ -- $ -- $ 80 $ 522 $ 175 $ 266
Maintenance and support services....... -- -- 212 1,683 316 2,332
Consulting services.................... -- -- -- -- -- 587
------ ------- ------- -------- ------- -------
Total revenues....................... -- -- 292 2,205 491 3,185
------ ------- ------- -------- ------- -------
Cost of revenues:
Licenses............................... -- -- 87 95 30 88
Maintenance and support services....... -- -- 266 1,063 420 1,109
Consulting services.................... -- -- -- -- -- 135
------ ------- ------- -------- ------- -------
Total cost of revenues............... -- -- 353 1,158 450 1,332
------ ------- ------- -------- ------- -------
Gross profit (loss).................. -- -- (61) 1,047 41 1,853
------ ------- ------- -------- ------- -------
Operating expenses:
Research and development............... 92 1,387 3,959 5,732 2,453 5,137
Sales and marketing.................... 6 757 3,198 5,011 1,965 3,875
General and administrative............. 5 522 1,237 1,801 744 1,440
Stock-based compensation............... -- -- -- 108 6 504
------ ------- ------- -------- ------- -------
Total operating expenses............. 103 2,666 8,394 12,652 5,168 10,956
------ ------- ------- -------- ------- -------
Operating loss....................... (103) (2,666) (8,455) (11,605) (5,127) (9,103)
Interest income, net..................... -- 196 464 982 172 780
------ ------- ------- -------- ------- -------
Net loss............................. $ (103) $(2,470) $(7,991) $(10,623) $(4,955) $(8,323)
====== ======= ======= ======== ======= =======
Basic and diluted net loss per share..... $(0.02) $ (0.53) $ (1.67) $ (2.03) $ (0.97) $ (1.49)
====== ======= ======= ======== ======= =======
Shares used in computing basic and
diluted net loss per share............. 4,671 4,704 4,776 5,221 5,098 5,578
====== ======= ======= ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
------------------------------------- DECEMBER 31,
1995 1996 1997 1998 1998
------ ------ ------ ------- ------------
(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 $29,261
Total assets............................................ 2,315 6,767 9,759 39,144 34,627
Equipment loan and capital lease obligations, less
current portion....................................... -- -- -- 915 712
Total stockholders' equity.............................. 2,243 6,464 8,125 28,393 20,595
</TABLE>
22
<PAGE> 24
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 certain 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 $266,000 for the six months ended December 31, 1998. 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 $8.3 million for
the six months ended December 31, 1998. As of December 31, 1998, we had an
accumulated deficit of $29.5 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 Unwired Planet'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.
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 provide maintenance and support services for an annual
flat fee. As of March 1999, we have licensed UP.Browser to 22 wireless telephone
manufacturers. To date, maintenance and support services fees have accounted for
a majority of our revenues.
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, we cannot be certain that our revenues will 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 cannot be certain that we would
sustain or increase profitability on a quarterly or annual basis. See "Risk
Factors -- We have a limited operating history" and "-- We have a history of
losses and expect to continue to experience losses."
23
<PAGE> 25
We generate revenues from licenses, maintenance and support services and
consulting services. We receive license revenues primarily from licensing our
products directly to network operators and indirectly through value-added
resellers. Maintenance and support services revenues consist of installation,
training and support services to network operators, and engineering and support
services to wireless telephone manufacturers. Consulting services revenues are
derived from consulting services provided to network operator customers either
directly by us or indirectly through resellers.
We sell our products and services primarily through our direct sales force
and through value-added resellers and systems integrators. 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 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. 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. See "Risk
Factors -- Our success depends in part on our ability to maintain and expand our
distribution channels."
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
66% of our total revenues for the six months ended December 31, 1998. 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. See "Risk Factors -- International expansion is an
important part of our strategy, and such expansion carries specific risks."
We attempt to license our products to network operators in a manner such
that our future revenues are not dependent upon the election by their wireless
subscribers to use Internet-based services that utilize our products. We
anticipate, however, that agreements in which we bear the risk of subscriber
adoption may become more prevalent over time. See "Risk Factors -- The market
for our products and services is undeveloped, and market acceptance of our
products and services is uncertain" and "-- Our success depends upon acceptance
of our products and services by network operators."
To date, a majority of our revenues have come from annual support service
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 products and services to new and existing
network operator customers. See "Risk Factors -- Our success depends on
acceptance of our products and services by network operators" and "-- We expect
to rely on sales of one product family." 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. See
"Risk Factors--The market for our products and services is undeveloped, and
market acceptance of our products and services is uncertain." During the year
ended June 30, 1998, AT&T Wireless Services and Matsushita Communications
Industrial accounted for approximately 22% and 18%, respectively, of our total
revenues. See "Risk Factors -- Failure to retain customers or add new customers
may have a material adverse effect on our business." Our business strategy
relies to a significant extent on the widespread propagation of
UP.Browser-enabled telephones through our relationships with network operators
and wireless telephone manufacturers. See "Risk Factors -- Our business depends
heavily on wireless telephone manufacturers."
For agreements entered into prior to July 1, 1998, we recognize revenue in
accordance with the provisions of the American Institute of Certified Public
Accountants' Statement of Position
24
<PAGE> 26
("SOP") No. 91-1, "Software Revenue Recognition." Prepaid network operator
license fees are recognized under subscription accounting due to our commitment
to provide standards-compliant products during the prepaid license term. The
prepaid license fees are recognized ratably over the estimated deployment
period, generally one to two years. Revenues associated with additional licenses
in excess of those associated with prepaid fees are generally recognized when
reported to us by the network operator or one of our resellers, as applicable.
We recognize revenues from maintenance and support services provided to network
operators and wireless telephone manufacturers ratably over the term of the
agreement, typically one year. We recognize revenues from consulting services as
the services are performed.
Effective July 1, 1998, we 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 values of
the elements. The adoption of SOP 97-2, as amended, did not have a significant
impact on our accounting for revenues.
Deferred revenue was $9.6 million as of December 31, 1998. While we
anticipate that deferred revenue will increase in the near term, we expect that
deferred revenue will decline in the long term as network operators deploy
services based on our products. In particular, revenue recognition will commence
beginning in the third quarter of fiscal 1999 in connection with the launch by
one network operator of commercial services based on our products and the
acceptance of our products by a second network operator. Revenue recognition
also will increase commencing in the third quarter of fiscal 1999 under an
agreement with a third network operator initially entered into in May 1996.
Under that agreement, the network operator 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 the network
operator 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, approximately
$0.5 million was recognized relating to this prepayment. In connection with an
amendment to the agreement entered into in March 1999, the network operator
agreed that we would not be further obligated to assist the network operator in
the deployment of the prepaid licenses discussed above. Therefore, the remaining
deferred revenue of approximately $4.2 million relating to the prepayment will
be recognized as revenue ratably over the remaining estimated deployment period.
Accordingly, we will recognize revenue of approximately $0.3 million in the
quarter ending March 31, 1999, and approximately $1.3 million in each of the
quarters ending June 30, 1999, September 30, 1999, and December 31, 1999,
associated with the prepayment.
SIX MONTHS ENDED DECEMBER 31, 1997 AND 1998
License Revenues
License revenues increased 52% from $175,000 for the six months ended
December 31, 1997 to $266,000 for the six months ended December 31, 1998. The
increase in license revenues was due primarily to a fee received from a wireless
telephone manufacturer in connection with the license of our UP.Browser product.
Maintenance and Support Services Revenues
Maintenance and support services revenues increased 638% from $316,000 for
the six months ended December 31, 1997 to $2.3 million for the six months ended
December 31, 1998. The increase
25
<PAGE> 27
in maintenance and support services revenues was attributable primarily to
increased maintenance and engineering support fees received from wireless
telephone manufacturers.
Consulting Services Revenues
Consulting services revenues were $587,000 for the six months ended
December 31, 1998. No consulting services were performed in the six months ended
December 31, 1997.
Cost of License Revenues
Cost of licenses revenues consists primarily of third-party license and
support fees. Cost of licenses revenues increased from $30,000 for the six
months ended December 31, 1997 to $88,000 for the six months ended December 31,
1998. The growth in cost of licenses revenues was attributable primarily to the
increase in licenses revenues. As a percentage of licenses revenues, cost of
licenses revenues for the six months ended December 31, 1997 and 1998 was 17%
and 33%, respectively.
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. Cost of
maintenance and support services revenues increased 164% from $420,000 for the
six months ended December 31, 1997 to $1.1 million for the six months ended
December 31, 1998. The growth in cost of maintenance and support services
revenues was attributable primarily to growth in the number of wireless
telephone manufacturer customers and increased staffing in anticipation of
growth in the number of network operator customers. As a percentage of
maintenance and support service revenues, cost of maintenance and support
services revenues for the six months ended December 31, 1997 and 1998 was 133%
and 48%, respectively. Gross profit on maintenance and support services revenues
is impacted by the timing of acceptance or launch by network operator customers
of commercial services utilizing our products and the need to invest in
personnel and support systems ahead of such commercial launch activity. 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 six months ended
December 31, 1998 was $135,000. No consulting services were performed in the six
months ended December 31, 1998. As a percentage of consulting services revenues,
cost of consulting services revenues for the six months ended December 31, 1998
was 23%. 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.
26
<PAGE> 28
Research and Development Expenses
Research and development expenses consist primarily of compensation and
related costs for research and development personnel, including costs
attributable to our applications for patents in the United States and
internationally. Research and development expenses increased 109% from $2.5
million for the six months ended December 31, 1997 to $5.1 million for the six
months ended December 31, 1998. This increase was attributable primarily to the
addition of personnel in our research and development organization associated
with product development and higher expenses associated with increased patent
activities. Research and development expenses were 500% and 161% of total
revenues for the six months ended December 31, 1997 and 1998, respectively. 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, travel expenses and trade show exhibit
expenses. Sales and marketing expenses increased 97% from $2.0 million for the
six months ended December 31, 1997 to $3.9 million for the six months ended
December 31, 1998. This increase 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. Sales
and marketing expenses were 400% and 122% of total revenues for the six months
ended December 31, 1997 and 1998, respectively. 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 94% from $744,000 for the six months ended December 31, 1997
to $1.4 million for the six months ended December 31, 1998. This increase was
due primarily to the addition of personnel performing general and administrative
functions and higher legal expenses associated with increased product licensing
activity. General and administrative expenses were 152% and 45% of total
revenues for the six months ended December 31, 1997 and 1998, respectively. 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
Certain stock options granted and restricted stock sold during the fiscal
year ended June 30, 1998 and during the six months ended December 31, 1998 have
been deemed to be compensatory. Total deferred stock-based compensation
associated with such equity arrangements through December 31, 1998 amounted to
$2.0 million related to stock options granted and restricted stock issued from
October 1997 through December 1998. These amounts are being amortized over the
respective vesting periods of such equity arrangements in a manner consistent
with Financial Accounting Standards Board Interpretation No. 28. Of the total
deferred stock-based compensation, $6,000 and $504,000 was amortized in the six
months ended December 31, 1997 and 1998, respectively. We expect amortization of
approximately $976,000, $523,000, $278,000 and $117,000 in the fiscal years
ending June 30, 1999, 2000, 2001 and 2002.
27
<PAGE> 29
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 $172,000 and $780,000 for the six months ended December 31, 1997 and 1998,
respectively. The increase was attributable to increased cash balances as a
result of our private placement financing consummated in February 1998.
FISCAL YEARS ENDED JUNE 30, 1996, 1997 AND 1998
License Revenues
License revenues increased 553% 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 694% 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 9% 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 300% 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.
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
28
<PAGE> 30
activity. Research and development expenses were 1,356% and 260% of total
revenues for the fiscal years ended June 30, 1997 and 1998, respectively.
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. Sales and marketing expenses were 1,095% and 227% of
total revenues for the fiscal years ended June 30, 1997 and 1998, respectively.
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. General and administrative expenses were 424% and 82% of total
revenues for the fiscal years ended June 30, 1997 and 1998, respectively.
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, 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 2011 and 2003, respectively. We also had research
and development credit carryforwards of approximately $379,000 and $287,000 for
federal and California income tax purposes, respectively. 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.
29
<PAGE> 31
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 such deferred
tax assets. Accordingly, no tax benefit was recorded in the accompanying
consolidated statements of operations.
30
<PAGE> 32
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth our consolidated operating results for each
of the six quarters ended December 31, 1998. 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 such 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,
1997 1997 1998 1998 1998 1998
--------- -------- --------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Licenses............................................... $ 17 $ 158 $ 114 $ 233 $ 202 $ 64
Maintenance and support services....................... 94 222 319 1,048 1,005 1,327
Consulting services.................................... -- -- -- -- 161 426
------- ------- ------- ------- ------- -------
Total revenues....................................... 111 380 433 1,281 1,368 1,817
------- ------- ------- ------- ------- -------
Cost of revenues:
Licenses............................................... 5 25 29 36 62 26
Maintenance and support services....................... 175 245 295 348 433 676
Consulting services.................................... -- -- -- -- 58 77
------- ------- ------- ------- ------- -------
Total cost of revenues............................... 180 270 324 384 553 779
------- ------- ------- ------- ------- -------
Gross profit (loss).................................. (69) 110 109 897 815 1,038
------- ------- ------- ------- ------- -------
Operating expenses:
Research and development............................... 1,072 1,381 1,418 1,861 2,533 2,604
Sales and marketing.................................... 837 1,128 1,342 1,704 1,801 2,074
General and administrative............................. 341 403 441 616 597 843
Stock-based compensation............................... -- 6 39 63 249 255
------- ------- ------- ------- ------- -------
Total operating expenses............................. 2,250 2,918 3,240 4,244 5,180 5,776
------- ------- ------- ------- ------- -------
Operating loss....................................... (2,319) (2,808) (3,131) (3,347) (4,365) (4,738)
Interest income, net..................................... 96 76 356 454 415 365
------- ------- ------- ------- ------- -------
Net loss............................................. $(2,223) $(2,732) $(2,775) $(2,893) $(3,950) $(4,373)
======= ======= ======= ======= ======= =======
Basic and diluted net loss per share..................... $ (0.44) $ (0.53) $ (0.53) $ (0.53) $ (0.71) $ (0.78)
======= ======= ======= ======= ======= =======
Shares used in computing basic and diluted net loss per
share.................................................. 5,050 5,147 5,230 5,459 5,539 5,617
======= ======= ======= ======= ======= =======
AS A PERCENTAGE OF TOTAL REVENUES
Revenues:
Licenses............................................... 15% 42% 26% 18% 15% 4%
Maintenance and support services....................... 85 58 74 82 73 73
Consulting services.................................... -- -- -- -- 12 23
------- ------- ------- ------- ------- -------
Total revenues....................................... 100 100 100 100 100 100
------- ------- ------- ------- ------- -------
Cost of revenues:
Licenses............................................... 4 7 7 3 4 2
Maintenance and support services....................... 158 64 68 27 32 37
Consulting services.................................... -- -- -- -- 4 4
------- ------- ------- ------- ------- -------
Total cost of revenues............................... 162 71 75 30 40 43
------- ------- ------- ------- ------- -------
Gross profit (loss).................................. (62) 29 25 70 60 57
------- ------- ------- ------- ------- -------
Operating expenses:
Research and development............................... 966 363 327 145 185 144
Sales and marketing.................................... 754 297 310 133 132 114
General and administrative............................. 307 106 102 48 44 46
Stock-based compensation............................... -- 2 9 5 18 14
------- ------- ------- ------- ------- -------
Total operating expenses............................. 2,027 768 748 331 379 318
------- ------- ------- ------- ------- -------
Operating loss....................................... (2,089) (739) (723) (261) (319) (261)
Interest income, net..................................... 86 20 82 35 30 20
------- ------- ------- ------- ------- -------
Net loss............................................. (2,003)% (719)% (641)% (226)% (289)% (241)%
======= ======= ======= ======= ======= =======
AS A PERCENTAGE OF RELATED REVENUES
Cost of license revenues................................. 29% 16% 25% 15% 31% 41%
Cost of maintenance and support services revenues........ 186% 110% 92% 33% 43% 51%
Cost of consulting services revenues..................... --% --% --% --% 36% 18%
</TABLE>
31
<PAGE> 33
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 Internet software industries. We may not be able to
successfully address such risks and difficulties. In addition, although we have
experienced revenue growth recently, such 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.
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. See "Risk
Factors -- Our quarterly operating results are subject to significant
fluctuations" and "-- Our sales cycle is long."
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through private
sales of convertible preferred stock, which totaled $49.3 million in aggregate
net proceeds through December 31, 1998. We have also financed our operations
through an equipment loan and a capitalized lease, which totaled $1.1 million in
principal amount outstanding at December 31, 1998. As of December 31,
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<PAGE> 34
1998, we had $4.9 million of cash and cash equivalents and $24.4 million of
short-term investments, and working capital of $18.5 million.
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 $3.4 million for the six months ended December 31, 1998. For
each of the fiscal years ended June 30, 1996, 1997 and 1998, and for the six
months ended December 31, 1998, cash used for operating activities was
attributable primarily to net losses and increases in accounts receivable,
offset in part by depreciation and amortization, increases in accounts payable
and accrued liabilities, and increases in deferred revenues.
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 $4.2 million for the six months ended December 31, 1998. 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 six months ended December 31,
1998.
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, and for the six months ended December 31, 1998 cash used in
financing activities was $182,000. Cash provided by financing activities in each
of these fiscal years 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. For the six months ended December 31, 1998, cash used in
financing activities was primarily attributable to payments on the equipment
loan and capitalized lease obligations.
As of December 31, 1998, 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 certain rights, preferences and privileges senior to
holders of common stock, and the terms of such 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 we cannot be
certain that such additional financing will be available in amounts or on terms
acceptable to us, if at all. If we 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. As a result, software
that records only the last two digits of the calendar year may not be able to
distinguish between 20th and 21st century dates. This may result in software
failures or the creation of erroneous results.
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<PAGE> 35
We have conducted the first phases of a Year 2000 readiness review for the
current versions of our products. The review includes assessment, implementation
(including remediation, upgrading and replacement of certain product versions),
validation testing, and contingency planning. We continue to respond to customer
questions about prior versions of our products on a case-by-case basis.
We have largely completed all phases of this plan, except for contingency
planning, for the current versions of our products. As a result, all current
versions of our products are "Year 2000 Compliant," as defined below, 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 or in the host machine or our products are also Year 2000 Compliant.
We have not tested our products on all platforms or all versions of operating
systems that we currently support.
We have defined "Year 2000 Compliant" as the ability to:
- correctly handle date information needed for the December 31, 1999 to
January 1, 2000 date change;
- function according to the product documentation provided for this date
change, without changes in operation resulting from the advent of a new
century, assuming correct configuration;
- where appropriate, respond to two-digit date input in a way that resolves
the ambiguity as to the century in a disclosed, defined and predetermined
manner;
- if the date elements in interfaces and data storage specify the century,
store and provide output of date information in ways that are unambiguous
as to century; and
- recognize the year 2000 as a leap year.
We are testing software obtained from third parties (licensed software,
shareware, and freeware) that is incorporated into our products, and we are
seeking assurances from our vendors that licensed software is Year 2000
Compliant. 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 such lawsuits against other
software vendors. Because of the unprecedented nature of such litigation, it is
uncertain whether or to what extent we may be affected by it.
Our internal systems include both our information technology, or IT, and
non-IT systems. We have initiated an assessment of our material internal IT
systems (including both our own software products and third-party software and
hardware technology), but we have not initiated an assessment of our non-IT
systems. We expect to complete testing of our IT systems in 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 or costs
associated with preparing our internal IT and non-IT systems for the Year 2000.
However, we may experience material unanticipated problems and costs caused by
undetected errors or defects in the technology used in our internal IT and
non-IT systems.
We do not currently have any information concerning the Year 2000
compliance status of our customers. Our network operator customers face certain
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
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<PAGE> 36
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. We will incur additional expenses related to the Year
2000 plan for administrative personnel to manage the project, outside contractor
assistance, technical support for our products, product engineering and customer
satisfaction. 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.
We have not yet fully developed a contingency plan to address situations
that may result if we are unable to achieve Year 2000 readiness of our critical
operations. The cost of developing and implementing such a plan may itself be
material. 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. Accordingly, we are
subject to exposure from adverse movements in foreign currency exchange rates.
As of December 31, 1998, we had no hedging contracts outstanding.
We currently do not use financial instruments to hedge operating expenses
in the U.K. or Japan denominated in the 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 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 investments in debt securities issued by United States government
agencies and 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 three months or less at the date of purchase are
considered to be cash equivalents; investments with maturities between three and
twelve months are considered to be short-term investments; investments with
maturities in excess of twelve months are considered to be long-term
investments.
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<PAGE> 37
BUSINESS
UNWIRED PLANET, 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 March 1999, 22 network operators have licensed our software
and have commenced or announced commercial service or are in market or
laboratory trials. In addition, 22 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
97 million users of the Internet worldwide at the end of 1998 and that the
number of users will grow to 320 million by the end of 2002. 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 such
subscribers will grow to 590 million by the end of 2002.
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
their wireless subscribers. They are also looking for ways to differentiate
their product offerings in an
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<PAGE> 38
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. Unwired Planet was a pioneer in the convergence of
the Internet and mobile telephony. In 1995, Unwired Planet developed its initial
technology, which enables the delivery of Internet-based services to wireless
telephones. In 1996, Unwired Planet 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, Unwired Planet,
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. 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 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 Unwired Planet, and, as of March
1999, has grown to over 90 members, including the following companies:
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
BOARD MEMBERS
- --------------------------------------------------------------------------------------------------------
Unwired Planet 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> 39
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
NETWORK OPERATORS
- --------------------------------------------------------------------------------------------------------
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>
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
DEVICE AND EQUIPMENT MANUFACTURERS
- --------------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
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>
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<PAGE> 40
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.
THE UNWIRED PLANET 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.
[DIAGRAM DEPICTING COMPONENTS OF UP.LINK PLATFORM AND RELATIONSHIPS OF
VARIOUS SYSTEMS, INCLUDING WIRELESS TELEPHONES, SERVERS AND INTERNET]
Our platform consists of the UP.Link Server Suite and UP.Browser software
products. The UP.Link Server Suite includes: (1) a gateway that facilitates the
exchange of data between the Internet and mass-market wireless telephones; (2) 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 (3) 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, ESPN Sportszone and Travelocity.
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<PAGE> 41
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:
- CDMA (Code Division Multiple Access)
- TDMA (Time Division Multiple Access)
- iDEN (Integrated Digital Enhanced Network)
- PHS (Personal Handyphone System)
- - GSM (Global System for Mobile Communication)
- - CDPD (Cellular Digital Packet Data)
- - PDC (Personal Digital Cellular)
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 such 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 certain of these inquiries using their wireless
telephones without assistance by customer care representatives. By
bypassing the call center infrastructure for certain of these activities,
network operators can reduce their operating costs.
THE UNWIRED PLANET 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.
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- 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.
- 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: (1) UP.Mail, which delivers email to wireless telephones,
(2) UP.Organizer, a personal information management application, and (3)
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 March 1999, we have licensed UP.Browser to 22 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, Quote.com, Bloomberg, Reuters, ESPN
Sportszone and Travelocity.
PRODUCTS AND SERVICES
PRODUCTS
We sell and support software products that 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
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<PAGE> 43
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 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:
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<PAGE> 44
<TABLE>
- ------------------------------------------------------------------------------------------
COMPONENTS DESCRIPTION
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Gateway The UP.Link gateway component provides the network-layer
functions of the UP.Link Server Suite, and connects
Internet- and intranet-based services to wireless networks
and wireless telephones. The UP.Link gateway system 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> 45
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>
- ------------------------------------------------------------------------------------------
FEATURES DESCRIPTION
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Browsing UP.Browser displays WML-designed pages from any Web or
intranet site.
- ------------------------------------------------------------------------------------------
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 Allows access to important information when out of network
Environment 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 synchronizes with PC-based personal information management applications
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
The Unwired Planet Software Development Kit, or 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.
- Tools for establishing secure communications between WML applications and
UP.Link Servers.
- Sample WML files and application source code.
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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 porting 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 March 1999, 22 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 Announced Commercial Launch GSM France
(expected March 1999)
- --------------------------------------------------------------------------------------------------
Bell Mobility Announced Commercial Launch CDMA Canada
(expected April 1999)
- --------------------------------------------------------------------------------------------------
DDI Corporation Announced Commercial Launch CDMA Japan
(expected April 1999)
- --------------------------------------------------------------------------------------------------
IDO Corporation Announced Commercial Launch CDMA Japan
(expected April 1999)
- --------------------------------------------------------------------------------------------------
Nextel Communications Announced Commercial Launch iDEN USA
(expected June 1999)
- --------------------------------------------------------------------------------------------------
France Telecom Mobile Trial GSM France
- --------------------------------------------------------------------------------------------------
Omnitel Trial GSM Italy
- --------------------------------------------------------------------------------------------------
Orange Trial GSM U.K.
- --------------------------------------------------------------------------------------------------
Deutsche Telekom Mobilnet GmbH Trial GSM Germany
(T-Mobil)
- --------------------------------------------------------------------------------------------------
Telecom Italia Mobile Trial GSM Italy
- --------------------------------------------------------------------------------------------------
Telstra Trial GSM Australia
- --------------------------------------------------------------------------------------------------
Telenor Trial GSM Norway
- --------------------------------------------------------------------------------------------------
</TABLE>
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
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<PAGE> 47
customers with assistance in choosing the appropriate content and applications
for their subscribers and creating the promotion and pricing strategies for
their service.
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 porting support and engineering 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 March 1999, 22 wireless telephone manufacturers have licensed
UP.Browser, and the following manufacturers have publicly announced products
that will include UP.Browser:
<TABLE>
<S> <C>
- - Alcatel - Qualcomm
- - IGS - Sagem
- - LG Information & Communications - Samsung Electronics
- - Mitsubishi - Siemens
- - Motorola - Sony
- - Panasonic (Matsushita)
</TABLE>
Additionally, Nokia and Ericsson have announced that they will introduce
wireless telephones that will be compatible with our UP.Link Server Suite.
During the year ended June 30, 1998, AT&T Wireless Services and Matsushita
Communications Industrial accounted for approximately 22% and 18%, 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 $5.1 million for the six months ended
December 31, 1998. As of December 31, 1998, we had 58 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 such engineers on a timely basis.
See "Risk Factors -- Our market is subject to rapid technological change,"
"-- Our software products may contain defects or errors, and shipments of our
software may be delayed," "-- Our success depends on key management and
technical personnel," "-- We depend on others to
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provide content and develop applications for wireless telephones," "-- We must
integrate our products with third-party technology" and "-- We rely on
technology licensed to us by others."
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
Unwired Planet, 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 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. See "Risk Factors -- We depend on the emergence of the WAP Forum's
specifications as the predominant standard for the delivery of Internet-based
services through wireless telephones."
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 the same manner as JavaScript does for HTML Web 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 URLs.
On standard Internet Web servers, content typically resides in databases,
but is provided to users via a number of content formats, including HTML,
JavaScript 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.
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Components of UP.Link Technology
Our UP.Link Server Suite is designed to be modular, expandable, flexible,
scalable and reliable. Using a distributed 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 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 certain 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 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 fault
tolerance 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 provides an extensible software framework to translate
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 (France), CTC (Japan), Sema Group (France, Canada
and United States) and Siemens (Germany). In addition, we have a joint sales and
marketing relationship with Lucent Technologies.
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As of December 31, 1998, we had 24 persons in sales and marketing serving the
United States market, and 11 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 66% of our total revenues for the six
months ended December 31, 1998. 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. See "Risk Factors -- International expansion is
an important part of our strategy, and such expansion carries specific risks."
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. In addition, our agreements with
these partners typically do not restrict the sale of products that are
competitive with our products, and each of our partners can cease marketing our
products and services at their option and, under certain circumstances, with
little notice and with little or no penalty. See "Risk Factors -- Our success
depends in part on our ability to maintain and expand our distribution
channels."
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 both 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.
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
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<PAGE> 51
already sell billions of dollars of wireless telephones and other
telecommunications products to network operators which are our existing
and potential customers.
- Microsoft and Wireless Knowledge, a joint venture of Microsoft and
Qualcomm, which have announced their intention to introduce products 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 port its Windows CE operating system to wireless handheld devices,
including wireless telephones, and to develop and market its own browser
for such 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. See "Risk Factors -- The market
for our products and services is highly competitive."
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 March 1999, we had one issued United States patent, two allowed
patent applications and 54 pending United States patent applications, as well as
foreign counterparts with respect to certain 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 now pending of which we are unaware, which will cause us to
be infringing when it issues in the future. To address such patent infringement
claims, we may have to enter into royalty or licensing
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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. See "Risk Factors -- We may be unable to adequately protect our
proprietary rights or may be sued by third parties for infringement of their
proprietary rights."
EMPLOYEES
As of December 31, 1998, we had a total of 111 employees. None of our
employees is covered by any collective bargaining agreements. We believe that
our relations with our employees are good. See "Risk Factors -- Our success
depends on key management and technical personnel" and "-- We must successfully
manage our anticipated growth."
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.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors and their ages as of December 31, 1998
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
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
Malcolm Bird 42 Managing Director, Unwired Planet (Europe) Ltd.
Roger Evans(1)(2) 53 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 Unwired Planet. Prior to founding Unwired Planet 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 Unwired Planet 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.
ALAN BLACK. Mr. Black joined Unwired Planet 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
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California Society of Certified Public Accountants and the Canadian Institute of
Chartered Accountants.
ANDREW LAURSEN. Mr. Laursen joined Unwired Planet 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 Unwired Planet in January 1996 as Vice
President of Product Development and was appointed as Vice President of
Marketing in October 1996. From July 1987 to December 1995 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 Unwired Planet in August 1996 as
Director of Business Development and was promoted to Vice President of North
American Sales in August 1997. Prior to joining Unwired Planet, 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.
MALCOLM BIRD. Prior to joining Unwired Planet as Vice President of Europe
in September 1997, Mr. Bird worked at Acorn Computer Group, Plc., a computer
company, from November 1989 to 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 Unwired Planet 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, and several
privately-held networking companies. Mr. Evans holds a Master of Arts degree in
Economics from Cambridge University, England.
DAVID KRONFELD. Mr. Kronfeld has been a director of Unwired Planet 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
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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 Unwired Planet 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.
BOARD COMPOSITION
Our Bylaws currently provide for a Board of Directors consisting of five
members. 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 Unwired Planet, 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 Unwired Planet and certain of its principal stockholders.
This voting agreement will terminate 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
Unwired Planet are eligible to participate in our 1995 and 1996 Stock Plans and
will be eligible to participate in the our 1999 Employee Stock Purchase Plan.
Directors who are not employees of Unwired Planet are eligible to participate in
our 1996 Stock Plan and will be eligible to participate in our 1999 Directors'
Stock Option Plan. See "Stock Plans."
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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 such 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 Unwired Planet's Board of
Directors are currently Messrs. Evans and Verhalen, neither of whom has at any
time been an officer or employee of Unwired Planet.
EXECUTIVE COMPENSATION
Summary Compensation. The following table sets forth certain 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 $100,000 during the year ended June 30, 1998 (collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) 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 35,000(2) 106,667 73,287(3)
Maurice Jeffery, Vice President,
North America Sales....................... 118,508 56,667(2) 55,000 600(1)
Malcolm Bird, Managing Director, Unwired
Planet (Europe) Ltd....................... 100,000 137,224(2) 120,000 18,000(4)
Michael Matthys, former
Vice President, Asia Sales(5)............. 84,615 69,444 -- 497(1)
</TABLE>
- -------------------------
(1) Consists of life insurance premiums paid by Unwired Planet.
(2) Consists of sales commissions.
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<PAGE> 57
(3) Consists of payments for moving and relocation costs, monthly payments for
housing expenses pursuant to relocation agreement and life insurance
premiums paid by Unwired Planet.
(4) Consists of Unwired Planet's contribution to pension plan and auto
allowance.
(5) Mr. Matthys resigned from Unwired Planet in February 1999.
Option Grants. The following table shows certain 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 STOCK PRICE
NUMBER OF PERCENTAGE OF APPRECIATION
SHARES TOTAL FOR OPTION
UNDERLYING OPTIONS EXERCISE TERM(2)
OPTIONS GRANTED TO PRICE PER EXPIRATION ------------------
NAME GRANTED(1) EMPLOYEES SHARE DATE 5% 10%
---- ---------- ------------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Alain Rossmann...................... -- -- -- -- -- --
Charles Parrish..................... 106,667 8.6% $2.48 6/24/2008 166,029 421,599
Maurice Jeffery..................... 35,000 2.8 0.60 2/18/2008 13,207 33,469
20,000 1.6 2.48 6/24/2008 31,193 79,050
Malcolm Bird........................ 100,000 8.1 0.39 9/24/2007 24,527 62,156
20,000 1.6 2.48 6/24/2008 31,193 79,050
Michael Matthys(3).................. -- -- -- -- -- --
</TABLE>
- -------------------------
(1) These stock options, which were granted under the 1996 Stock Plan, become
exercisable at a rate of 1/4 of the total number of shares of common stock
subject to the option on the first anniversary of the date of grant, and
1/48 of the total number of shares monthly thereafter, as long as the
optionee remains an employee with, consultant to, or director of Unwired
Planet.
(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the Securities and Exchange Commission. There is no
assurance provided to any executive officer or any other holder of our
securities that the actual stock price appreciation over the 10-year option
term will be at the assumed 5% and 10% levels or at any other defined level.
Unless the market price of the common stock appreciates over the option
term, no value will be realized from the option grants made to the executive
officers.
(3) Mr. Matthys resigned from Unwired Planet in February 1999.
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<PAGE> 58
Aggregate Option Exercises and Holdings. The following table provides
certain summary information concerning the shares of common stock represented by
outstanding stock options held by each of the Named Executive Officers as of
June 30, 1998.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS AT JUNE 30, IN-THE-MONEY OPTIONS
SHARES VALUE 1998 (#) AT JUNE 30, 1998 ($)(2)
ACQUIRED ON REALIZED ---------------------------- ---------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alain Rossmann............ -- -- -- -- -- --
Charles Parrish........... -- -- -- 106,667 -- $ 0
Maurice Jeffrey........... 14,581 $27,268 731 74,687 $1,645 117,271
Malcolm Bird.............. -- -- -- 119,999 -- 208,500
Michael Matthys(3)........ -- -- -- -- -- --
</TABLE>
- -------------------------
(1) The amount set forth represents the difference between the fair market value
of the shares on the date of exercise as determined by the Board of
Directors and the exercise price of the option.
(2) Based on the fair market value as of June 30, 1998, as determined by the
Board of Directors, minus the exercise price, multiplied by the number of
shares underlying the option.
(3) Mr. Matthys resigned from Unwired Planet in February 1999.
We have entered into agreements with each of our executive officers which
provide that if such officer's employment is terminated involuntarily other than
for cause within 18 months following a change of control transaction, then
subject to certain limitations, the vesting of any stock option or restricted
stock held by such 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 1,649,463 shares of common stock have been
reserved for issuance under the 1995 Stock Plan. As of March 15, 1999, options
to purchase 463,898 shares of common stock were outstanding at a weighted
average exercise price of $0.16, 1,185,565 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 1995 Stock Plan may be administered by the Board of Directors or a
committee of the Board (the "Administrator"). 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 such 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 such fair market value in the case of an
optionee who holds more than
57
<PAGE> 59
10% of the total voting power of all classes of our stock). Payment of the
exercise price may be made in cash or such 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. Each option may be exercised during the lifetime of the optionee
only by such 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 Unwired Planet, or within 12 months if such
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 1/4th of the total number of shares
subject to the option 12 months after the date of grant, and 1/48th 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 such period exceed 30 days. Unless the
Administrator determines otherwise, the recipient of a stock purchase right must
execute a restricted stock purchase agreement granting Unwired Planet an option
to repurchase unvested shares at cost upon termination of such 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 certain other changes. The 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. As of
March 15, 1999, options to purchase 2,870,420 shares of common stock were
outstanding at a weighted average exercise price of $1.99, 364,699 shares had
been issued upon exercise of outstanding options or pursuant to restricted stock
purchase agreements, and 4,499,306 shares remained available for future grant.
The 1996 Stock Plan may be administered by the Board of Directors or a
committee of the Board (the "Administrator"). 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 1996 plan in any fiscal year. Incentive stock options granted
under the
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<PAGE> 60
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 such 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 such 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 such optionee or permitted transferee. The Administrator
determines when options become exercisable. Options granted under the 1996 Stock
Plan generally must be exercised within 60 days after the termination of the
optionee's status as an employee, director or consultant of Unwired Planet, or
within 12 months if such 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 at the rate of 1/4th of
the total number of shares subject to the option 12 months after the date of
grant, and 1/48th 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.
However, if the successor corporation does not agree to such assumption or
substitution of an 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 such period exceed 30 days. Unless the
Administrator determines otherwise, the recipient of a stock purchase right must
execute a restricted stock purchase agreement granting Unwired Planet an option
to repurchase the unvested shares at cost upon termination of such recipient's
relationship with us.
1999 Employee Stock Purchase Plan. Our 1999 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 1999
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 1999 Employee Stock
Purchase Plan becomes effective upon the date of this offering. Unless
terminated earlier by the Board of Directors, the 1999 Employee Stock Purchase
Plan shall terminate in March 2019.
The 1999 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'
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<PAGE> 61
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 1999
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 1999 Employee Stock Purchase Plan if
they are employed by us or any such subsidiary for at least 20 hours per week
and more than five months per year. The 1999 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 1999 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 1999 Employee Stock
Purchase Plan if immediately after the grant such 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 such option would permit an employee to purchase stock under
the 1999 Employee Stock Purchase Plan at a rate that exceeds $25,000 of fair
market value of such 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 1999 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 1999
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
1999 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 such corporation. The Board of Directors has
the power to amend or terminate the 1999 Employee Stock Purchase Plan and to
change or terminate offering periods as long as such action does not adversely
affect any outstanding rights to purchase stock thereunder. However, the Board
of Directors may amend or terminate the 1999 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.
1999 Directors' Stock Option Plan. The 1999 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 1999
Directors' Stock Option Plan, all of which remain available for future grants.
The 1999 Directors' Stock Option Plan provides for the grant of nonstatutory
stock options to nonemployee directors of Unwired Planet. The 1999 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
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<PAGE> 62
will be addressed by abstention of any interested director from both
deliberations and voting regarding matters in which such director has a personal
interest.
The 1999 Directors' Stock Option Plan provides that each person who becomes
a nonemployee director of Unwired Planet 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 such individual first becomes a nonemployee director
of Unwired Planet. 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, such director will be
granted an option to purchase 2,500 shares of common stock.
The 1999 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 1999
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 such optionee. All options granted under the 1999 Directors'
Stock Option Plan shall vest in full immediately upon grant of such 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 Unwired Planet, exercise options granted under
the 1999 Directors' Stock Option Plan. If he or she does not exercise such
option within such 90 day period, such option shall terminate. The exercise
price of all stock options granted under the 1999 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 1999 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 Unwired
Planet in which more than 50% of the shares of Unwired Planet 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 such
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 Unwired Planet or acquiring its
business by reason of such sale, merger or reorganization. Our Board of
Directors may amend or terminate the 1999 Directors' Stock Option Plan as long
as such action does not adversely affect any outstanding option and we shall
obtain stockholder approval for any amendment to the extent required by
applicable law.
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 such individual's fiduciary duties as a director except for liability (a) for
any breach of such director's duty of loyalty to Unwired Planet or to its
stockholders, (b) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (c) for unlawful payments
of dividends or unlawful stock repurchases or redemptions as provided in Section
174 of the Delaware General Corporation Law or (d) for any transaction from
which a director derives an improper personal benefit.
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<PAGE> 63
Our Bylaws provide that Unwired Planet 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 such party's status or service as a director, officer, employee
or other agent of Unwired Planet upon an undertaking by such party to repay such
advances if it is ultimately determined that such party 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 such director or officer against expenses (including attorney's fees),
judgments, fines and settlements (collectively, "Liabilities") paid by such
individual in connection with any action, suit or proceeding arising out of such
individual's status or service as a director or officer of Unwired Planet (other
than Liabilities arising from willful misconduct or conduct that is knowingly
fraudulent or deliberately dishonest) and to advance expenses incurred by such
individual in connection with any proceeding against such individual with
respect to which such individual 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 Unwired Planet 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 such
indemnification.
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<PAGE> 64
CERTAIN TRANSACTIONS
Certain stock option grants to directors and executive officers of Unwired
Planet are described herein under the caption "Management -- Executive
Compensation."
Since our inception, we have issued, in private placement transactions
(collectively, the "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 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 Unwired Planet 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 -- -- --
Entities Affiliated with 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."
Certain of our officers issued full recourse promissory notes to Unwired
Planet to purchase restricted stock under the 1995 Stock Plan and the 1996 Stock
Plan:
<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%
</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 certain 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.
We have entered into agreements with each of our executive officers which
provide that if such officer's employment is terminated involuntarily other than
for cause within 18 months following a change of control transaction, then
subject to certain limitations, the vesting of any stock option or restricted
stock held by such officer shall be automatically accelerated so that the option
or restricted stock becomes completely vested.
We entered into an 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 Unwired Planet. In
addition, we have agreed to pay Mr. Parrish a severance payment equal to six
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<PAGE> 65
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 such termination.
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<PAGE> 66
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of our common stock as of March 29, 1999, and as adjusted
to reflect the sale of common stock offered hereby, as to (a) each person (or
group of affiliated persons) known by us to own beneficially more than 5% of our
outstanding common stock, (b) each of our directors, (c) each of the Named
Executive Officers, and (d) all directors and executive officers of Unwired
Planet as a group.
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY
OWNED(1)
---------------------
NUMBER OF BEFORE AFTER
NAME AND ADDRESS SHARES(1) OFFERING OFFERING
---------------- ---------- --------- --------
<S> <C> <C> <C>
Greylock Equity Limited Partnership........................ 3,004,142 11.3%
c/o Greylock Management
One Federal Street
Boston, MA 02110
Entities affiliated with Matrix Partners(2)................ 3,004,138 11.3%
Bay Colony Corporate Center
1000 Winter Street, Suite 4500
Waltham, MA 02154
Alain Rossmann(3).......................................... 3,737,832 14.1%
Charles Parrish............................................ 752,822 2.8%
Roger Evans(4)............................................. 3,037,475 11.4%
c/o Greylock Management
One Federal Street
Boston, MA 02110
David Kronfeld(5).......................................... 635,763 2.4%
c/o JK&B Capital
205 North Michigan Avenue, Suite 808
Chicago, IL 60601
Andrew Verhalen(6)......................................... 3,037,471 11.4%
c/o Matrix Partners
Bay Colony Corporate Center
1000 Winter Street, Suite 4500
Waltham, MA 02154
Maurice Jeffery(7)......................................... 34,270 *
Malcolm Bird(8)............................................ 41,667 *
Michael Matthys(9)......................................... 29,167 *
All directors and executive officers as a group
(11 persons)(10)......................................... 12,321,880 46.0%
</TABLE>
- -------------------------
* Less than 1%.
(1) Applicable percentage of beneficial ownership is based on 26,474,055 shares
of common stock outstanding as of March 29, 1999, together with applicable
options and warrants for such stockholder. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission. The number of shares beneficially owned by a person includes
shares of common stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of March 29, 1999. Such
shares issuable pursuant to such options are deemed outstanding for
computing the percentage ownership of the person holding such options but
are not deemed outstanding for the purposes of computing the percentage
ownership of each other person. To our knowledge, the persons named in this
table have sole voting and investment power with respect to all shares of
common stock shown as owned by them, subject to community property laws
where applicable and except as indicated in the other footnotes to this
table. Unless otherwise indicated, the address of each of the individuals
named above is: c/o Unwired Planet, Inc., 800 Chesapeake Drive, Redwood
City, California 94063.
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<PAGE> 67
(2) Consists of 2,891,203 shares held by Matrix Partners IV, L.P. and 112,935
shares held by Matrix IV Entrepreneurs Fund. Mr. Verhalen is a director of
Unwired Planet 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 such shares except to the extent
of his pecuniary interest therein.
(3) Includes 74,832 shares held by Platane Fund. Mr. Rossmann is the manager of
Platane Fund, and disclaims beneficial ownership of such shares except to
the extent of his pecuniary interest therein.
(4) Consists of 33,333 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 29, 1999 and 3,004,142 shares held by
Greylock Equity Limited Partnership. Mr. Evans is a director of Unwired
Planet and a general partner of Greylock Equity GP Limited Partnership, the
general partner of Greylock Equity Limited Partnership. Mr. Evans disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein.
(5) Consists of 33,333 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 29, 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 Unwired Planet 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 such shares except to the extent
of his pecuniary interest therein.
(6) Consists of 33,333 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 29, 1999, 2,891,203 shares held by
Matrix Partners IV, L.P. and 112,935 shares held by Matrix IV Entrepreneurs
Fund. Mr. Verhalen is a director of Unwired Planet 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 such shares except to the extent of his pecuniary interest
therein.
(7) Includes 19,689 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 29, 1999.
(8) Consists of 41,667 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 29, 1999.
(9) Mr. Matthys resigned from Unwired Planet in February 1999.
(10) Includes 317,247 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 29, 1999.
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<PAGE> 68
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 15, 1999, there were 26,474,055 shares of common stock
outstanding that were held of record by approximately 92 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 15, 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 15, 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 such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." In the event of a liquidation, dissolution or winding up of
Unwired Planet, 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, Unwired Planet 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 such 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
Unwired Planet 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 CERTAIN HOLDERS
The holders of 20,174,170 shares of common stock (the "Registrable
Securities") or their transferees are entitled to certain rights with respect to
the registration of such shares under the Securities Act. These rights are
provided under the terms of an agreement between Unwired Planet and the holders
of Registrable Securities. Subject to certain 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 Unwired Planet
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 Registrable Securities are
entitled to include their shares of
67
<PAGE> 69
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
such registrations must be borne by Unwired Planet 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 CERTAIN 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 certain 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 Unwired
Planet without further action by the stockholders. In addition, upon completion
of this offering, certain 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 Unwired Planet, 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 such 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 Unwired Planet. Furthermore, such preferred
stock may have other rights, including economic rights senior to the common
stock, and, as a result, the issuance of such 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 such time
as 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 Unwired Planet, with the other
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 Unwired Planet.
68
<PAGE> 70
WARRANTS
As of December 31, 1998, 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 will apply to list our common stock on The Nasdaq Stock Market's
National Market under the trading symbol "UNWP."
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. We cannot provide any assurances that a significant public market for the
common stock will develop or be sustained after this offering. Future sales of
substantial amounts of our common stock in the public market, or the possibility
of such 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 shares of
common stock. Of these shares, the shares to be sold in this offering
( 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 such shares are held by "affiliates" of Unwired Planet,
as that term is defined in Rule 144 under the Securities Act.
The remaining 26,474,055 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 certain "lock-up" agreements, all the executive officers,
directors and certain stockholders of Unwired Planet, who collectively hold an
aggregate of 26,474,055 these restricted securities, have agreed not to offer,
sell, contract to sell, grant any option to purchase or otherwise dispose of any
such 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.
On the date of the expiration of the lock-up agreements, 18,111,259
restricted securities will be eligible for immediate sale (of which 11,768,289
shares will be subject to certain volume, manner of sale and other limitations
under Rule 144). The remaining 8,362,796 shares will be eligible for sale
pursuant to Rule 144 on the expiration of various one-year holding periods over
the six months following the expiration of the lock-up period.
Following the expiration of such lock-up periods, certain 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
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<PAGE> 71
pursuant to Rule 701 under the Securities Act. Rule 701 permits resales of such
shares in reliance upon Rule 144 under the Securities Act but without compliance
with certain restrictions, including the holding-period requirement, imposed
under Rule 144. In general, under Rule 144, as in effect at the closing of this
offering, beginning 90 days after the date of this prospectus, a person (or
persons whose shares of Unwired Planet are aggregated) who has beneficially
owned restricted securities for at least one year (including the holding period
of any prior owner who is not an affiliate of Unwired Planet) would be entitled
to sell, within any three-month period, a number of shares that does not exceed
the greater of (1) 1% of the then-outstanding shares of common stock or (2) the
average weekly trading volume of the common stock during the four calendar weeks
preceding the filing of a Form 144 with respect to such sale. Sales under Rule
144 are also subject to certain manner of sale and notice requirements and to
the availability of current public information about Unwired Planet. Under Rule
144(k), a person who is not deemed to have been an affiliate of Unwired Planet
at any time during the 90 days preceding a sale and who has beneficially owned
the shares proposed to be sold for at least two years (including the holding
period of any prior owner who is not an affiliate of Unwired Planet) is entitled
to sell such 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 shares of
common stock reserved for issuance under the 1995 Stock Plan, the 1996 Stock
Plan and the 1999 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 certain holders, to
the Rule 144 limitations applicable to affiliates, the above-referenced 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 certain circumstances, have rights to
require us to register their shares for future sale. See "Description of Capital
Stock -- Registration Rights of Certain Holders."
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<PAGE> 72
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
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
BancBoston Robertson Stephens Inc. .........................
Hambrecht & Quist LLC.......................................
U.S. Bancorp Piper Jaffray Inc. ............................
--------
Total
========
</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 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
--------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions
payable by Unwired Planet...........
Expenses payable by Unwired Planet....
</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 certain of 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 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
certain other persons associated with us who have
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<PAGE> 73
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 such persons purchase such 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 certain liabilities
under the Securities Act or contribute to payments which the underwriters may be
required to make in that respect.
We will apply to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "UNWP."
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 such 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> 74
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 such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under these securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such 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 such persons. All or a substantial portion of the assets of the issuer
and such 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 such 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 such 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 such 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 such report must be
filed in respect of common stock acquired on the same date and under the same
prospectus exemption.
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<PAGE> 75
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.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Unwired Planet by Venture Law Group, A Professional Corporation, Menlo Park,
California. Certain legal matters in connection with this offering will be
passed upon for the underwriters by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California. Certain 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 the
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended June 30, 1998, 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.
ADDITIONAL 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, certain
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 Unwired Planet 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 such 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 such 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
certain fees prescribed by the Commission. Such reports and other information
may also be inspected without charge at a Web site maintained by the Commission.
The address of such site is http://www.sec.gov.
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<PAGE> 76
UNWIRED PLANET, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of June 30, 1997 and 1998,
and December 31, 1998 (Unaudited)......................... F-3
Consolidated Statements of Operations for the years ended
June 30, 1996, 1997, and 1998, and for the six months
ended December 31, 1997 and 1998 (Unaudited).............. F-4
Consolidated Statements of Stockholders' Equity for the
years ended June 30, 1996, 1997, and 1998, and for the six
months ended December 31, 1998 (Unaudited)................ F-5
Consolidated Statements of Cash Flows for the years ended
June 30, 1996, 1997, and 1998, and for the six months
ended December 31, 1997 and 1998 (Unaudited).............. F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 77
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Unwired Planet, Inc.:
We have audited the accompanying consolidated balance sheets of Unwired Planet,
Inc. and subsidiaries (the Company) as of June 30, 1997 and 1998, 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. 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 Unwired Planet, Inc.
and subsidiaries as of June 30, 1997 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 1998, in conformity with generally accepted accounting
principles.
Mountain View, California
September 11, 1998, except as to
Note 9, which is as of
March 26, 1999
F-2
<PAGE> 78
UNWIRED PLANET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, 1998
-------------------- -----------------------
1997 1998 ACTUAL PRO FORMA
-------- -------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 4,090 $ 12,677 $ 4,878 $ 22,678
Short-term investments.................................... 3,924 20,787 24,383 24,383
Accounts receivable....................................... 126 2,724 2,091 2,091
Prepaid expenses and other current assets................. 128 352 452 452
-------- -------- -------- --------
Total current assets...................................... 8,268 36,540 31,804 49,604
Property and equipment, net................................. 1,226 1,336 1,517 1,517
Deposits and other assets................................... 265 1,268 1,306 1,306
-------- -------- -------- --------
$ 9,759 $ 39,144 $ 34,627 $ 52,427
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of equipment loan and capital lease
obligations............................................. $ -- $ 424 $ 424 $ 424
Accounts payable.......................................... 213 532 470 470
Accrued liabilities....................................... 565 1,877 2,864 2,864
Deferred revenue.......................................... 856 7,003 9,562 9,562
-------- -------- -------- --------
Total current liabilities................................. 1,634 9,836 13,320 13,320
Equipment loan and capital lease obligations, less current
portion................................................... -- 915 712 712
-------- -------- -------- --------
Total liabilities......................................... 1,634 10,751 14,032 14,032
-------- -------- -------- --------
Commitments
Stockholders' equity:
Convertible preferred stock, $0.001 par value;
actual -- 17,843,550 shares authorized;
pro forma -- 20,329,722 shares authorized:
Series A; 4,731,997 shares designated;
actual -- 4,731,997 shares issued and outstanding as
of June 30, 1997 and 1998, and December 31, 1998;
liquidation preference of $0.50 per share; pro
forma -- no shares issued and outstanding............. 5 5 5 --
Series B; 4,000,000 shares designated;
actual -- 3,999,987 shares issued and outstanding as
of June 30, 1997 and 1998, and December 31, 1998;
liquidation preference of $1.68 per share; pro
forma -- no shares issued and outstanding............. 4 4 4 --
Series C; 2,666,667 shares designated;
actual -- 2,538,766 shares issued and outstanding as
of June 30, 1997 and 1998, and December 31, 1998;
liquidation preference of $3.81 per share; pro
forma -- no shares issued and outstanding............. 3 3 3 --
Series D; 6,444,877 shares designated; actual -- -0-,
6,444,877, and 6,444,877 shares issued and outstanding
as of June 30, 1997 and 1998, and December 31, 1998,
respectively; liquidation preference of $5.08 per
share; pro forma -- no shares issued and
outstanding........................................... -- 6 6 --
Series E; 2,486,171 shares designated; actual -- no
shares issued and outstanding as of June 30, 1997 and
1998 and December 31, 1998; liquidation preference of
$7.24 per share; pro forma -- no shares issued and
outstanding........................................... -- -- -- --
Common stock, $0.001 par value; 29,333,333 shares
authorized; actual -- 5,712,250, 6,192,398 and 6,329,378
shares issued and outstanding as of June 30, 1997 and
1998, and December 31, 1998, respectively; pro
forma -- 26,503,548 shares issued and outstanding....... 6 6 6 27
Additional paid-in capital................................ 18,864 51,611 51,963 69,760
Deferred stock-based compensation......................... -- (1,786) (1,390) (1,390)
Treasury stock............................................ (46) (72) (72) (72)
Notes receivable from stockholders........................ (147) (197) (420) (420)
Accumulated deficit....................................... (10,564) (21,187) (29,510) (29,510)
-------- -------- -------- --------
Total stockholders' equity................................ 8,125 28,393 20,595 38,395
-------- -------- -------- --------
$ 9,759 $ 39,144 $ 34,627 $ 52,427
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 79
UNWIRED PLANET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
---------------------------- -----------------
1996 1997 1998 1997 1998
------- ------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Licenses.................................................. $ -- $ 80 $ 522 $ 175 $ 266
Maintenance and support services.......................... -- 212 1,683 316 2,332
Consulting services....................................... -- -- -- -- 587
------- ------- -------- ------- -------
Total revenues.......................................... -- 292 2,205 491 3,185
------- ------- -------- ------- -------
Cost of revenues:
Licenses.................................................. -- 87 95 30 88
Maintenance and support services.......................... -- 266 1,063 420 1,109
Consulting services....................................... -- -- -- -- 135
------- ------- -------- ------- -------
Total cost of revenues.................................. -- 353 1,158 450 1,332
------- ------- -------- ------- -------
Gross profit (loss)..................................... -- (61) 1,047 41 1,853
------- ------- -------- ------- -------
Operating expenses:
Research and development.................................. 1,387 3,959 5,732 2,453 5,137
Sales and marketing....................................... 757 3,198 5,011 1,965 3,875
General and administrative................................ 522 1,237 1,801 744 1,440
Stock-based compensation.................................. -- -- 108 6 504
------- ------- -------- ------- -------
Total operating expenses................................ 2,666 8,394 12,652 5,168 10,956
------- ------- -------- ------- -------
Operating loss.......................................... (2,666) (8,455) (11,605) (5,127) (9,103)
Interest income, net........................................ 196 464 982 172 780
------- ------- -------- ------- -------
Net loss................................................ $(2,470) $(7,991) $(10,623) $(4,955) $(8,323)
======= ======= ======== ======= =======
Basic and diluted net loss per share........................ $ (0.53) $ (1.67) $ (2.03) $ (0.97) $ (1.49)
======= ======= ======== ======= =======
Shares used in computing basic and diluted net loss per
share..................................................... 4,704 4,776 5,221 5,098 5,578
======= ======= ======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 80
UNWIRED PLANET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCK
---------------------------------------------------------------------------------
SERIES A SERIES B SERIES C SERIES D
------------------ ------------------ ------------------ ------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ------ --------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances as of June 30, 1995........ 4,731,997 $5 -- $-- -- $-- -- $ --
Issuance of common stock to
employees for cash................. -- -- -- -- -- -- -- --
Issuance of Series B convertible
preferred stock, net of $16 of
issuance costs..................... -- -- 3,999,987 4 -- -- -- --
Payment on notes receivable from
stockholders....................... -- -- -- -- -- -- -- --
Net loss............................ -- -- -- -- -- -- -- --
--------- -- --------- --- --------- --- --------- ----
Balances as of June 30, 1996........ 4,731,997 5 3,999,987 4 -- -- -- --
Issuance of common stock to officers
and employees for notes
receivable......................... -- -- -- -- -- -- -- --
Issuance of common stock to
consultant......................... -- -- -- -- -- -- -- --
Stock options exercised............. -- -- -- -- -- -- -- --
Issuance of Series C convertible
preferred stock, net of $36
issuance costs..................... -- -- -- -- 2,538,766 3 -- --
Repurchase of common stock in
settlement of notes receivable from
stockholders....................... -- -- -- -- -- -- -- --
Net loss............................ -- -- -- -- -- -- -- --
--------- -- --------- --- --------- --- --------- ----
Balances as of June 30, 1997........ 4,731,997 5 3,999,987 4 2,538,766 3 -- --
Issuance of common stock to officers
and employees for notes
receivable......................... -- -- -- -- -- -- -- --
Repayment of notes receivable from
stockholders....................... -- -- -- -- -- -- -- --
Stock options exercised............. -- -- -- -- -- -- -- --
Issuance of Series D convertible
preferred stock, net of $2,066
issuance costs..................... -- -- -- -- -- -- 6,444,877 6
Repurchase of common stock in
settlement of notes receivable from
stockholders....................... -- -- -- -- -- -- -- --
Deferred compensation related to
stock option grants................ -- -- -- -- -- -- -- --
Amortization of stock-based
compensation....................... -- -- -- -- -- -- -- --
Net loss............................ -- -- -- -- -- -- -- --
--------- -- --------- --- --------- --- --------- ----
Balances as of June 30, 1998........ 4,731,997 5 3,999,987 4 2,538,766 3 6,444,877 6
Issuance of common stock to officers
and employees for notes receivables
(unaudited)........................ -- -- -- -- -- -- -- --
Stock options exercised
(unaudited)........................ -- -- -- -- -- -- -- --
Deferred compensation related to
stock option grants (unaudited).... -- -- -- -- -- -- -- --
Amortization of stock-based
compensation (unaudited)........... -- -- -- -- -- -- -- --
Net loss (unaudited)................ -- -- -- -- -- -- -- --
--------- -- --------- --- --------- --- --------- ----
Balances as of December 31, 1998
(unaudited)........................ 4,731,997 $5 3,999,987 $ 4 2,538,766 $ 3 6,444,877 $ 6
========= == ========= === ========= === ========= ====
<CAPTION>
NOTES
COMMON STOCK ADDITIONAL DEFERRED RECEIVABLE
------------------ PAID-IN STOCK-BASED TREASURY FROM ACCUMULATED
SHARES AMOUNT CAPITAL COMPENSATION STOCK STOCKHOLDERS DEFICIT
--------- ------ ---------- ------------ -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances as of June 30, 1995........ 4,671,000 $ 5 $ 2,340 $ -- $ -- $ (4) $ (103)
Issuance of common stock to
employees for cash................. 72,806 -- 3 -- -- -- --
Issuance of Series B convertible
preferred stock, net of $16 of
issuance costs..................... -- -- 6,680 -- -- -- --
Payment on notes receivable from
stockholders....................... -- -- -- -- -- 4 --
Net loss............................ -- -- -- -- -- -- (2,470)
--------- --- ------- ------- ---- ----- --------
Balances as of June 30, 1996........ 4,743,806 5 9,023 -- -- -- (2,573)
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 -- -- -- --
Stock options exercised............. 93,084 -- 9 -- -- -- --
Issuance of Series C convertible
preferred stock, net of $36
issuance costs..................... -- -- 9,638 -- -- -- --
Repurchase of common stock in
settlement of notes receivable from
stockholders....................... (200,000) -- -- -- (46) 46 --
Net loss............................ -- -- -- -- -- -- (7,991)
--------- --- ------- ------- ---- ----- --------
Balances as of June 30, 1997........ 5,712,250 6 18,864 -- (46) (147) (10,564)
Issuance of common stock to officers
and employees for notes
receivable......................... 226,667 -- 88 -- -- (88) --
Repayment of notes receivable from
stockholders....................... -- -- -- -- -- 12 --
Stock options exercised............. 403,481 -- 87 -- -- -- --
Issuance of Series D convertible
preferred stock, net of $2,066
issuance costs..................... -- -- 30,678 -- -- -- --
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 -- -- --
Net loss............................ -- -- -- -- -- -- (10,623)
--------- --- ------- ------- ---- ----- --------
Balances as of June 30, 1998........ 6,192,398 6 51,611 (1,786) (72) (197) (21,187)
Issuance of common stock to officers
and employees for notes receivables
(unaudited)........................ 90,000 -- 223 -- -- (223) --
Stock options exercised
(unaudited)........................ 46,980 -- 21 -- -- -- --
Deferred compensation related to
stock option grants (unaudited).... -- -- 108 (108) -- -- --
Amortization of stock-based
compensation (unaudited)........... -- -- -- 504 -- -- --
Net loss (unaudited)................ -- -- -- -- -- -- (8,323)
--------- --- ------- ------- ---- ----- --------
Balances as of December 31, 1998
(unaudited)........................ 6,329,378 $ 6 $51,963 $(1,390) $(72) $(420) $(29,510)
========= === ======= ======= ==== ===== ========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balances as of June 30, 1995........ $ 2,243
Issuance of common stock to
employees for cash................. 3
Issuance of Series B convertible
preferred stock, net of $16 of
issuance costs..................... 6,684
Payment on notes receivable from
stockholders....................... 4
Net loss............................ (2,470)
--------
Balances as of June 30, 1996........ 6,464
Issuance of common stock to officers
and employees for notes
receivable......................... --
Issuance of common stock to
consultant......................... 2
Stock options exercised............. 9
Issuance of Series C convertible
preferred stock, net of $36
issuance costs..................... 9,641
Repurchase of common stock in
settlement of notes receivable from
stockholders....................... --
Net loss............................ (7,991)
--------
Balances as of June 30, 1997........ 8,125
Issuance of common stock to officers
and employees for notes
receivable......................... --
Repayment of notes receivable from
stockholders....................... 12
Stock options exercised............. 87
Issuance of Series D convertible
preferred stock, net of $2,066
issuance costs..................... 30,684
Repurchase of common stock in
settlement of notes receivable from
stockholders....................... --
Deferred compensation related to
stock option grants................ --
Amortization of stock-based
compensation....................... 108
Net loss............................ (10,623)
--------
Balances as of June 30, 1998........ 28,393
Issuance of common stock to officers
and employees for notes receivables
(unaudited)........................ --
Stock options exercised
(unaudited)........................ 21
Deferred compensation related to
stock option grants (unaudited).... --
Amortization of stock-based
compensation (unaudited)........... 504
Net loss (unaudited)................ (8,323)
--------
Balances as of December 31, 1998
(unaudited)........................ $ 20,595
========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 81
UNWIRED PLANET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
---------------------------- ------------------
1996 1997 1998 1997 1998
------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(2,470) $(7,991) $(10,623) $(4,955) $ (8,323)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and amortization......................... 108 447 630 277 449
Amortization of deferred stock-based compensation..... -- -- 108 6 504
Changes in operating assets and liabilities:
Accounts receivable................................. -- (126) (2,598) (2,405) 633
Prepaid expenses and other assets................... (156) (233) (427) (100) (138)
Accounts payable.................................... 175 38 319 (34) (62)
Accrued liabilities................................. 31 462 1,312 339 987
Deferred revenue.................................... 25 831 6,147 4,602 2,559
------- ------- -------- ------- --------
Net cash used for operating activities............ (2,287) (6,572) (5,132) (2,270) (3,391)
------- ------- -------- ------- --------
Cash flows from investing activities:
Purchases of property and equipment, net.................. (852) (914) (367) -- (630)
Purchases of short-term investments....................... -- (3,924) (32,338) (3,604) (14,681)
Proceeds from maturities of short-term investments........ -- -- 15,475 5,435 11,085
Other assets.............................................. -- -- (800) -- --
------- ------- -------- ------- --------
Net cash (used for) provided by investing
activities...................................... (852) (4,838) (18,030) 1,831 (4,226)
------- ------- -------- ------- --------
Cash flows from financing activities:
Net proceeds from sale of convertible preferred stock..... 6,680 9,641 30,684 -- --
Issuance of common stock.................................. 3 11 87 14 21
Repayment of notes receivable from stockholders........... 4 -- 12 12 --
Proceeds from equipment loan.............................. -- -- 1,300 1,300 --
Repayment of equipment loan and capital lease
obligations............................................. -- -- (334) (155) (203)
------- ------- -------- ------- --------
Net cash provided by (used for) financing
activities...................................... 6,687 9,652 31,749 1,171 (182)
------- ------- -------- ------- --------
Net increase (decrease) in cash and cash equivalents........ 3,548 (1,758) 8,587 732 (7,799)
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 $ 4,822 $ 4,878
======= ======= ======== ======= ========
Supplemental disclosures of cash flow information:
Property and equipment acquired under capital lease
obligations............................................. $ -- $ -- $ 373 $ 90 $ --
======= ======= ======== ======= ========
Common stock issued to officers and employees for notes
receivable.............................................. $ -- $ 193 $ 88 $ 52 $ 223
======= ======= ======== ======= ========
Repurchase of common stock in settlement of notes
receivable from stockholders............................ $ -- $ 46 $ 26 $ 26 $ --
======= ======= ======== ======= ========
Deferred stock-based compensation......................... $ -- $ -- $ 1,894 $ 63 $ 108
======= ======= ======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 82
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, 1997, AND 1998
(INFORMATION AS OF DECEMBER 31, 1998, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND 1998, IS UNAUDITED.)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION
Unwired Planet, 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.
(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 recognizes
revenue in accordance with the provisions of the American Institute of Certified
Public Accountants' Statement of Position ("SOP") No. 91-1, Software Revenue
Recognition. Prepaid network operator license fees are recognized under
subscription accounting due to our commitment to provide standards-compliant
products during the prepaid license term. The prepaid license fees are
recognized ratably over the estimated deployment period, generally one to two
years. Revenues associated with additional licenses in excess of those
associated with prepaid fees are generally recognized when reported to the
Company by a network operator or reseller, as applicable. The Company recognizes
revenues from maintenance and support services provided to network operators and
wireless telephone manufacturers ratably over the term of the agreement,
typically one year. The Company recognizes revenues from consulting services as
the services are performed.
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 values of
the elements. The adoption of SOP 97-2, as amended, did not have a significant
impact on the Company's accounting for revenues.
(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"). 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 sale by the Company of 2,458,543 shares of convertible
preferred stock at $7.24 per share on March 12, 1998 resulting in gross proceeds
to the Company of approximately $17,800,000 and the conversion of all of the
convertible preferred
F-7
<PAGE> 83
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998
(INFORMATION AS OF DECEMBER 31, 1998, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND 1998, IS UNAUDITED.)
stock have been reflected in the accompanying unaudited pro forma consolidated
balance sheet as if they had occurred on December 31, 1998.
(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, 1998, and December 31, 1998 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
"held-to-maturity" given the Company's positive intent and ability to hold the
securities to maturity. Held-to-maturity securities are carried at amortized
cost, which approximates the fair market value.
(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 to date.
Significant customer information is as follows:
<TABLE>
<CAPTION>
% OF TOTAL REVENUES
------------------------------
SIX MONTHS % OF TOTAL
YEAR ENDED ENDED ACCOUNTS RECEIVABLE
JUNE 30, DECEMBER 31, ------------------------
------------ ------------ JUNE 30, DECEMBER 31,
1997 1998 1997 1998 1998 1998
---- ---- ---- ---- -------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Customer A.............................. 20% 22% 65% 7% -- 3%
Customer B.............................. -- 18% -- 14% 13% --
Customer C.............................. 30% -- -- -- -- --
Customer D.............................. 19% 1% 6% -- -- --
Customer E.............................. 10% 2% -- -- -- --
Customer F.............................. -- -- -- 16% -- --
</TABLE>
F-8
<PAGE> 84
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998
(INFORMATION AS OF DECEMBER 31, 1998, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND 1998, IS UNAUDITED.)
(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.
(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.
F-9
<PAGE> 85
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998
(INFORMATION AS OF DECEMBER 31, 1998, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND 1998, IS UNAUDITED.)
(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 adjustments, necessary for the fair
statement of the Company's consolidated financial position as of December 31,
1998, and the results of its operations and its cash flows for the six months
ended December 31, 1997 and 1998.
(q) NET LOSS PER SHARE
Basic net loss per share is computed using the weighted-average number of
outstanding shares of common stock. 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
F-10
<PAGE> 86
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998
(INFORMATION AS OF DECEMBER 31, 1998, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND 1998, IS UNAUDITED.)
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:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
-------------------------- ----------------
1996 1997 1998 1997 1998
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Shares issuable under stock options......................... 646 2,071 2,877 2,155 3,066
Shares of restricted stock subject to repurchase............ -- 715 670 690 671
Shares issuable pursuant to warrants to purchase convertible
preferred stock........................................... -- -- 31 -- 31
Shares of convertible preferred stock on an "as if
converted" basis.......................................... 8,732 11,271 17,716 11,271 17,716
</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 $0.30
and $1.16 for the six months ended December 31, 1997 and 1998, 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 $0.58 for the
six months ended December 31, 1997 and 1998, respectively. The weighted-average
exercise price of warrants was $3.81 for both the fiscal year ended June 30,
1998 and the six months ended December 31, 1998.
(r) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 131 requires disclosure of certain information regarding
operating segments, products and services, geographic areas of operation, and
major customers. Management is in the process of evaluating the effects of this
change on its reportable segments. The Company will adopt SFAS No. 131 in fiscal
1999.
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.
F-11
<PAGE> 87
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998
(INFORMATION AS OF DECEMBER 31, 1998, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND 1998, IS UNAUDITED.)
(2) SHORT-TERM INVESTMENTS
All of the Company's investments are considered held-to-maturity securities
and consisted of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
----------------- DECEMBER 31,
1997 1998 1998
------ ------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Commercial paper............................................ $3,148 $13,594 $ 7,847
Corporate bonds............................................. 3,006 9,213 14,321
Certificates of deposit..................................... -- 7,238 4,209
------ ------- -------
$6,154 $30,045 $26,377
====== ======= =======
</TABLE>
As of June 30, 1997 and 1998 and December 31, 1998, $2,230,000, $9,258,000,
and $1,994,000, respectively, of the Company's investments are included in cash
and cash equivalents.
The contractual maturity for all short-term investments is one year or
less.
(3) PROPERTY AND EQUIPMENT
Property and equipment, consisted of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
----------------- DECEMBER 31,
1997 1998 1998
------ ------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment and software............................. $1,615 $ 2,214 $ 2,834
Furniture and equipment..................................... 90 213 223
Leasehold improvements...................................... 77 95 95
------ ------- -------
1,782 2,522 3,152
Accumulated depreciation and amortization................... (556) (1,186) (1,635)
------ ------- -------
$1,226 $ 1,336 $ 1,517
====== ======= =======
</TABLE>
Equipment under capital leases aggregated $373,000 as of June 30, 1998 and
December 31, 1998. Accumulated amortization on the assets under capital leases
aggregated $42,000 and $105,000 as of June 30, 1998 and December 31, 1998,
respectively.
(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 December 31, 1998,
$1,000,000 and $875,000 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 $261,000 outstanding as of June 30, 1998 and
December 31, 1998, respectively, bearing interest at an
F-12
<PAGE> 88
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998
(INFORMATION AS OF DECEMBER 31, 1998, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND 1998, IS UNAUDITED.)
effective interest rate of 11.8%, and payable in 42 monthly installments of
$11,000 through December 2001.
As of June 30, 1998, aggregate maturities for the equipment loan and
capital lease obligations for fiscal 1999, 2000, 2001, and 2002 are $424,000,
$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 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
The rights, preferences, and privileges of the holders of Series A, B, C,
and D 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, and $0.51
per share for Series A, B, C, and D preferred stock, respectively.
- Holders of Series A, B, C, and D preferred stock have a liquidation
preference of $0.50, $1.68, $3.81, and $5.08 per share, respectively,
plus any declared but unpaid dividends over holders of common stock.
- Each share of Series A, B, C, and D preferred stock is convertible at any
time into one share of common stock subject to certain antidilution
provisions.
- Each holder of preferred stock has voting rights equal to the number of
shares of common stock into which such shares could be converted.
(b) STOCK PLANS
The Company is authorized to issue up to 5,133,888 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 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
F-13
<PAGE> 89
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998
(INFORMATION AS OF DECEMBER 31, 1998, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND 1998, IS UNAUDITED.)
year through June 30, 1998. The Company has issued 1,291,667 shares under
restricted stock purchase agreements, of which 350,000 shares have been
repurchased and 670,000 are subject to repurchase at a weighted-average price of
$0.30 per share.
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 June 30, 1998, there were -0- and 808,510 additional shares available
for grant under the 1995 and 1996 stock option plans, respectively.
(c) 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 December 1998. With respect to the stock options granted and
restricted stock sold from October 1997 to December 1998, the Company recorded
deferred stock compensation of $2,002,000 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 amortized on an accelerated basis
over the vesting period, generally 48 months, consistent with the method
described in FASB Interpretation No. 28. Had compensation costs been determined
in
F-14
<PAGE> 90
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998
(INFORMATION AS OF DECEMBER 31, 1998, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND 1998, IS UNAUDITED.)
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 30,
------------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Net loss:
As reported................................ $(2,470) $(7,991) $(10,623)
======= ======= ========
Pro forma.................................. $(2,471) $(8,003) $(10,656)
======= ======= ========
Basic and diluted net loss per share:
As reported................................ $ (0.53) $ (1.67) $ (2.03)
======= ======= ========
Pro forma.................................. $ (0.53) $ (1.68) $ (2.04)
======= ======= ========
</TABLE>
The fair value of each option was estimated on the date of grant using the
minimum value method with the following weighted-average assumption: no
dividends; risk-free interest rate of 5.75%, 6.5% and 5.55% for fiscal 1996,
1997 and 1998, respectively; and expected life of 4.40, 3.84 and 3.23 years for
fiscal 1996, 1997 and 1998, 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,
------------------------------------------------------------
1996 1997 1998
------------------ ------------------ ------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year................... -- $ -- 646 $0.11 2,071 $0.28
Granted............................................ 684 0.11 1,630 0.34 1,422 1.73
Forfeited.......................................... (38) 0.17 (112) 0.26 (213) 0.30
Exercised.......................................... -- -- (93) 0.13 (403) 0.22
--- ----- -----
Outstanding at end of year......................... 646 $0.11 2,071 $0.28 2,877 $1.00
=== ===== =====
Options exercisable at end of year................. 11 $0.11 235 $0.15 385 $0.28
=== ===== =====
Weighted-average fair value of options granted
during the year with exercise prices equal to
fair value at date of grant...................... $0.03 $0.07 $0.06
Weighted-average fair value of options granted
during the year with exercise prices less than
fair value at date of grant...................... -- -- $1.82
</TABLE>
F-15
<PAGE> 91
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998
(INFORMATION AS OF DECEMBER 31, 1998, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND 1998, IS UNAUDITED.)
As of June 30, 1998, 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 WEIGHTED- WEIGHTED-
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- ------------ ----------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.05 - 0.39 1,934 8.66 $0.32 385 $0.28
1.20 42 9.74 1.20 -- --
1.80 - 3.98 901 9.98 2.44 -- --
----- ---
2,877 9.08 1.00 385 0.28
===== ===
</TABLE>
(6) LEASES
In fiscal 1998, the Company entered into a new noncancelable operating
lease for its facilities expiring in June 2005. As of June 30, 1998, the Company
had 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 June 30, 1998, 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 June 30, 1998, 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................................................. $ 1,758 $(1,023) $ 735
2000................................................. 1,807 (714) 1,093
2001................................................. 1,810 (402) 1,408
2002................................................. 1,627 -- 1,627
2003................................................. 1,676 -- 1,676
Thereafter........................................... 3,347 -- 3,347
------- ------- ------
$12,025 $(2,139) $9,886
======= ======= ======
</TABLE>
Rent expense for the years ended June 30, 1997 and 1998, and for the six
months ended December 31, 1997 and 1998, was approximately $451,000, $307,000,
$163,000, and $478,000, respectively.
(7) INCOME TAXES
The differences between the income tax benefit computed at the federal
statutory rate and the Company's tax provision for all periods presented relate
to net operating losses not benefited.
F-16
<PAGE> 92
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998
(INFORMATION AS OF DECEMBER 31, 1998, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND 1998, IS UNAUDITED.)
The individual components of the Company's deferred tax assets are as
follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
--------------------
1997 1998
------- -------
<S> <C> <C>
Accruals and reserves not deductible for tax purposes....... $ 83 $ 146
Property and equipment...................................... 58 15
Capitalized start-up expenditures........................... 583 406
Net operating loss carryovers............................... 3,761 7,600
Research and development credit carryforwards............... 169 666
------- -------
Total deferred tax assets................................. 4,654 8,833
Valuation allowance......................................... (4,654) 8,833
------- -------
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 June 30, 1998, the Company has a net operating loss carryover for
federal and California income tax purposes of approximately $19,000,000. In
addition, the Company had federal and California research and development credit
carryforwards of approximately $379,000 and $287,000, respectively. The
Company's federal net operating loss and research and development credit
carryforwards will expire in the year 2011 through 2014 if not utilized. The
Company's California net operating loss carryforwards will expire in the year
2003. The state research and development credit can be carried forward
indefinitely.
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 INFORMATION
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 percentage of sales in different
geographic regions is as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
--------------------- ----------------
1996 1997 1998 1997 1998
----- ---- ---- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
North America................................ -- 93% 56% 94% 34%
Europe....................................... -- 7% 23% 1% 36%
Asia Pacific................................. -- -- 21% 5% 30%
</TABLE>
F-17
<PAGE> 93
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998
(INFORMATION AS OF DECEMBER 31, 1998, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND 1998, IS UNAUDITED.)
(9) SUBSEQUENT EVENTS
CONVERTIBLE PREFERRED STOCK
On March 12, 1999, the Company issued 2,458,543 shares of Series E
convertible preferred stock for $7.24 per share resulting in gross proceeds to
the Company of approximately $17,800,000. The rights, preferences, and
privileges of the holders of Series E stock are the same as the holders of
Series A, B, C, and D convertible preferred stock discussed in Note 5 except
that the dividend rate is $0.72 per share, and the liquidation preference is
$7.24 per share.
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. The
accompanying consolidated financial statements have been retroactively restated
to give effect to the reverse stock split.
STOCK PLANS
From July 1998 through March 1999, the Company granted options to purchase
518,669 shares of the Company's common stock at exercise prices ranging from
$3.38 to $12.00 per share. In conjunction with such grants, the Company recorded
deferred stock compensation of approximately $435,000 for the difference at the
grant date between the exercise price and the fair value of the common stock
underlying the options. In addition, in March 1999, the Board of Directors
increased the number of shares reserved under the 1996 stock option plan by
4,250,000 shares.
As of December 31, 1998 the Company has issued 1,381,667 shares under
restricted stock purchase agreements of which 350,000 shares have been
repurchased and 671,110 shares are subject to repurchase at a weighted-average
price of $0.58 per share.
EMPLOYEE STOCK PURCHASE PLAN
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.
DIRECTORS OPTION PLAN
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,
F-18
<PAGE> 94
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998
(INFORMATION AS OF DECEMBER 31, 1998, AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND 1998, IS UNAUDITED.)
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.
F-19
<PAGE> 95
[UNWIRED PLANET LOGO]
<PAGE> 96
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............................. 115,000
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky qualification fees and expenses.................... 5,000
Transfer Agent and Registrar fees........................... *
Miscellaneous fees and expenses............................. *
--------
Total............................................... *
========
</TABLE>
- ------------------------
* To be filed by amendment.
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 (the "Act"). The
Registrant's 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 the Registrant's Bylaws provides for
indemnification of its directors, officers, employees and other agents to the
maximum extent permitted by the Delaware General Corporation Law. In addition,
the Registrant has entered into Indemnification Agreements with its 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 the Company, among
other things, to indemnify its 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 officers and directors of the
Company against certain liabilities.
II-1
<PAGE> 97
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) Since January 1, 1996, the Registrant has issued and sold (without
payment of any selling commission to any person) the following unregistered
securities:
(1) Prior to completion of this offering, the Registrant intends to effect
a two-for-three stock split of its 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, the Registrant issued and sold shares of Series C
Preferred Stock convertible into an aggregate of 2,538,766 shares of
common stock to a total of 13 investors for an aggregate purchase price
of $9,674,983.
(3) In January and February 1998, the Registrant issued and sold shares of
Series D Preferred Stock convertible into an aggregate of 6,444,877
shares of common stock to a total of 26 investors for an aggregate
purchase price of $32,748,354.
(4) In March 1999, the Registrant 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 7 investors for an aggregate purchase price
of $17,799,114.
(5) As of March 15, 1999, 1,550,264 shares of common stock had been issued
upon exercise of options or pursuant to restricted stock purchase
agreements and 3,334,318 shares of common stock were issuable upon
exercise of outstanding options under the Registrant's 1995 and 1996
Stock Plan.
(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 the Company, to information
about the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<S> <C>
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.
</TABLE>
II-2
<PAGE> 98
<TABLE>
<S> <C>
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.
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-5).
27.1 Financial Data Schedule.
</TABLE>
- -------------------------
* 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.
II-3
<PAGE> 99
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.
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> 100
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this 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 March 29, 1999.
UNWIRED PLANET, INC.
By: /s/ ALAIN ROSSMANN
------------------------------------
Alain Rossmann, Chief Executive
Officer
and Chairman
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.
Pursuant to the requirements of the Securities Act of 1933, this
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
--------- ----- ----
<C> <S> <C>
/s/ ALAIN ROSSMANN Chief Executive Officer and March 29, 1999
- ------------------------------------------------ Chairman (Principal Executive
(Alain Rossmann) Officer)
/s/ ALAN BLACK Vice President, Finance and March 29, 1999
- ------------------------------------------------ Administration, Chief Financial
(Alan Black) Officer and Treasurer (Principal
Financial and Accounting Officer)
/s/ ROGER EVANS Director March 29, 1999
- ------------------------------------------------
(Roger Evans)
/s/ CHARLES PARRISH Executive Vice President March 29, 1999
- ------------------------------------------------ and Director
(Charles Parrish)
/s/ DAVID KRONFELD Director March 29, 1999
- ------------------------------------------------
(David Kronfeld)
/s/ ANDREW VERHALEN Director March 29, 1999
- ------------------------------------------------
(Andrew Verhalen)
</TABLE>
II-5
<PAGE> 101
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------
<S> <C>
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.
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.
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-5).
27.1 Financial Data Schedule.
</TABLE>
- -------------------------
* To be supplied by amendment.
** Confidential treatment has been requested with respect to this exhibit.
II-6
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION
OF
UNWIRED PLANET, 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 Unwired Planet, 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 Unwired Planet, 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
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 78,494,582 shares,
48,000,000 shares of which shall be Common Stock (the "Common Stock") and
30,494,582 shares of which shall be Preferred Stock (the "Preferred Stock"). The
Preferred Stock shall have a par value of one-tenth of one cent
<PAGE> 2
($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 7,098,000, the number of shares constituting such Series B
Preferred shall be 6,000,000, the number of shares constituting such Series C
Preferred shall be 4,000,000, the number of shares constituting such Series D
Preferred shall be 9,667,326 and the number of shares constituting such Series E
Preferred shall be 3,729,256.
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 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 $0.0333,
-2-
<PAGE> 3
$0.1117, $0.2541, $0.3388 and $0.4827 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) $0.3333, as adjusted for any
Recapitalization with respect to the Series A Preferred plus (ii) all declared
and unpaid 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) $1.1167, 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) $2.5407, 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) $3.3877 per share, as adjusted for any
-3-
<PAGE> 4
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) $4.8267 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:
(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.
-4-
<PAGE> 5
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
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 $0.3333, and the Conversion Value per share of the Series A
Preferred shall be $0.3333. The initial Conversion Price per share of the Series
B Preferred shall be $1.1167, and the Conversion Value per share of the Series B
Preferred shall be $1.1167. The initial Conversion Price per share of the Series
C Preferred shall be $2.5407, and the Conversion Value per share of the Series C
Preferred shall be $2.5407. The initial Conversion Price per share of the Series
D Preferred shall be $3.3877 per share, and the Conversion Value per share of
the Series D Preferred shall be $3.3877. The initial Conversion
-5-
<PAGE> 6
Price per share of the Series E Preferred shall be $4.8267 per share, and the
Conversion Value per share of the Series E Preferred shall be $4.8267. 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 $6.4195 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 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
-6-
<PAGE> 7
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;
(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
-7-
<PAGE> 8
(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 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.
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<PAGE> 9
(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 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
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<PAGE> 10
(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, 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
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<PAGE> 11
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 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.
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<PAGE> 12
(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.
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
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<PAGE> 13
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 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
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<PAGE> 14
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 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
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<PAGE> 15
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.
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<PAGE> 16
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
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<PAGE> 17
of the creditors or class of creditors, and/or of the stockholders or class of
stockholders of the 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.
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<PAGE> 18
IN WITNESS WHEREOF, Unwired Planet, Inc. has caused this Amended and
Restated Certificate of Incorporation to be signed by the Chief Executive
Officer and the Secretary on this 4th day of March, 1999.
UNWIRED PLANET, INC.
By /s/ Alain Rossmann
--------------------------------------
Alain Rossmann, Chief Executive
Officer
ATTEST:
By
---------------------------------
Alain Rossmann, Secretary
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<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
UNWIRED PLANET, 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 Unwired Planet, 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 Unwired Planet, 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> 2
$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
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<PAGE> 3
second annual meeting of stockholders following the Listing Event, the term of
office of the 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.
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<PAGE> 4
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> 5
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> 6
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
<PAGE> 1
EXHIBIT 3.3
AMENDED AND RESTATED
BYLAWS
OF
UNWIRED PLANET, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - CORPORATE OFFICES.........................................................1
1.1 Registered Office.........................................................1
1.2 Other Offices.............................................................1
ARTICLE II - MEETINGS OF STOCKHOLDERS.................................................1
2.1 Place of Meetings.........................................................1
2.4 Manner of Giving Notice; Affidavit of Notice..............................3
2.5 Advance Notice of Stockholder Nominees....................................3
2.6 Quorum....................................................................4
2.7 Adjourned Meeting; Notice.................................................4
2.8 Conduct of Business.......................................................4
2.9 Voting....................................................................5
2.10 Waiver of Notice.........................................................5
2.11 Record Date for Stockholder Notice; Voting...............................5
2.12 Proxies..................................................................6
ARTICLE III - DIRECTOR................................................................6
3.1 Powers....................................................................6
3.2 Number of Directors.......................................................6
3.3 Election, Qualification and Term of Office of Directors...................6
3.4 Resignation and Vacancies.................................................6
3.5 Place of Meetings; Meetings by Telephone..................................7
3.6 Regular Meetings..........................................................8
3.7 Special Meetings; Notice..................................................8
3.8 Quorum....................................................................8
3.9 Waiver of Notice..........................................................8
3.10 Board Action by Written Consent without a Meeting........................9
3.11 Fees and Compensation of Directors.......................................9
3.12 Approval of Loans to Officers............................................9
3.13 Removal of Directors.....................................................9
3.14 Chairman of the Board of Directors......................................10
ARTICLE IV - COMMITTEES..............................................................10
4.1 Committees of Directors..................................................10
4.2 Committee Minutes........................................................11
4.3 Meetings and Action of Committees........................................11
ARTICLE V - OFFICERS.................................................................11
5.1 Officers.................................................................11
5.2 Appointment of Officers..................................................11
5.3 Subordinate Officers.....................................................11
5.4 Removal and Resignation of Officers......................................12
5.5 Vacancies in Offices.....................................................12
5.6 Chief Executive Officer..................................................12
5.7 President................................................................12
5.8 Vice Presidents..........................................................12
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C>
5.9 Secretary................................................................13
5.10 Chief Financial Officer.................................................13
5.11 Representation of Shares of Other Corporations..........................13
5.12 Authority and Duties of Officers........................................14
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS.....14
6.1 Indemnification of Directors and Officers................................14
6.2 Indemnification of Others................................................14
6.3 Payment of Expenses in Advance...........................................15
6.4 Indemnity Not Exclusive..................................................15
6.5 Insurance................................................................15
6.6 Conflicts................................................................15
ARTICLE VII - RECORDS AND REPORTS....................................................16
7.1 Maintenance and Inspection of Records....................................16
7.2 Inspection by Directors..................................................16
7.3 Annual Statement to Stockholders.........................................16
ARTICLE VIII - GENERAL MATTERS.......................................................16
8.1 Checks...................................................................16
8.2 Execution of Corporate Contracts and Instruments.........................17
8.3 Stock Certificates; Partly Paid Shares...................................17
8.4 Special Designation on Certificates......................................17
8.5 Lost Certificates........................................................18
8.6 Construction; Definitions................................................18
8.7 Dividends................................................................18
8.8 Fiscal Year..............................................................18
8.9 Seal.....................................................................19
8.10 Transfer of Stock.......................................................19
8.11 Stock Transfer Agreements...............................................19
8.12 Registered Stockholders.................................................19
ARTICLE IX - AMENDMENTS..............................................................19
</TABLE>
-ii-
<PAGE> 4
AMENDED AND RESTATED
BYLAWS
OF
UNWIRED PLANET, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE.
The address of the Corporation's registered office in the State
of Delaware is 1013 Centre Road, Wilmington, County of New Castle. The name of
its registered agent at such address is The Prentice-Hall Corporation System,
Inc.
1.2 OTHER OFFICES.
The Board of Directors may at any time establish other offices at
any place or places where the Corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS.
Meetings of stockholders shall be held at any place, within or
outside the State of Delaware, designated by the Board of Directors. In the
absence of any such designation, stockholders' meetings shall be held at the
registered office of the Corporation.
2.2 ANNUAL MEETING.
(a) The annual meeting of stockholders shall be held each year on a date
and at a time designated by the Board of Directors. At the meeting, directors
shall be elected and any other proper business may be transacted.
(b) Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be transacted by the stockholders
may be made at an annual meeting of stockholders (i) pursuant to the
Corporation's notice with respect to such meeting, (ii) by or at the direction
of the Board of Directors or (iii) by any stockholder of the Corporation who was
a stockholder of record at the time of giving of the notice provided for in this
Section 2.2,
<PAGE> 5
who is entitled to vote at the meeting and who has complied with the notice
procedures set forth in this Section 2.2.
(c) In addition to the requirements of Section 2.5, for nominations or
other business to be properly brought before an annual meeting by a stockholder
pursuant to clause (iii) of paragraph (b) of this Section 2.2, the stockholder
must have given timely notice thereof in writing to the secretary of the
Corporation and such business must be a proper matter for stockholder action
under the General Corporation Law of Delaware. To be timely, a stockholder's
notice shall be delivered to the secretary at the principal executive offices of
the Corporation not less than 20 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting of stockholders; provided,
however, that in the event that the date of the annual meeting is more than 30
days prior to or more than 60 days after such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the 90th day
prior to such annual meeting and not later than the close of business on the
later of the 20th day prior to such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is first made. Such
stockholder's notice shall set forth (i) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected); (ii)
as to any other business that the stockholder proposes to bring before the
meeting, a brief description of such business, the reasons for conducting such
business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (iii) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made (A) the name
and address of such stockholder, as they appear on the Corporation's books, and
of such beneficial owner and (B) the class and number of shares of the
Corporation which are owned beneficially and of record by such stockholder and
such beneficial owner.
(d) Only such business shall be conducted at an annual meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 2.2. The chairman of the meeting shall
determine whether a nomination or any business proposed to be transacted by the
stockholders has been properly brought before the meeting and, if any proposed
nomination or business has not been properly brought before the meeting, the
chairman shall declare that such proposed business or nomination shall not be
presented for stockholder action at the meeting.
(e) For purposes of this Section 2.2, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or a comparable national news service.
(f) Nothing in this Section 2.2 shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
<PAGE> 6
2.3 SPECIAL MEETING.
(a) A special meeting of the stockholders may be called at any time by
the Board of Directors, or by the chairman of the board, or by the president.
(b) Nominations of persons for election to the Board of Directors may be
made at a special meeting of stockholders at which directors are to be elected
pursuant to such notice of meeting (i) by or at the direction of the Board of
Directors or (ii) by any stockholder of the Corporation who is a stockholder of
record at the time of giving of notice provided for in Section 2.5, who shall be
entitled to vote at the meeting and who complies with the notice procedures set
forth in Section 2.5.
2.4 NOTICE OF STOCKHOLDER'S MEETINGS; AFFIDAVIT OF NOTICE.
All notices of meetings of stockholders shall be in writing and
shall be sent or otherwise given in accordance with this Section 2.4 of these
Bylaws not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting (or such longer or shorter
time as is required by Section 2.5 of these Bylaws, if applicable). The notice
shall specify the place, date, and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called.
Written notice of any meeting of stockholders, if mailed, is
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the Corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES.
Only persons who are nominated in accordance with the procedures
set forth in this Section 2.5 shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the Corporation entitled to vote for the
election of directors at the meeting who complies with the notice procedures set
forth in this Section 2.5. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation not less than 60 days nor more than 90 days prior to
the meeting; provided, however, that in the event that less than 60 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made.
Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a director, (i)
the name, age, business address and residence address of such person, (ii) the
principal occupation or employment of such person, (iii) the class and number of
shares of the Corporation which are beneficially owned by
<PAGE> 7
such person and (iv) any other information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Exchange Act (including, without limitation, such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected); and (b) as to the stockholder giving the notice (i) the name and
address, as they appear on the Corporation's books, of such stockholder and (ii)
the class and number of shares of the Corporation which are beneficially owned
by such stockholder. At the request of the Board of Directors any person
nominated by the Board of Directors for election as a director shall furnish to
the secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the Corporation unless nominated
in accordance with the procedures set forth in this Section 2.5. The chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the Bylaws, and if he or she should so determine, he or she shall so declare to
the meeting and the defective nomination shall be disregarded.
2.6 QUORUM.
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the Certificate of
Incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either (a) the chairman of the meeting or (b)
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE.
When a meeting is adjourned to another time or place, unless
these Bylaws otherwise require, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the Corporation may transact any
business that might have been transacted at the original meeting. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the meeting.
2.8 CONDUCT OF BUSINESS.
The chairman of any meeting of stockholders shall determine the
order of business and the procedure at the meeting, including the manner of
voting and the conduct of business.
<PAGE> 8
2.9 VOTING.
(a) The stockholders entitled to vote at any meeting of
stockholders shall be determined in accordance with the provisions of Section
2.11 of these Bylaws, subject to the provisions of Sections 217 and 218 of the
General Corporation Law of Delaware (relating to voting rights of fiduciaries,
pledgors and joint owners of stock and to voting trusts and other voting
agreements).
(b) Except as may be otherwise provided in the Certificate of
Incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
2.10 WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of
the General Corporation Law of Delaware or of the Certificate of Incorporation
or these Bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice unless so required by the Certificate of Incorporation or these
Bylaws.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING.
In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than 60 nor less than 10 days before the date of such
meeting, nor more than 60 days prior to any other action. If the Board of
Directors does not so fix a record date:
(a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(b) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
<PAGE> 9
2.12 PROXIES.
Each stockholder entitled to vote at a meeting of stockholders
may authorize another person or persons to act for such stockholder by a written
proxy, signed by the stockholder and filed with the secretary of the
Corporation, but no such proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period. A proxy shall be
deemed signed if the stockholder's name is placed on the proxy (whether by
manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware.
ARTICLE III
DIRECTORS
3.1 POWERS.
Subject to the provisions of the General Corporation Law of
Delaware and any limitations in the Certificate of Incorporation or these Bylaws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the Corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
Board of Directors.
3.2 NUMBER OF DIRECTORS.
The number of directors constituting the entire Board of
Directors shall be five.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.
Except as provided in Section 3.4 of these Bylaws, directors
shall be elected at each annual meeting of stockholders to hold office until the
next annual meeting. Directors need not be stockholders unless so required by
the Certificate of Incorporation or these Bylaws, wherein other qualifications
for directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES.
Any director may resign at any time upon written notice to the
attention of the secretary of the Corporation. When one or more directors so
resigns and the resignation is effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section in the filling of other vacancies.
A vacancy created by the
<PAGE> 10
removal of a director by the vote of the stockholders or by court order may be
filled only by the affirmative vote of a majority of the shares represented and
voting at a duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute a majority of the quorum. Each director so elected
shall hold office until the next annual meeting of the stockholders and until a
successor has been elected and qualified.
Unless otherwise provided in the Certificate of Incorporation or
these Bylaws:
(a) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(b) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the Certificate of Incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause,
the Corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the Certificate of Incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole Board of Directors (as constituted immediately prior to any such
increase), then the Court of Chancery may, upon application of any stockholder
or stockholders holding at least 10% of the total number of the shares at the
time outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.
The Board of Directors of the Corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the Certificate of Incorporation
or these Bylaws, members of the Board of Directors, or any committee designated
by the Board of Directors, may participate in a meeting of the Board of
Directors, or any committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in
<PAGE> 11
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
3.6 REGULAR MEETINGS.
Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board of Directors.
3.7 SPECIAL MEETINGS; NOTICE.
Special meetings of the Board of Directors for any purpose or
purposes may be called at any time by the chairman of the board, the president,
any vice president, the secretary or any two directors.
Notice of the time and place of special meetings shall be
delivered personally or by telephone to each director or sent by first-class
mail or telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the Corporation. If the notice is
mailed, it shall be deposited in the United States mail at least four days
before the time of the holding of the meeting. If the notice is delivered
personally or by telephone or by telegram, it shall be delivered personally or
by telephone or to the telegraph company at least 48 hours before the time of
the holding of the meeting. Any oral notice given personally or by telephone may
be communicated either to the director or to a person at the office of the
director who the person giving the notice has reason to believe will promptly
communicate it to the director. The notice need not specify the purpose or the
place of the meeting, if the meeting is to be held at the principal executive
office of the Corporation.
3.8 QUORUM.
At all meetings of the Board of Directors, a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of
the General Corporation Law of Delaware or of the Certificate of Incorporation
or these Bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall
<PAGE> 12
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so required
by the Certificate of Incorporation or these Bylaws.
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Unless otherwise restricted by the Certificate of Incorporation
or these Bylaws, any action required or permitted to be taken at any meeting of
the Board of Directors, or of any committee thereof, may be taken without a
meeting if all members of the Board of Directors or committee, as the case may
be, consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or committee. Written consents
representing actions taken by the board or committee may be executed by telex,
telecopy or other facsimile transmission, and such facsimile shall be valid and
binding to the same extent as if it were an original.
3.11 FEES AND COMPENSATION OF DIRECTORS.
Unless otherwise restricted by the Certificate of Incorporation
or these Bylaws, the Board of Directors shall have the authority to fix the
compensation of directors. No such compensation shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
3.12 APPROVAL OF LOANS TO OFFICERS.
The Corporation may lend money to, or guarantee any obligation
of, or otherwise assist any officer or other employee of the Corporation or of
its subsidiary, including any officer or employee who is a director of the
Corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
Corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this Section 3.2 contained shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the Corporation
at common law or under any statute.
3.13 REMOVAL OF DIRECTORS.
Unless otherwise restricted by statute, by the Certificate of
Incorporation or by these Bylaws, any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that if the stockholders of the Corporation are entitled to cumulative voting,
if less than the entire Board of Directors is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire Board of
Directors.
<PAGE> 13
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
3.14 CHAIRMAN OF THE BOARD OF DIRECTORS.
The Corporation may also have, at the discretion of the Board of
Directors, a chairman of the Board of Directors who shall not be considered an
officer of the Corporation.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS.
The Board of Directors may, by resolution passed by a majority of
the whole Board of Directors, designate one or more committees, with each
committee to consist of one or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors or
in the Bylaws of the Corporation, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers that may require it; but no such committee shall have the
power or authority to (a) amend the Certificate of Incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors
as provided in Section 151(a) of the General Corporation Law of Delaware, fix
the designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series), (b)
adopt an agreement of merger or consolidation under Sections 251 or 252 of the
General Corporation Law of Delaware, (c) recommend to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, (d) recommend to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or (e) amend the Bylaws of the Corporation; and,
unless the board resolution establishing the committee, the Bylaws or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the General Corporation Law of Delaware.
<PAGE> 14
4.2 COMMITTEE MINUTES.
Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES.
Meetings and actions of committees shall be governed by, and held
and taken in accordance with, the provisions of Section 3.5 (place of meetings
and meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and
Section 3.10 (action without a meeting) of these Bylaws, with such changes in
the context of such provisions as are necessary to substitute the committee and
its members for the Board of Directors and its members; provided, however, that
the time of regular meetings of committees may be determined either by
resolution of the Board of Directors or by resolution of the committee, that
special meetings of committees may also be called by resolution of the Board of
Directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The Board of Directors may adopt rules for the government of any
committee not inconsistent with the provisions of these Bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS.
The officers of the Corporation shall be a chief executive
officer, a president, a secretary, and a chief financial officer. The
Corporation may also have, at the discretion of the Board of Directors, one or
more vice presidents, one or more assistant secretaries, one or more assistant
treasurers, and any such other officers as may be appointed in accordance with
the provisions of Section 5.3 of these Bylaws. Any number of offices may be held
by the same person.
5.2 APPOINTMENT OF OFFICERS.
The officers of the Corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
Bylaws, shall be appointed by the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS.
The Board of Directors may appoint, or empower the chief
executive officer or the president to appoint, such other officers and agents as
the business of the Corporation may require, each of whom shall hold office for
such period, have such authority, and perform such duties as are provided in
these Bylaws or as the Board of Directors may from time to time determine.
<PAGE> 15
5.4 REMOVAL AND RESIGNATION OF OFFICERS.
Subject to the rights, if any, of an officer under any contract
of employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the Board of Directors or, except in the case of an officer
chosen by the Board of Directors, by any officer upon whom such power of removal
may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to
the attention of the secretary of the Corporation. Any resignation shall take
effect at the date of the receipt of that notice or at any later time specified
in that notice; and, unless otherwise specified in that notice, the acceptance
of the resignation shall not be necessary to make it effective. Any resignation
is without prejudice to the rights, if any, of the Corporation under any
contract to which the officer is a party.
5.5 VACANCIES IN OFFICES.
Any vacancy occurring in any office of the Corporation shall be
filled by the Board of Directors.
5.6 CHIEF EXECUTIVE OFFICER.
Subject to such supervisory powers, if any, as may be given by
the Board of Directors to the chairman of the board, if any, the chief executive
officer of the Corporation shall, subject to the control of the Board of
Directors, have general supervision, direction, and control of the business and
the officers of the Corporation. He or she shall preside at all meetings of the
stockholders and, in the absence or nonexistence of a chairman of the board, at
all meetings of the Board of Directors and shall have the general powers and
duties of management usually vested in the office of chief executive officer of
a corporation and shall have such other powers and duties as may be prescribed
by the Board of Directors or these Bylaws.
5.7 PRESIDENT.
Subject to such supervisory powers, if any, as may be given by
the Board of Directors to the chairman of the board (if any) or the chief
executive officer, the president shall have general supervision, direction, and
control of the business and other officers of the Corporation. He or she shall
have the general powers and duties of management usually vested in the office of
president of a corporation and such other powers and duties as may be prescribed
by the Board of Directors or these Bylaws.
5.8 VICE PRESIDENTS.
In the absence or disability of the chief executive officer and
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a vice president designated by the Board
of Directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
<PAGE> 16
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, these Bylaws, the president or the chairman of the board.
5.9 SECRETARY.
The secretary shall keep or cause to be kept, at the principal
executive office of the Corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show the
time and place of each meeting, the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the Corporation or at the office of the Corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors required to be given
by law or by these Bylaws. He or she shall keep the seal of the Corporation, if
one be adopted, in safe custody and shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or by these
Bylaws.
5.10 CHIEF FINANCIAL OFFICER.
The chief financial officer shall keep and maintain, or cause to
be kept and maintained, adequate and correct books and records of accounts of
the properties and business transactions of the Corporation, including accounts
of its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He or she shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, shall render to the president, the chief executive officer, or the
directors, upon request, an account of all his or her transactions as chief
financial officer and of the financial condition of the Corporation, and shall
have other powers and perform such other duties as may be prescribed by the
Board of Directors or the Bylaws.
5.11 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The chairman of the board, the chief executive officer, the
president, any vice president, the chief financial officer, the secretary or
assistant secretary of this Corporation, or
<PAGE> 17
any other person authorized by the Board of Directors or the chief executive
officer or the president or a vice president, is authorized to vote, represent,
and exercise on behalf of this Corporation all rights incident to any and all
shares of any other corporation or corporations standing in the name of this
Corporation. The authority granted herein may be exercised either by such person
directly or by any other person authorized to do so by proxy or power of
attorney duly executed by the person having such authority.
5.12 AUTHORITY AND DUTIES OF OFFICERS.
In addition to the foregoing authority and duties, all officers
of the Corporation shall respectively have such authority and perform such
duties in the management of the business of the Corporation as may be designated
from time to time by the Board of Directors or the stockholders.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the Corporation. For purposes of this Section 6.1, a
"director" or "officer" of the Corporation includes any person (a) who is or was
a director or officer of the Corporation, (b) who is or was serving at the
request of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (c) who was a director
or officer of a Corporation which was a predecessor corporation of the
Corporation or of another enterprise at the request of such predecessor
corporation.
6.2 INDEMNIFICATION OF OTHERS.
The Corporation shall have the power, to the maximum extent and
in the manner permitted by the General Corporation Law of Delaware, to indemnify
each of its employees and agents (other than directors and officers) against
expenses (including attorneys' fees), judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with any proceeding,
arising by reason of the fact that such person is or was an agent of the
Corporation. For purposes of this Section 6.2, an "employee" or "agent" of the
Corporation (other than a director or officer) includes any person (a) who is or
was an employee or agent of the Corporation, (b) who is or was serving at the
request of the Corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (c) who was an
employee or agent of a corporation which was a predecessor corporation of the
Corporation or of another enterprise at the request of such predecessor
corporation.
<PAGE> 18
6.3 PAYMENT OF EXPENSES IN ADVANCE.
Expenses incurred in defending any action or proceeding for which
indemnification is required pursuant to Section 6.1 or for which indemnification
is permitted pursuant to Section 6.2 following authorization thereof by the
Board of Directors shall be paid by the Corporation in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by or on
behalf of the indemnified party to repay such amount if it shall ultimately be
determined that the indemnified party is not entitled to be indemnified as
authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE.
The indemnification provided by this Article VI shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any Bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the Certificate of
Incorporation
6.5 INSURANCE.
The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions of the General
Corporation Law of Delaware.
6.6 CONFLICTS.
No indemnification or advance shall be made under this Article
VI, except where such indemnification or advance is mandated by law or the
order, judgment or decree of any court of competent jurisdiction, in any
circumstance where it appears:
(a) That it would be inconsistent with a provision of the
Certificate of Incorporation, these Bylaws, a resolution of the stockholders or
an agreement in effect at the time of the accrual of the alleged cause of the
action asserted in the proceeding in which the expenses were incurred or other
amounts were paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
<PAGE> 19
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS.
The Corporation shall, either at its principal executive offices
or at such place or places as designated by the Board of Directors, keep a
record of its stockholders listing their names and addresses and the number and
class of shares held by each stockholder, a copy of these Bylaws as amended to
date, accounting books, and other records.
Any stockholder of record, in person or by attorney or other
agent, shall, upon written demand under oath stating the purpose thereof, have
the right during the usual hours for business to inspect for any proper purpose
the Corporation's stock ledger, a list of its stockholders, and its other books
and records and to make copies or extracts therefrom. A proper purpose shall
mean a purpose reasonably related to such person's interest as a stockholder. In
every instance where an attorney or other agent is the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing that authorizes the attorney or other agent to so
act on behalf of the stockholder. The demand under oath shall be directed to the
Corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS.
Any director shall have the right to examine the Corporation's
stock ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order the
Corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.
The Board of Directors shall present at each annual meeting, and
at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
Corporation.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS.
From time to time, the Board of Directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money,
<PAGE> 20
notes or other evidences of indebtedness that are issued in the name of or
payable to the Corporation, and only the persons so authorized shall sign or
endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.
The Board of Directors, except as otherwise provided in these
Bylaws, may authorize any officer or officers, or agent or agents, to enter into
any contract or execute any instrument in the name of and on behalf of the
Corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the Corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.
The shares of the Corporation shall be represented by
certificates, provided that the Board of Directors of the Corporation may
provide by resolution or resolutions that some or all of any or all classes or
series of its stock shall be uncertificated shares. Any such resolution shall
not apply to shares represented by a certificate until such certificate is
surrendered to the Corporation. Notwithstanding the adoption of such a
resolution by the Board of Directors, every holder of stock represented by
certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the Corporation by
the chairman or vice-chairman of the Board of Directors, or the chief executive
officer or the president or vice-president, and by the chief financial officer
or an assistant treasurer, or the secretary or an assistant secretary of the
Corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he or she were such officer, transfer
agent or registrar at the date of issue.
The Corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, upon the books and records of the
Corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
Corporation shall declare a dividend upon partly paid shares of the same class,
but only upon the basis of the percentage of the consideration actually paid
thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES.
If the Corporation is authorized to issue more than one class of
stock or more than one series of any class, then the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full
<PAGE> 21
or summarized on the face or back of the certificate that the Corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the Corporation shall issue to represent
such class or series of stock a statement that the Corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES.
Except as provided in this Section 8.5, no new certificates for
shares shall be issued to replace a previously issued certificate unless the
latter is surrendered to the Corporation and canceled at the same time. The
Corporation may issue a new certificate of stock or uncertificated shares in the
place of any certificate previously issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or the owner's legal representative, to give
the Corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS.
Unless the context requires otherwise, the general provisions,
rules of construction, and definitions in the Delaware General Corporation Law
shall govern the construction of these Bylaws. Without limiting the generality
of this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS.
The directors of the Corporation, subject to any restrictions
contained in (a) the General Corporation Law of Delaware or (b) the Certificate
of Incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
Corporation's capital stock.
The directors of the Corporation may set apart out of any of the
funds of the Corporation available for dividends a reserve or reserves for any
proper purpose and may abolish any such reserve. Such purposes shall include but
not be limited to equalizing dividends, repairing or maintaining any property of
the Corporation, and meeting contingencies.
8.8 FISCAL YEAR.
The fiscal year of the Corporation shall be fixed by resolution
of the Board of Directors and may be changed by the Board of Directors.
<PAGE> 22
8.9 SEAL.
The Corporation may adopt a corporate seal, which may be altered
at pleasure, and may use the same by causing it or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK.
Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS.
The Corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the Corporation to restrict the transfer of shares of stock of the Corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS.
The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends and to vote as such owner, shall be entitled to hold liable for calls
and assessments the person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The Bylaws of the Corporation may be adopted, amended or repealed
by the stockholders entitled to vote; provided, however, that the Corporation
may, in its Certificate of Incorporation, confer the power to adopt, amend or
repeal Bylaws upon the directors. The fact that such power has been so conferred
upon the directors shall not divest the stockholders of the power, nor limit
their power to adopt, amend or repeal Bylaws.
<PAGE> 1
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Agreement") is made as of
_______________, by and between Unwired Planet, Inc., a Delaware corporation
(the "Company"), and ______________(the "Indemnitee").
RECITALS
The Company and Indemnitee recognize the increasing difficulty in
obtaining liability insurance for directors, officers and key employees, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance. The Company and Indemnitee further recognize
the substantial increase in corporate litigation in general, subjecting
directors, officers and key employees to expensive litigation risks at the same
time as the availability and coverage of liability insurance has been severely
limited. Indemnitee does not regard the current protection available as adequate
under the present circumstances, and Indemnitee and agents of the Company may
not be willing to continue to serve as agents of the Company without additional
protection. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, and to indemnify its directors,
officers and key employees so as to provide them with the maximum protection
permitted by law.
AGREEMENT
In consideration of the mutual promises made in this Agreement, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) THIRD PARTY PROCEEDINGS. The Company shall indemnify Indemnitee if
Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee
<PAGE> 2
reasonably believed to be in or not opposed to the best interests of the
Company, or, with respect to any criminal action or proceeding, that Indemnitee
had reasonable cause to believe that Indemnitee's conduct was unlawful.
(b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company
shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to
be made a party to any threatened, pending or completed action or proceeding by
or in the right of the Company or any subsidiary of the Company to procure a
judgment in its favor by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) and, to the fullest extent
permitted by law, amounts paid in settlement (if such settlement is approved in
advance by the Company, which approval shall not be unreasonably withheld), in
each case to the extent actually and reasonably incurred by Indemnitee in
connection with the defense or settlement of such action or suit if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company and its stockholders, except
that no indemnification shall be made in respect of any claim, issue or matter
as to which Indemnitee shall have been finally adjudicated by court order or
judgment to be liable to the Company in the performance of Indemnitee's duty to
the Company and its stockholders unless and only to the extent that the court in
which such action or proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(c) MANDATORY PAYMENT OF EXPENSES. To the extent that Indemnitee
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1(a) or Section 1(b) or the defense of any
claim, issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
2. NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement is intended
to create in Indemnitee any right to continued employment.
3. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. The Company shall advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action, suit or proceeding
referred to in Section l(a) or Section 1(b) hereof (including amounts actually
paid in settlement of any such action, suit or proceeding). Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
by the Company as authorized hereby.
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in
<PAGE> 3
writing as soon as practicable of any claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company and
shall be given in accordance with the provisions of Section 12(d) below. In
addition, Indemnitee shall give the Company such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.
(c) PROCEDURE. Any indemnification and advances provided for in
Section 1 and this Section 3 shall be made no later than twenty (20) days after
receipt of the written request of Indemnitee. If a claim under this Agreement,
under any statute, or under any provision of the Company's Certificate of
Incorporation or Bylaws providing for indemnification, is not paid in full by
the Company within twenty (20) days after a written request for payment thereof
has first been received by the Company, Indemnitee may, but need not, at any
time thereafter bring an action against the Company to recover the unpaid amount
of the claim and, subject to Section 11 of this Agreement, Indemnitee shall also
be entitled to be paid for the expenses (including attorneys' fees) of bringing
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any action,
suit or proceeding in advance of its final disposition) that Indemnitee has not
met the standards of conduct which make it permissible under applicable law for
the Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company and Indemnitee shall be entitled to
receive interim payments of expenses pursuant to Section 3(a) unless and until
such defense may be finally adjudicated by court order or judgment from which no
further right of appeal exists. It is the parties' intention that if the Company
contests Indemnitee's right to indemnification, the question of Indemnitee's
right to indemnification shall be for the court to decide, and neither the
failure of the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel, or its
stockholders) to have made a determination that indemnification of Indemnitee is
proper in the circumstances because Indemnitee has met the applicable standard
of conduct required by applicable law, nor an actual determination by the
Company (including its Board of Directors, any committee or subgroup of the
Board of Directors, independent legal counsel, or its stockholders) that
Indemnitee has not met such applicable standard of conduct, shall create a
presumption that Indemnitee has or has not met the applicable standard of
conduct.
(d) NOTICE TO INSURERS. If, at the time of the receipt of a
notice of a claim pursuant to Section 3(b) hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall be
obligated under Section 3(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel
<PAGE> 4
by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same proceeding, provided that (i) Indemnitee shall have the
right to employ counsel in any such proceeding at Indemnitee's expense; and (ii)
if (A) the employment of counsel by Indemnitee has been previously authorized by
the Company, (B) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense or (C) the Company shall not, in fact, have employed counsel to
assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
4. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. Notwithstanding any other provision of this Agreement,
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute, or
rule which expands the right of a Delaware corporation to indemnify a member of
its board of directors or an officer, such changes shall be deemed to be within
the purview of Indemnitee's rights and the Company's obligations under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
(b) NONEXCLUSIVITY. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Company's Certificate of Incorporation, its Bylaws, any
agreement, any vote of stockholders or disinterested members of the Company's
Board of Directors, the General Corporation Law of the State of Delaware, or
otherwise, both as to action in Indemnitee's official capacity and as to action
in another capacity while holding such office. The indemnification provided
under this Agreement shall continue as to Indemnitee for any action taken or not
taken while serving in an indemnified capacity even though he or she may have
ceased to serve in any such capacity at the time of any action, suit or other
covered proceeding.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred in the investigation, defense, appeal or settlement of any civil or
criminal action, suit or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
6. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or public policy may override applicable
state law and prohibit the Company from indemnifying its directors and officers
under this Agreement or otherwise.
<PAGE> 5
For example, the Company and Indemnitee acknowledge that the Securities and
Exchange Commission (the "SEC") has taken the position that indemnification is
not permissible for liabilities arising under certain federal securities laws,
and federal legislation prohibits indemnification for certain ERISA violations.
Indemnitee understands and acknowledges that the Company has undertaken or may
be required in the future to undertake with the SEC to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
7. OFFICER AND DIRECTOR LIABILITY INSURANCE. The Company shall, from
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a parent
or subsidiary of the Company.
8. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except with respect
to proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification
<PAGE> 6
or advancement of expenses may be provided by the Company in specific cases if
the Board of Directors finds it to be appropriate;
(b) LACK OF GOOD FAITH. To indemnify Indemnitee for any expenses
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous;
(c) INSURED CLAIMS. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the
extent such expenses or liabilities have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability insurance
maintained by the Company; or
(d) CLAIMS UNDER SECTION 16(B). To indemnify Indemnitee for
expenses or the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the "Company"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that if Indemnitee is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan, Indemnitee shall be deemed to have acted in a
manner "not opposed to the best interests of the Company" as referred to in this
Agreement.
11. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee
<PAGE> 7
with respect to such action, unless as a part of such action, the court of
competent jurisdiction determines that each of the material assertions made by
Indemnitee as a basis for such action were not made in good faith or were
frivolous. In the event of an action instituted by or in the name of the Company
under this Agreement or to enforce or interpret any of the terms of this
Agreement, Indemnitee shall be entitled to be paid all court costs and expenses,
including attorneys' fees, incurred by Indemnitee in defense of such action
(including with respect to Indemnitee's counterclaims and cross-claims made in
such action), unless as a part of such action the court determines that each of
Indemnitee's material defenses to such action were made in bad faith or were
frivolous.
12. MISCELLANEOUS.
(a) 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
Delaware, without giving effect to principles of conflict of law.
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) CONSTRUCTION. This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; 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.
(d) NOTICES. Any notice, demand or request required or permitted
to be given under this Agreement shall be in writing and shall be deemed
sufficient when delivered personally or sent by telegram or forty-eight (48)
hours after being deposited in the U.S. mail, as certified or registered mail,
with postage prepaid, and addressed to the party to be notified at such party's
address as set forth below or as subsequently modified by written notice.
(e) 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.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the Company and its successors and assigns, and inure to the benefit of
Indemnitee and Indemnitee's heirs, legal representatives and assigns.
(g) SUBROGATION. In the event of payment under this Agreement,
the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of
<PAGE> 8
Indemnitee, who shall execute all documents required and shall do all acts that
may be necessary to secure such rights and to enable the Company to effectively
bring suit to enforce such rights.
[Signature Page Follows]
<PAGE> 9
The parties hereto have executed this Agreement as of the day and year
set forth on the first page of this Agreement.
Unwired Planet, Inc.
By:
---------------------------------
Title:
------------------------------
Address: 800 Chesapeake Drive
Redwood City, CA 94063
AGREED TO AND ACCEPTED:
Indemnitee:
---------------------------
- --------------------------------------
(Signature)
Address:
------------------------------
------------------------------
<PAGE> 1
Exhibit 10.6
UNWIRED PLANET, INC.
FOURTH AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
---------------------------------
THIS FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (this
"AGREEMENT") is entered into effective as of March 12, 1999 by and among Unwired
Planet, Inc., a Delaware corporation (the "COMPANY"), those holders of Series A
Preferred Stock of the Company (the "SERIES A INVESTORS"), those holders of
Series B Preferred Stock of the Company (the "SERIES B INVESTORS"), those
holders of Series C Preferred Stock of the Company (the "SERIES C INVESTORS"),
those holders of Series D Preferred Stock (the "SERIES D INVESTORS") and those
holders of Series E Preferred Stock (the "SERIES E INVESTORS") set forth in
Exhibit A hereto (collectively, the "INVESTORS").
R E C I T A L S
1. In connection with the prior issuance of its outstanding
Series A Preferred Stock (the "SERIES A STOCK") to the Series A Investors, its
outstanding Series B Preferred Stock (the "SERIES B STOCK") to the Series B
Investors, its outstanding Series C Preferred Stock (the "SERIES C STOCK") to
the Series C Investors and its outstanding Series D Preferred Stock (the "SERIES
D STOCK") to the Series D Investors the Company entered into the Third Amended
and Restated Investor Rights Agreement, as amended, dated as of January 23, 1998
(the "THIRD AMENDED AND RESTATED AGREEMENT") pursuant to which the Company
granted the Series A Investors, the Series B Investors, the Series C Investors
and the Series D Investors certain registration, first refusal and information
rights.
2. The Company and the Series E Investors are parties to the
Series E Preferred Stock Purchase Agreement, dated March 12, 1999 (the "SERIES E
AGREEMENT") pursuant to which the Company shall issue and sell up to 3,729,256
shares of its Series E Preferred Stock (the "SERIES E STOCK").
3. The Company, the Series A Investors, the Series B Investors,
the Series C Investors and the Series D Investors wish to enter into this
Agreement to amend and supersede the Third Amended and Restated Agreement so as
to modify the registration, first refusal and information rights contained
therein to be as set forth herein and to extend such rights to the Series E
Investors.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises herein contained, the parties agree as follows:
A G R E E M E N T
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
<PAGE> 2
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"COMMON STOCK" shall mean the Common Stock of the Company.
"CONVERSION STOCK" means the Common Stock issued or issuable pursuant to
conversion of the Preferred Stock.
"HOLDER" shall mean (i) any Investor holding Registrable Securities, and
(ii) any person holding Registrable Securities to whom the rights under this
Agreement have been transferred in accordance with Section 5.9 hereof.
"INITIATING HOLDERS" shall mean any Holders who in the aggregate hold
not less than 50% of the Registrable Securities.
"PREFERRED STOCK" shall mean the Series A Stock, the Series B Stock, the
Series C Stock, the Series D Stock and the Series E Stock of the Company.
"REGISTRABLE SECURITIES" means the Conversion Stock and any Common Stock
issued or issuable in respect of the Conversion Stock upon any stock split,
dividend, recapitalization, or similar event, or any Common Stock otherwise
issuable with respect to the Conversion Stock; provided, however, that shares of
Conversion Stock or other securities shall only be treated as Registrable
Securities if and so long as they have not been (a) sold to or through a broker
or dealer or underwriter in a public distribution or a public securities
transaction, or (b) sold in a single transaction exempt from the registration
and prospectus delivery requirements of the Securities Act of 1933, as amended,
so that all transfer restrictions and restrictive legends with respect thereto
are removed prior to any such sale.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses, except as otherwise
stated below, incurred by the Company in complying with Sections 5.1, 5.2 and
5.3 hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for the Company, blue sky fees and expenses, the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company, which shall be paid in any event by the
Company) and excluding the fees and disbursements of counsel for Holders.
"RESTRICTED SECURITIES" shall mean the securities of the Company
required to bear the legend set forth in Section 3 hereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
-2-
<PAGE> 3
"SECURITIES EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and, except as set forth under "Registration Expenses," all fees and
disbursements of counsel for any Holder.
2. RESTRICTIONS ON TRANSFERABILITY. The Preferred Stock, the Conversion
Stock and any other securities issued in respect of the Preferred Stock or the
Conversion Stock upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event shall not be sold, assigned, transferred or
pledged except upon the conditions specified in this Agreement, which conditions
are intended to ensure compliance with the provisions of the Securities Act. The
Investors will cause any proposed purchaser, assignee, transferee, or pledgee of
any such shares held by the Investors to agree to take and hold such securities
subject to the provisions and upon the conditions specified in this Agreement.
3. RESTRICTIVE LEGEND. Each certificate representing (i) the Preferred
Stock, (ii) the Conversion Stock, and (iii) any other securities issued in
respect of the Preferred Stock or the Conversion Stock upon any stock split,
stock dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted by the provisions of Section 4 below) be stamped or
otherwise imprinted with a legend in substantially the following form (in
addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. SUCH SHARES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF SAID ACT.
COPIES OF THE AGREEMENTS COVERING THE PURCHASE OF THESE SHARES
AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE
TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE CORPORATION.
Each Investor and/or Holder consents to the Company making a notation on its
records and giving instructions to any transfer agent of the Preferred Stock or
the Common Stock in order to implement the restrictions on transfer established
in this Agreement.
-3-
<PAGE> 4
4. NOTICE OF PROPOSED TRANSFER. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than (i) a
transfer not involving a change in beneficial ownership, (ii) in transactions
involving the distribution without consideration of Restricted Securities by the
Investor to any of its partners, or retired partners, or to the estate of any of
its partners or retired partners, (iii) in transactions involving the transfer
without consideration of Restricted Securities by the Investor during his
lifetime by way of gift or on death by will or intestacy, (iv) in transactions
involving the transfer or distribution of Restricted Securities by a corporation
to any subsidiary, parent or affiliated corporation of such corporation, or (v)
in transactions in compliance with Rule 144), unless there is in effect a
registration statement under the Securities Act covering the proposed transfer,
the holder thereof shall give written notice to the Company of such holder's
intention to effect such transfer, sale, assignment or pledge. Each such notice
shall describe the manner and circumstances of the proposed transfer, sale,
assignment or pledge in sufficient detail, and shall be accompanied, at such
holder's expense by either (i) an unqualified written opinion of legal counsel
who shall be, and whose legal opinion shall be, reasonably satisfactory to the
Company addressed to the Company, to the effect that the proposed transfer of
the Restricted Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission to the effect
that the transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the holder of such Restricted Securities shall be entitled to
transfer such Restricted Securities in accordance with the terms of the notice
delivered by the holder to the Company. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear, except if such
transfer is made pursuant to Rule 144, the appropriate restrictive legend set
forth in Section 3 above, except that such certificate shall not bear such
restrictive legend if, in the opinion of counsel for such holder and the
Company, such legend is not required in order to establish compliance with any
provision of the Securities Act.
5. REGISTRATION.
5.1 DEMAND REGISTRATION.
(a) Demand for Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to not less than thirty
percent (30%) of the shares of Preferred Stock or Conversion Stock, or any
lesser number of shares if the anticipated aggregate offering price, net of
underwriting discounts and commissions, would exceed ($15,000,000) fifteen
million dollars the Company will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts
to effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental requirements or regulations)
as may be so requested and as would permit or facilitate the sale and
distribution of all or such
-4-
<PAGE> 5
portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within 20 days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 5.1:
A. In any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance, unless the Company
is already subject to service in such jurisdiction and except as may be required
by the Securities Act;
B. Prior to the earlier of June 30, 2002 or
six months after the effective date of the Company's first registered public
offering of its stock;
C. If the Company, within ten (10) days of
the receipt of the request of the Initiating Holders, gives notice of its bona
fide intention to effect the filing of a registration statement with the
Commission within ninety (90) days of receipt of such request;
D. During the period starting with the date
sixty (60) days prior to the Company's good faith estimate of the date of filing
of, and ending on the date 180 days immediately following the effective date of,
any registration statement pertaining to securities of the Company, provided
that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective;
E. After the Company has effected two such
registrations pursuant to this Section 5.1(a);
F. Within twelve (12) months after the
Company has effected such a registration pursuant to this Section 5.1(a); or
G. If the Company shall furnish to such
Initiating Holders a certificate signed by the Chief Executive Officer of the
Company stating that in the good faith judgment of the Company's Board of
Directors (the "BOARD") it would be seriously detrimental to the Company or its
stockholders for a registration statement to be filed at the date filing would
be required, in which case the Company's obligation to use its best efforts to
register, qualify or comply under this Section 5.1 shall be deferred for a
period not to exceed 120 days from the date of receipt of written request from
the Initiating Holders, provided that the Company may not exercise this deferral
right more than once during any twelve (12) month period.
Subject to the foregoing clauses (A) through (G), the Company shall file
a registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.
(b) Underwriting. Any registration pursuant to Section 5.1
shall be firmly underwritten by an underwriter of national recognition. In the
event that a registration pursuant to Section 5.1 is for a public offering
involving an underwriting, the Company shall so advise the Holders as part of
the notice given pursuant to Section 5.1(a)(i), and the right of any Holder to
registration pursuant to Section 5.1 shall be conditioned upon such Holder's
participation
-5-
<PAGE> 6
in such underwriting arrangements, and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent requested shall be
limited to the extent provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by a majority in interest of the Initiating Holders, but subject to the
Company's reasonable approval. Notwithstanding any other provision of this
Section 5.1, if the managing underwriter advises the Initiating Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Company shall so advise all holders of Registrable
Securities, and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Holders in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders at the time of filing the
registration statement. No Registrable Securities excluded from the underwriting
by reason of the underwriter's marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may round the number of shares
allocated to any Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to 180 days after the effective date
of such registration, or such other shorter period of time as the underwriters
may require. If the underwriter has not limited the number of Registrable
Securities to be underwritten, the Company may include securities for its own
account (or for the account of other stockholders) in such registration if the
underwriter so agrees and if the number of Registrable Securities that would
otherwise have been included in such registration and underwriting will not
thereby be limited.
5.2 COMPANY REGISTRATION.
(a) Notice of Registration. If at any time or from time to
time the Company shall determine to register any of its equity securities,
either for its own account or for the account of a security holder or holders
(other than pursuant to Section 5.1 or Section 5.3 hereof), other than (A) a
registration relating solely to employee benefit plans, (B) a registration
relating solely to a Rule 145 transaction, or (C) a registration on any
registration form that does not permit secondary sales, the Company will:
(i) promptly give to each Holder written notice
thereof; and
(ii) use its best efforts to include in such
registration (and any related qualification under blue sky laws or other
compliance), except as set forth in Section 5.2 (b) below, and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within twenty (20) days after receipt of such
written notice from the Company by any Holder.
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(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 5.2(a)(i). In such event the right of any Holder to
registration pursuant to Section 5.2 shall be conditioned upon such Holder's
participation in such underwriting, and the inclusion of Registrable Securities
in the underwriting shall be limited to the extent provided herein.
All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company. Notwithstanding any other provision of this Section 5.2, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit the
Registrable Securities to be included in such registration (i) in the case of
the Company's initial public offering, to zero, and (ii) in the case of any
other offering, to an amount no less than 25% of all shares to be included in
such offering; provided however, that any such limitation or "cutback" shall be
first applied to all shares proposed to be sold in such offering other than for
the account of the Company which are not Registrable Securities. The Company
shall so advise all Holders and other holders distributing their securities
through such underwriting, and the number of shares of Registrable Securities or
other securities that may be included in the registration and underwriting shall
be first allocated among all the Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holder at the time of filing the registration statement. To facilitate the
allocation of shares in accordance with the above provisions, the Company may
round the number of shares allocated to any Holder or holder to the nearest 100
shares.
If any Holder or holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to 180 days after the effective date
of the registration statement thereto, or such other shorter period of time as
the underwriters may require.
(c) Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 5.2 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration.
5.3 REGISTRATION ON FORM S-3.
(a) If any Holder or Holders request that the Company file
a registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of shares of the Registrable Securities the reasonably
anticipated aggregate price to the public of which would equal or exceed one
million dollars ($1,000,000), and the Company is a registrant entitled to use
Form S-3 to register the Registrable Securities for such an offering, the
Company shall use its best efforts to cause such Registrable Securities to be
registered for the offering on such form and to cause such Registrable
Securities to be qualified in such jurisdictions as such Holder or Holders may
reasonably request; provided, however, that the Company shall not be required to
effect more than one registration pursuant to this Section 5.3 in any twelve
(12) month period. The Company shall inform
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other Holders of the proposed registration and offer them the opportunity to
participate. In the event the registration is proposed to be part of a firm
commitment underwritten public offering, the substantive provisions of Section
5.1(b) shall be applicable to each such registration initiated under this
Section 5.3.
(b) Notwithstanding the foregoing, the Company shall not
be obligated to take any action pursuant to this Section 5.3:
(i) in any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act;
(ii) if the Company, within ten (10) days of the
receipt of the request of the Initiating Holders, gives notice of its bona fide
intention to effect the filing of a registration statement with the Commission
within ninety (90) days of receipt of such request;
(iii) during the period starting with the date
sixty (60) days prior to the Company's good faith estimate of the date of filing
of, and ending on the date 180 days immediately following the effective date of,
any registration statement pertaining to securities of the Company, provided
that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective; or
(iv) if the Company shall furnish to such Holder or
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board it would be seriously detrimental to the
Company or its stockholders for registration statements to be filed at the date
filing would be required, in which case the Company's obligation to use its best
efforts to file a registration statement shall be deferred for a period not to
exceed 120 days from the receipt of the request to file such registration by
such Holder or Holders, provided that the Company may not exercise this deferral
right more than once during any twelve (12) month period.
5.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred
in connection with (i) two registrations pursuant to Section 5.1 and (ii) all
registrations pursuant to Section 5.2 shall be borne by the Company. Unless
otherwise stated, all expenses incurred in connection with registrations
pursuant to Section 5.3 of this Agreement and all other Selling Expenses
relating to securities registered on behalf of the Holders shall be borne by the
Holders pro rata on the basis of the number of shares so registered.
Notwithstanding the foregoing, the Company shall not be required to effect or to
pay any Registration Expenses of any registration begun pursuant to Sections 5.1
or 5.3, the request of which has been subsequently withdrawn by Holders of a
number of shares of Registrable Securities such that there are no Holders of
Registrable Securities intending to participate in the registration sufficient
to request such a registration, in which case such expenses shall be borne by
the Holders of securities (including Registrable Securities) requesting or
causing such withdrawal; provided further, however, that if at the time of such
withdrawal, the Holders have learned of a material adverse change in the
condition, business or prospects of the Company from that known to the Holders
at the time of their request, then the Holders shall not be required to pay any
of such Registration Expenses and shall retain their rights pursuant to this
Section 5.4.
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5.5 REGISTRATION PROCEDURES. In the case of each registration
effected by the Company pursuant to this Agreement, the Company will keep each
Holder advised in writing as to the initiation of each registration and as to
the completion thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
twenty (120) days or until the distribution described in the registration
statement has been completed, whichever first occurs; and
(b) Furnish to the Holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such Holders and
underwriters may reasonably request in order to facilitate the public offering
of such securities.
(c) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(d) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(e) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
5.6 INDEMNIFICATION.
(a) The Company will indemnify each Holder of Registrable
Securities included in a registration, qualification or compliance pursuant to
this Agreement, each of its officers and directors and partners, and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification or compliance has been
effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act, the
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<PAGE> 10
Securities Exchange Act, state securities law or any rule or regulation
promulgated under the such laws applicable to the Company in connection with any
such registration, qualification and compliance, and the Company will reimburse
each such Holder, each of its officers, directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred, as
such expenses are incurred, in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission, made in reliance
upon and in conformity with written information furnished to the Company by an
instrument duly executed by any Holder, controlling person or underwriter and
stated to be specifically for use therein; provided, however, that the foregoing
indemnity agreement is subject to the condition that, insofar as it relates to
any such untrue statement, alleged untrue statement, omission or alleged
omission made in a preliminary prospectus, such indemnity agreement shall not
inure to the benefit of any underwriter, or any Holder, if there is no
underwriter, if a copy of the final prospectus filed with the Commission
pursuant to its Rule 424(b) was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act, and if such final prospectus cured the untrue statement,
alleged untrue statement, omission or alleged omission giving rise to the loss,
liability, claim or damage.
(b) Each Holder will, if Registrable Securities held by
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such registration statement, each person who controls the
Company or such underwriter within the meaning of Section 15 of the Securities
Act, and each other such Holder, each of its officers, directors and partners
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other document, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company, such Holders, such directors, officers, partners,
persons, underwriters or control persons for any legal or any other expenses
reasonably incurred, as such expenses are incurred, in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by such Holder and stated to be
specifically for use therein. Notwithstanding the foregoing, the liability of
each Holder under this Section 5.6(b) shall be limited in an amount equal to the
net proceeds of the shares sold by such Holder, unless such liability arises out
of or is based on willful misconduct by such Holder. In no event will any Holder
be required to enter into any agreement or undertaking for the benefit of the
Company in connection with any registration, qualification or compliance under
this Section 5 providing for any indemnification or contribution obligations on
the part of such Holder greater than such Holder's obligations under this
Section 5.6 (b).
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<PAGE> 11
(c) Each party entitled to indemnification under this
Section 5.6 (the "INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action, and provided further that the Indemnifying Party shall not
assume the defense for matters as to which representation of both the
Indemnifying Party and the Indemnified Party by the same counsel would be
inappropriate due to actual or potential differing interests between them, but
shall instead in such event pay the fees and costs of separate counsel for the
Indemnified Party. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
5.7 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration, qualification or compliance shall
furnish to the Company such information regarding such Holder or Holders, the
Registrable Securities held by them and the distribution proposed by such Holder
or Holders as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement.
5.8 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock,
the Company agrees to use its best efforts to:
(a) Make and keep public information regarding the Company
available as those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after (90) days following the effective
date of the first registration under the Securities Act filed by the Company for
an offering of its securities to the general public;
(b) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Securities Exchange Act (at any time after it has become subject to such
reporting requirements); and
(c) So long as a Holder owns any Restricted Securities to
furnish to such Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after 90 days after the effective date of the first registration statement
filed by the Company for an offering of its securities to the general public)
and of the Securities Act and the Securities Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company,
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and such other reports and documents of the Company and other information in the
possession of or reasonably obtainable by the Company as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without registration.
5.9 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register securities granted Investors under Sections 5.1, 5.2 and 5.3
may be assigned to a transferee or assignee in connection with any transfer or
assignment of Registrable Securities by the Investor provided that: (i) such
transfer may otherwise be effected in accordance with applicable securities
laws, (ii) such assignee or transferee acquires at least 575,000 shares of
Registrable Securities held by the assignor or transferor (as presently
constituted and subject to subsequent adjustments for recapitalizations, stock
splits, stock dividends and the like) (iii) written notice is promptly given to
the Company and (iv) such transferee agrees to be bound by the provisions of
this Agreement. Notwithstanding the foregoing, the rights to cause the Company
to register securities may be assigned to (A) any affiliated partnership or
constituent partner or retired partner of an Investor which is a partnership,
(B) any affiliate of any corporate Investor, provided that such affiliate
acquires at least 207,000 shares of Registrable Securities or (C) a family
member or trust for the benefit of an Investor who is an individual, provided
written notice thereof is promptly given to the Company and the transferee
agrees to be bound by the provisions of this Agreement.
5.10 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of Holders holding more than fifty percent (50%) of the
Registrable Securities, enter into any agreement with any holder or prospective
holder of any securities of the Company which would allow such holder or
prospective holder to (i) require the Company to effect a registration,
qualification or compliance prior to the date set forth in Section 5.1 (a) (ii)
(B) or (ii) include any securities in any registration, qualification or
compliance filed under Section 5.1 hereof, unless, under the terms of such
agreement, such holder or prospective holder may include such securities in any
such registration only to the extent that the inclusion of such securities will
not diminish the amount of Registrable Securities which are included in such
registration and includes the equivalent of Section 11 of this Agreement as a
term.
5.11 TERMINATION OF REGISTRATION RIGHTS. The rights granted
pursuant to Sections 5.1, 5.2 and 5.3 of this Agreement shall terminate at the
sooner of: (i) as to all Holders, five (5) years after the consummation of the
sale of securities pursuant to a registration statement filed by the Company
under the Securities Act, in connection with the firm commitment underwritten
offering of its securities to the general public; or (ii) as to any Holder, at
such time as such Holder can sell all of his Registrable Securities pursuant to
Rule 144 promulgated under the Securities Act in any ninety (90) day period.
6. FINANCIAL INFORMATION.
(a) The Company will provide the following reports to each
holder of at least 207,000 shares of Preferred Stock and/or Conversion Stock
(appropriately adjusted for recapitalizations, stock splits and the like after
the date hereof):
(i) As soon as practicable after the end of each
fiscal year, and in any event within 90 days thereafter, consolidated balance
sheets of the Company, as of the end of
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such fiscal year, and consolidated statements of operations and of cash flows
and stockholders' equity of the Company, for such year, prepared in accordance
with generally accepted accounting principles, all in reasonable detail and
audited by independent public accountants of national standing selected by the
Company.
(ii) As soon as practicable after the end of the
first, second and third quarterly accounting periods in each fiscal year of the
Company, and in any event within 45 days thereafter, a consolidated balance
sheet of the Company as of the end of each such quarterly period, and
consolidated statements of operations and of cash flows of the Company for such
period and for the current fiscal year to date, prepared in accordance with
generally accepted accounting principles (other than for accompanying notes),
subject to changes resulting from year-end audit adjustments, in reasonable
detail.
(iii) At least thirty days prior to the beginning
of each fiscal year, a budget adopted by the Board for the fiscal year, and, as
soon as prepared, any other budgets or revised budgets prepared by the Company;
7. VISITATION AND INSPECTION.
(a) The Company will afford to each holder of Preferred
Stock and/or Conversion Stock reasonable access during normal business hours to
the Company's accounting books and records and minutes of proceedings of the
stockholders and the Board and committees of the Board, and all information
distributed to the Board, for a purpose reasonably related to such holder's
interests as a stockholder of the Company.
(b) The Company will afford to each holder of shares of
Preferred Stock and/or Conversion Stock the right, upon twenty (20) days advance
notice, to meet periodically with the Company's principal executive officer or
chief financial officer during normal business hours to discuss and make
recommendations regarding the conduct of the Company's business and affairs.
8. CONFIDENTIALITY. Not withstanding the foregoing, the Company is not
required to disclose trade secrets or confidential information pursuant to
Section 6 or Section 7.
9. RIGHT OF FIRST REFUSAL.
(a) The Company hereby grants to each holder of at least
575,000 shares of Preferred Stock and/or Conversion Stock (appropriately
adjusted for recapitalizations, stock splits and the like after the date hereof)
(each such holder referred to herein as a "QUALIFIED INVESTOR"), the right of
first refusal to purchase its Pro Rata Share of New Securities (as defined in
this Section 9) which the Company may, from time to time, propose to sell and
issue. A "PRO RATA SHARE," for purposes of this right of first refusal, is the
ratio that (i) the sum of the number of shares of Common Stock then held by each
Qualified Investor and the number of shares of Common Stock issuable upon
conversion of the Preferred Stock then held by such Qualified Investor bears to
(ii) the sum of the total number of shares of Common Stock then outstanding and
the number of shares of Common Stock issuable upon exercise or conversion of all
then outstanding securities exercisable for or convertible into, directly or
indirectly, Common Stock.
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(b) Except as set forth below, "NEW SECURITIES" shall mean
any shares of capital stock of the Company, including Common Stock and any
series of preferred stock, whether now authorized or not, and rights, options or
warrants to purchase said shares of Common Stock or preferred stock, and
securities of any type whatsoever that are, or may become, convertible into or
exchangeable for said shares of Common Stock or preferred stock. Notwithstanding
the foregoing, "NEW SECURITIES" does not include (i) the Conversion Stock, (ii)
Common Stock offered to the public generally pursuant to a registration
statement under the Securities Act in connection with the Company's initial
public offering, (iii) securities issued pursuant to the acquisition of another
corporation by the Company by merger, purchase of all or substantially all of
the assets or other reorganization whereby the Company or its stockholders own
more than fifty percent (50%) of the voting power of the surviving or successor
corporation, (iv) shares of the Company's Common Stock or related options,
warrants or other rights to purchase such Common Stock issued to employees,
officers and directors of, and consultants to the Company, pursuant to
arrangements approved by the Board (the "EMPLOYEE SHARES"), (v) stock issued
pursuant to any rights, agreements or convertible securities, including without
limitation options and warrants, provided that the rights of first refusal
established by this Section 9 applied with respect to the initial sale or grant
by the Company of such rights, agreements or convertible securities, or (vi)
stock issued in connection with any stock split, stock dividend or
recapitalization by the Company.
(c) In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Qualified Investor written notice
of its intention, describing the amount and type of New Securities, and the
price and terms upon which the Company proposes to issue the same. Each
Qualified Investor shall have ten (10) days from the date of receipt of any such
notice to agree to purchase up to its respective Pro Rata Share of such New
Securities for the price and upon the terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased. If any Qualified Investor fails to agree to purchase its full
Pro Rata Share within such ten (10) day period, the Company will give the
Qualified Investors who did so agree (the "ELECTING QUALIFIED INVESTORS") notice
of the number of New Securities which were not subscribed for. Such notice may
be by telephone if followed by written confirmation within two days. The
Electing Qualified Investors shall have ten (10) days from the date of such
second notice to agree to purchase their Pro Rata Share of all or any part of
the New Securities not purchased by such other Qualified Investors. For the
purpose of this second election under this Section 9(c), shares held by
Qualified Investors other than Electing Qualified Investors shall be excluded
from clause (ii) for the definition of "PRO RATA Share" contained in Section
9(a).
(d) In the event all of the New Securities are not elected
to be purchased by Qualified Investors within ten (10) days after the second
notice pursuant to Section 9(c) above, the Company shall have ninety (90) days
thereafter to sell the New Securities not elected to be purchased by Qualified
Investors at the price and upon the terms no more favorable to the purchasers of
such securities than specified in the Company's notice. In the event the Company
has not sold the New Securities within said ninety (90) day period, the Company
shall not thereafter issue or sell any New Securities without first offering
such securities in the manner provided above.
(e) The right of first refusal hereunder is not assignable
except by each of such Qualified Investors to any party who acquires at least
575,000 shares of the Preferred Stock and/or Conversion Stock (appropriately
adjusted for recapitalizations, stock splits and the like after the date
hereof).
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10. TERMINATION OF COVENANTS. The covenants set forth in Sections 6, 7,
9 and 12 shall terminate and be of no further force or effect upon the
consummation of a firm commitment underwritten public offering or at such time
as the Company is required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act, whichever shall occur first.
11. STANDOFF AGREEMENT. In connection with the initial public offering
of the Company's securities, each Investor and Holder agrees, upon request of
the Company or the underwriters managing any underwritten offering of the
Company's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any securities of the
Company (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed one hundred eighty (180) days)) from the
effective date of such registration as may be requested by the underwriters,
provided that all officers and directors of the Company who own stock of or hold
options to purchase stock of the Company also agree to such restrictions. The
Investors and Holders agree that the Company may instruct its transfer agent to
place stop-transfer notations in its records to enforce the provisions of this
Section 11.
12. ADDITIONAL COVENANTS OF THE COMPANY.
12.1 RESERVED EMPLOYEE SHARES. The Employee Shares shall be
issued from time to time under a stock option and/or restricted stock plan (the
"STOCK PLAN") approved by the Board or such other arrangements, contracts or
plans as are reasonably recommended by management and approved by the Board.
Unless otherwise agreed to by a majority of the Directors who are not then
employees of the Company, Employee Shares subject to options issued under the
Stock Plan or other approved plans will vest, until the option holder's
employment with or service to the Company terminates, over a four year period on
terms no more favorable than 25% at the end of the first year and on an equal
monthly basis thereafter. Unless otherwise agreed to by a majority of the
Directors who are not then employees of the Company, all officers, directors and
employees of or consultants to, the Company acquiring Employee Shares other than
pursuant to an option will execute a stock restriction agreement with the
Company under which the Company will retain the right to repurchase the unvested
shares, over a four-year vesting period which shall lapse on terms no more
favorable than 25% at the end of the first year and on an equal monthly basis
thereafter, for the original purchase price in the event the holder's employment
with or service to the Company terminates. Pursuant to the option agreement or
restricted stock agreement, as the case may be, the Company shall retain a right
of first refusal with respect to all such Employee Shares subject to such
agreement (which right shall terminate and be of no further force or effect upon
the consummation of a firm commitment underwritten public offering or at such
time as the Company is required to file reports pursuant to Section 13 or 15(d)
of the Exchange Act, whichever shall first occur), and the holder shall agree to
a market standoff provision substantially identical to the market standoff
provision contained in Section 11 hereof.
13. DETERMINATION OF SHARE AMOUNTS AND PERCENTAGES. For the purposes of
determining the minimum holdings set forth in this Agreement, including without
limitation the minimum holdings pursuant to Sections 5.9, 6(a), 9(a) and 9(e),
the following rules shall govern:
(a) All shares held by entities affiliated with the
holder, to include, without limitation, any entity who holds more than 15% of
the outstanding voting stock of the
-15-
<PAGE> 16
holder, shall be deemed held by such holder, and any holder which is a
partnership shall be deemed to hold any shares of Preferred Stock and/or
Conversion Stock originally purchased by such holder and subsequently
distributed to partners of such holder which have not been resold by such
partners.
(b) When shares of Preferred Stock are counted either
separately or together with shares of Conversion Stock or shares of Common
Stock, shares of Preferred Stock shall be counted on an as-converted into Common
Stock basis, and the term "CONVERSION STOCK" shall mean only the shares of
Common Stock which have been issued pursuant to conversion of Preferred Stock.
(c) Unless otherwise specified, shares of Series A Stock,
Series B Stock, Series C Stock, Series D Stock, Series E Stock or any other
series of preferred stock issuable upon exercise of any warrants shall not be
counted as "Preferred Stock."
14. AMENDMENT.
(a) Any provision of Section 5 of this Agreement may be
amended or the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the Registrable
Securities then outstanding or deemed to be outstanding. Any amendment or waiver
effected in accordance with this Section 14(a) shall be binding upon each
Investor and each Holder of Registrable Securities at the time outstanding or
deemed to be outstanding (including securities into which such securities are
convertible), each future holder of all such securities, and the Company.
(b) Any provision of Section 9 of this Agreement may be
amended or the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holder of 66 2/3% of Preferred and
Conversion Stock then outstanding or deemed to be outstanding. Any amendment or
waiver effected in accordance with this Section 14(b) shall be binding upon each
Investor at the time outstanding or deemed to be outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company.
(c) Except as expressly provided herein, no other Section
of this Agreement may be amended, waived, discharged or terminated other than by
a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought; provided, however, that
holders of a majority of the Preferred Stock and Conversion Stock may, with the
Company's prior written consent, waive, modify or amend on behalf of all holders
any provisions hereof so long as the effect thereof will be that all such
persons will be treated in the same manner.
15. ADDITIONAL PARTIES. The parties hereto agree that additional
purchasers of the Series E Stock may, with the consent only of the Company, be
added as parties to this Agreement with respect to any or all securities of the
Company held by them, and shall thereupon be deemed for all purposes "Investors"
hereunder. Any such additional purchaser of Series E Stock shall execute a
counter-part of this Agreement, and upon execution by such additional party and
by the Company, shall be considered an Investor for purposes of this Agreement.
-16-
<PAGE> 17
16. GOVERNING LAW. This Agreement and the legal relations between the
parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California. The parties hereto agree to submit to
the jurisdiction of the federal and state courts of the State of California with
respect to the breach or interpretation of this Agreement or the enforcement of
any and all rights, duties, liabilities, obligations, powers, and other
relations between the parties arising under this Agreement.
17. ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties regarding the matters set forth
herein. Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon the successors, assigns,
heirs, executors and administrators of the parties hereto.
18. NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery to the party to be notified or three (3) days after
deposit with the United States mail, by registered or certified mail, postage
prepaid, addressed (a) if to an Investor, at such Investor's address as set
forth on the Schedule of Investors attached hereto, or at such other address as
such Investor shall have furnished to the Company in writing in accordance with
this Section 17, (b) if to any other holder of Preferred Stock or Conversion
Stock, at such address as such holder shall have furnished the Company in
writing in accordance with this Section 17, or, until any such holder so
furnishes an address to the Company, then to and at the address of the last
holder thereof who has so furnished an address to the Company, or (c) if to the
company, at its principal office.
19. ATTORNEYS' FEES. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party shall be
entitled to all costs and expenses of maintaining such suit or action, including
reasonable attorney's fees.
20. AMENDMENT OF ORIGINAL AGREEMENT; BINDING EFFECT. Effective upon the
first closing of the sale of Series E Stock pursuant to the Series E Agreement
and subject to the terms of this Section 20, the Third Amended and Restated
Agreement shall be terminated and replaced in its entirety by this Agreement,
The rights of the holders of the Series A Stock, the Series B Stock , the Series
C Stock and the Series D Stock pursuant to Section 9 of the Third Amended and
Restated Agreement are hereby waived with respect to the sale of the Series E
Stock pursuant to the Series E Agreement. In accordance with Section 14 of the
Third Amended and Restated Agreement, this Agreement shall become binding upon
its execution and delivery by the Company, the Series E Investors and the
holders of more than 66 2/3% of the Series A Stock, the Series B Stock, the
Series C Stock and the Series D Stock voting together as a class.
21. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[Remainder of Page Intentionally Blank]
-17-
<PAGE> 18
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By: /s/ A. Rossmann
-------------------------------------
Title: Chief Executive Officer
----------------------------------
"INVESTORS"
By:
-------------------------------------
Title:
----------------------------------
<PAGE> 19
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: Signature
-------------------------------------
Title: Managing Director
----------------------------------
ABN AMRO Capital (USA), Inc.
ABN AMRO Chicago Corproation
I Eagle Trust
<PAGE> 20
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: Signature
-------------------------------------
Title: VP, Corporate Development
----------------------------------
BCE Mobile Communications, Inc.
<PAGE> 21
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
BELL ATLANTIC INVESTMENTS, INC.
By: /s/ James M. Garrity
-------------------------------------
Title: President and Treasurer
----------------------------------
<PAGE> 22
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
CITICORP
By: /s/ Ronald A. Walter
-------------------------------------
Title: Vice President
----------------------------------
<PAGE> 23
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: Signature
-------------------------------------
Title: President
----------------------------------
DDI Corporation
<PAGE> 24
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: Signature
-------------------------------------
Title: Partner
----------------------------------
Greylock Equity Limited Partnership
<PAGE> 25
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By: /s/ A. Rossman
-------------------------------------
Title: Chief Executive Officer
----------------------------------
"INVESTORS"
By: Signature
-------------------------------------
Title: Director
----------------------------------
Hikari Tsushin, Inc.
<PAGE> 26
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: Signature
-------------------------------------
Title: General Manager
Information Technology Business Dept.
--------------------------------------
Itochu Corporation
<PAGE> 27
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: /s/ H. Satake
-------------------------------------
Title: President
----------------------------------
Itochu Techno-Science Corporation
<PAGE> 28
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: /s/ David Kronfeld
-------------------------------------
Title: Partner
----------------------------------
JK&B Capital, L.P.
JK&B Capital II, L.P.
<PAGE> 29
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: Signature
-------------------------------------
Title: Principal
----------------------------------
KLM Capital Management, Inc.
<PAGE> 30
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: /s/ Masahiro Umemura
-------------------------------------
Title: Senior Managing Director
----------------------------------
Kyocera Corporation
<PAGE> 31
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: Signature
-------------------------------------
Title: General Partner
----------------------------------
Matrix Partners IV, L.P.
Matrix IV Entrepreneurs Fund, L.P.
<PAGE> 32
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: Signature
-------------------------------------
Title: G.P.
----------------------------------
News Capital Partnership I
<PAGE> 33
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
PARIBAS NORTH AMERICA, INC.
By: /s/ John G. Martinez
-------------------------------------
Title: Financial Controller
----------------------------------
<PAGE> 34
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: Signature
-------------------------------------
Title: Principal
----------------------------------
Sema Group
<PAGE> 35
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: Signature
-------------------------------------
Title: Executive VP and CFO
----------------------------------
<PAGE> 36
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
Siienna Limited Partnership II
By: Signature
-------------------------------------
Title: Principal and GP
----------------------------------
<PAGE> 37
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: /s/ Allen Green
-------------------------------------
Title: General Manager (Illegible)
----------------------------------
<PAGE> 38
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: Signature
-------------------------------------
Title: Investment Director
----------------------------------
Societe de Financements et de
Participations dans la
Communication (Part' Com), S.A.
<PAGE> 39
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
C.V. SOFINNOVA VENTURES PARTNERS III
By: /s/ Alain Azan
-------------------------------------
Title: General Partner
----------------------------------
Sofinnova Management L.P.
<PAGE> 40
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: /s/ Josh Tanzer
-------------------------------------
Title: Josh Tanzer
----------------------------------
<PAGE> 41
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: /s/ R. Van Wagoner
-------------------------------------
Title: President
----------------------------------
Van Wagoner Capital Management
<PAGE> 42
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
WPG Enterprise Fund II, L.L.C.
By WPG Venture Partners II, L.P.,
Fund Investment Advisory Member
By: /s/ Peter Nieh
-------------------------------------
Title: General Partner
----------------------------------
Weiss, Peck & Greer Venture
Associates III, L.L.C.
By WPG Venture Partners II, L.P.,
Fund Investment Advisory Member
By: /s/ Peter Nieh
-------------------------------------
Title: General Partner
----------------------------------
<PAGE> 43
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: Signature
-------------------------------------
Title:
----------------------------------
<PAGE> 44
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
Unwired Planet, Inc.
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
"INVESTORS"
By: Signature
-------------------------------------
Title: Officer - Zay Cel Ltd.
----------------------------------
<PAGE> 45
EXHIBIT A
SCHEDULE OF INVESTORS
(TO INVESTOR RIGHTS AGREEMENT)
<PAGE> 46
<TABLE>
<S> <C>
SERIES A INVESTORS SERIES B INVESTORS (CONTINUED)
Matrix Partners IV, L.P.
Matrix Partners IV, L.P. Bay Colony Corporate Center
One International Place 1000 Winter Street, Suite 4500
Suite 3250 Waltham, MA 02154
Boston, MA 02110 Attn: Andrew W. Verhalen,
Attn: Andrew W. Verhalen, General Partner
General Partner
Cirrus Logic, Inc.
Matrix IV Entrepreneurs Fund, L.P. 3100 West Warren
Bay Colony Corporate Center Fremont, CA 94538
1000 Winter Street, Suite 4500 Attn: Satish Gupta
Waltham, MA 02154
Attn: Andrew W. Verhalen, C.V. Sofinnova Venture Partners III
General Partner c/o Sofinnova, Inc.
One Market Plaza
Greylock Equity Limited Partnership Steurt Plaza, Suite 2630
By Greylock Equity G.P. Limited Partnership San Francisco, CA 94105
One Federal Street Attn: Alain Azan
Boston, MA 02110
Attn: Roger Evans Matrix IV Entrepreneurs Fund, L.P.
Bay Colony Corporate Center
C.V. Sofinnova Venture Partners III. 1000 Winter Street, Suite 4500
c/o Sofinnova, Inc. Waltham, MA 02154
One Market Plaza Attn: Andrew W. Verhalen,
Steuart Plaza, Suite 2630 General Partner
San Francisco, CA 94105
WPG Enterprise Fund II, L.P.
Alain Rossmann c/o Weiss, Peck & Greer
c/o Unwired Planet, Inc. 555 California Street, Suite 4760
390 Bridge Parkway San Francisco, CA 94104
Redwood City, CA 94065 Attn: Gill Cogan
Weiss, Peck & Greer Venture Associates III,
SERIES B INVESTORS L.P.
c/o Weiss, Peck & Greer
Mitsubishi Electric Corporation 555 California Street, Suite 4760
1050 East Arques Avenue San Francisco, CA 94104
Sunnyvale, CA 94086 Attn: Gill Cogan
Attn: Grace Li
Greylock Equity Limited Partnership
One Federal Street
Boston, MA 02110
Attn: Roger Evans
</TABLE>
-20-
<PAGE> 47
<TABLE>
<S> <C>
SERIES B INVESTORS (CONTINUED) SERIES C INVESTORS (CONTINUED)
AT&T Wireless Services, Inc. C.V. Sofinnova Venture Partners III
10230 N.E. Points Drive c/o Sofinnova, Inc.
Kirkland, WA 98033 One Market Plaza
Attn: Carrie Schnelker Steurt Plaza, Suite 2630
San Francisco, CA 94105
Peter Cohn as Trustee, or the Successor Attn: Alain Azan
Trustee or Trustees, U/A/D June 29, 1995, as
amended, creating the Peter Cohn Revocable Cirrus Logic, Inc.
Trust 3100 West Warren
c/o Venture Law Group Fremont, CA 94538
2800 Sand Hill Road Attn: Satish Gupta
Menlo Park, CA 94025
AT&T Wireless Services, Inc.
Mark A. Medearis 10230 N.E. Points Drive
c/o Venture Law Group Kirkland, WA 98033
2800 Sand Hill Road Attn: Carrie Schnelker
Menlo Park, CA 94025
WPG Enterprise Fund II, L.P.
VLG Investments 1996 c/o Weiss, Peck & Greer
c/o Venture Law Group 555 California Street, Suite 4760
2800 Sand Hill Road San Francisco, CA 94104
Menlo Park, CA 94025 Attn: Gill Cogan
Attn: Linda Glisson
Weiss, Peck & Greer Venture Associates III,
SERIES C INVESTORS L.P.
c/o Weiss, Peck & Greer
Greylock Equity Limited Partnership 555 California Street, Suite 4760
One Federal Street San Francisco, CA 94104
Boston, MA 02110 Attn: Gill Cogan
Attn: Roger Evans
Qualcomm Incorporated
Matrix Partners IV, L.P. 6455 Lusk Boulevard
Bay Colony Corporate Center San Diego, CA 92121
1000 Winter Street, Suite 4500 Attn: Anthony S. Thornley
Waltham, MA 02154
Attn: Andrew W. Verhalen, Mitsubishi Electric Corporation
1050 East Arques Avenue
Matrix IV Entrepreneurs Fund, L.P. Sunnyvale, CA 94086
Bay Colony Corporate Center Attn: Grace Li
1000 Winter Street, Suite 4500
Waltham, MA 02154
Attn: Andrew W. Verhalen
</TABLE>
-21-
<PAGE> 48
<TABLE>
<S> <C>
SERIES C INVESTORS (CONTINUED)
Alexandre Jenkins Rhea Alan Green
Societe de Financements et de Participations Smart Fund (Gemplus)
dans la Communication (Part' Com), S.A. c/o Candel Partners
Tour Maine Montparnasse 34 rue Guynemer
33 Avenue Du Maine 92447 Issy-Les-Moulineaux
Paris, France 75755 Cedex France
Peter Mok William Bitan
KLM Capital Management, Inc. Sema Group
2041 Mission College Boulevard 16, Rue Barbes
Suite 175 France 92126
Santa Clara, CA 95054
Audrey Lam
Van Wagoner Capital Management
345 California Street, Suite 2450
San Francisco, CA 94104
</TABLE>
-22-
<PAGE> 49
<TABLE>
<S> <C>
SERIES D INVESTORS
Qualcomm Incorporated (Correspondence Address below)
6455 Lusk Boulevard JK& B Capital, L.P.
San Diego, CA 92121 JK& B Capital II, L.P.
Attn: Anthony S. Thornley 205 N. Michigan Avenue, Suite 808
Chicago, IL 60601
Kyocera Corporation Attn: David Kronfeld, Partner
Corporate Development Group 312 946 1200
5-22 Kitainoue-cho. Higashino
Yamashina-ku, Kyoto 607 Japan Zayucel Ltd.
Attn: Mr. Tsuyoshi Mano P.O. Box 71, Road Town
Tortola, British Virgin Islands
Mr. Kazushi Oi (Entity Registered Address above)
DDI Corporation (Correspondence Address below)
8, Ichibancho, Chiyoda-ku Michael Moh
Tokyo 102 Japan Officer
72 Grange Road, Unit 04-01
Nexus Capital Partners I, L.P. Singapore 249576
By Nexus Capital Partners Singapore
1 Market Street Phone: 65-732-8039
Steuart Tower, Suite 2400 Fax: 65-735-4510
San Francisco, CA 94105
Attn: Will Wethersby Greylock Equity Limited Partnership
By Greylock Equity G.P. Limited Partnership
BCE Mobile Communications, Inc. One Federal Street
2920 Matheson Boulevard East Boston, MA 02110
Mississauga, Ontario Canada
L4W5J4 WPG Enterprise Fund II, L.P.
Attn: Mr. Ted Maksimowksi c/o Weiss, Peck & Greer
Vice President Corporate Development 555 California Street, Suite 4760
San Francisco, CA 94104
JK& B Capital, L.P. Attn: Gill Cogan/Peter Nieh
JK&B Capital II, L.P.
Corporate Centre Weiss, Peck & Greer Venture Associates III,
W. Bay Road L.P.
Leeward 1 c/o Weiss, Peck & Greer
P.O. Box 31106 SMB 555 California Street, Suite 4760
Great Cayman, Cayman Islands San Francisco, CA 94104
Attn: William Keunen Attn: Gill Cogan/Peter Nieh
(Entity Registered Address above)
Matrix Partners IV, L.P.
Bay Colony Corporate Center
1000 Winter Street, Suite 4500
Waltham, MA 02154
Attn: Andrew W. Verhalen,
</TABLE>
-23-
<PAGE> 50
<TABLE>
<S> <C>
Matrix IV Entrepreneurs Fund, L.P. Koppel Ltd.
Bay Colony Corporate Center Kuang Hwa Investment Holdings
1000 Winter Street, Suite 4500 No. 10, Floor 232
Waltham, MA 02154 Pateh Section 2
Attn: Andrew W. Verhalen Taipei, Taiwan 106
Attn: Brian Hsing
Mr. Masao Yukawa
3-30-3 Denen-chofu ABN AMRO Capital (USA), Inc.
Ohta-ku, Tokyo 145-0071 Japan c/o Daniel J. Foreman
208 La Salle Street, 10th Floor
Chicago, IL 60604
ABN AMRO Chicago Corporation I Eagle Trust
c/o Daniel J. Foreman c/o Daniel J. Foreman
208 La Salle Street, 10th Floor 208 La Salle Street, 10th Floor
Chicago, IL 60604 Chicago, IL 60604
C.V. Sofinnova Venture Partners III Erling Corporation, N.V.
c/o Sofinnova, Inc. c/o Jeff Berman
One Market Plaza, Steuart Plaza, Suite 2630 Compass Capital Advisors, Ltd.
San Francisco, CA 94105 Swan House, 33 Old Bond Street
Attention: Alain Azan London W1X 3AD
Asia Tech Ventures Limited Cam Amenedo
5423 Blackhawk Drive Citicorp
Danville, CA 94506 Citicorp Center
Attn: James Yao 153 E. 53rd Street, 6th Floor
Executive Director New York, NY 10043
Sienna Limited Partnership II Paribas North America
c/o Nancy A. Roset c/o Steve Alexander
2330 Marinship Way Equitable Tower
Suite 220 787 Seventh Avenue
Sausalito, CA 94965 New York, NY 10019
Robert W. Humes Reuters Holdings PLC
17137 Yearling Lane 85 Fleet Street
Wadsworth, IL 60083 London, England EC4P4AJ
Attn: John Taysom
</TABLE>
-24-
<PAGE> 51
<TABLE>
<S> <C>
SERIES E INVESTORS
Siemens Information and Communication Itochu Techno-Science Corporation
Networks, Inc. 11-5, Fujimi 1-Chome,
900 Broken Sound Parkway Chiyoda-Ku, Tokyo 102 JAPAN
Boca Raton, FL 33487
Attn: Dieter Diehn
with a copy to:
Siemens Corporation
1301 Avenue of the Americas
New York, New York 10019
Attn: Barrett S. DiPaolo
Hikari Tsushin, Inc. Itochu Corporation
22F Ohtemachi Nomura Building 5-1, Kita-Aoyama 2-chome,
2-1-1 Ohtemachi, Chiyoda-ku, Tokyo 100-0004 Minato-ku, Tokyo, 107-8077, JAPAN
Japan
Bell Atlantic Investments, Inc. Alexandre Jenkins Rhea
3900 Washington St., 2nd Floor Societe de Financements et de Participations
Wilmington, DE 19802 dans la Communication (Part' Com), S.A.
Attn: Janet Garrity Tour Maine Montparnasse
33 Avenue Du Maine
with a copy to: Paris, France 75755
Bell Atlantic Mobile
180 Washington Valley Road
Bedminster, NJ 07921
Attn: Christine Mihok
Josh Tanzer
Credit Suisse First Boston
2400 Hanover Street
Palo Alto, CA 94304
</TABLE>
-25-
<PAGE> 1
Exhibit 10.7
UNWIRED PLANET, INC.
VOTING AGREEMENT
This VOTING AGREEMENT (the "Agreement") is made and entered into this
23rd day of January, 1998 by and among Unwired Planet, Inc., a Delaware
corporation (the "Company"), Alain Rossmann, Charles M. Parrish and Bruce V.
Schwartz (collectively the "Shareholders"), those purchasers of Series A
Preferred Stock of the Company who are signatories to this Agreement (the
"Series A Investors"), those purchasers of Series B Preferred Stock of the
Company who are signatories to this Agreement (the "Series B Investors") and
those purchasers of Series D Preferred Stock of the Company who are signatories
to this Agreement (the "Series D Investors," and collectively with the Series A
Investors and the Series B Investors, the "Investors).
RECITALS
A. In connection with the prior issuance of its outstanding Series A
Preferred Stock (the "Series A Preferred Stock") to the Series A Investors and
its outstanding Series B Preferred Stock (the "Series B Preferred Stock") to the
Series B Investors the Company entered into that certain Shareholders Agreement,
dated as of December 27, 1995 (the "Original Agreement"), pursuant to which the
Shareholders, the Series A Investors and the Series B Investors agreed as to the
voting of their shares of capital stock of the Company in elections for the
Company's Board of Directors (the "Board").
B. The Company and the Series D Investors are parties to that certain
Series D Preferred Stock Purchase Agreement dated as of January 23, 1998 (the
"Series D Agreement") pursuant to which the Company shall issue and sell up to
Eight Million Eight Hundred Fifty-Five Thousand Five Hundred Sixty-Five
(8,855,565) shares of its Series D Preferred Stock (the "Series D Preferred
Stock").
C. The Company, the Series A Investors and the Series B Investors wish
to enter into this Agreement to amend and supersede the voting provisions of the
Original Agreement as set forth herein and to extend the rights and obligations
provided herein to the Series D Investors.
NOW THEREFORE, the parties agree as follows:
1. Board of Directors.
a. The Shareholders and Investors hereby agree to vote, from time
to time, that number of shares of the capital stock of the Company as to which
they have beneficial ownership sufficient to elect and appoint to the Board the
following persons: (i) one member as shall be designated, from time to time, by
Matrix Partners IV, L.P. ("Matrix") and subsequent assignees and transferees of
Matrix; (ii) one member as shall be designated, from time to time, by Greylock
Equity Limited Partnership ("Greylock") and subsequent assignees and transferees
of Greylock; (iii) two members as shall be designated, from time to time, by the
holders of a
<PAGE> 2
majority of the Company's outstanding Common Stock (the "Common Holders"); and
(iv) one member as shall be designated, from time to time, by JK&B Capital, L.P.
and JK&B Capital II, L.P. (collectively "JK&B") and subsequent assignees and
transferees of JK&B. Any determination or designation to be made by the Common
Holders for the purpose of this Section 1 shall be made by those members of such
group holding a majority of the shares of Common Stock held by such group, and
any determination by such majority shall be binding on the remaining members of
such group. The parties hereto expect that one of the designees of the Common
Holders will be the Chief Executive Officer of the Company. The first appointees
of the Common Holders shall be Alain Rossmann and Charles M. Parrish. The first
appointee of Matrix shall be Andrew W. Verhalen. The first appointee of Greylock
shall be Roger L. Evans. The first appointee of JK&B shall be David Kronfeld. In
the event that any director elected pursuant to the terms hereof ceases to serve
as a member of the Board, the Company, the Investors and the Shareholders agree
to take all such action as is reasonable and necessary, including the voting of
shares of capital stock of the Company by the Shareholders and Investors as to
which they have beneficial ownership, to cause the election or appointment of
such other substitute person to the Board as may be designated on the terms as
herein provided. The Company shall promptly give the Investors written notice of
any election to or appointment of, or change in composition of, the Board.
b. The representatives of each of Matrix, Greylock, JK&B and the
Common Holders shall each be subject to approval by a majority of the members of
the Board, which approval shall not be unreasonably withheld unless the identity
of a particular nominee may, in the good faith opinion of a majority of said
Board, (i) result in the unauthorized disclosure of confidential information of
the Company, its affiliates, licensors, customers or suppliers; (ii) adversely
affect any existing or proposed relationships of the Company with its
affiliates, licensors, customers or suppliers; or (iii) otherwise adversely and
materially affect the interests of the Company.
c. During the term of this Agreement, the Shareholders and the
Investors agree to vote their shares of capital stock of the Company and
otherwise to take such action so as to maintain that the number of directors on
the Board shall be variable, between three (3) and five (5), which such number
shall, as of the date of this Agreement, be fixed at five (5). The size of the
Board or number of fixed directors may be changed upon the prior written consent
of Shareholders holding a majority of the shares of Common Stock held by all
Shareholders.
d. Each of the Shareholders, Investors and the Company agree not
to take any actions which would materially and adversely affect the provisions
of this Agreement and the intention of the parties with respect to the
composition of the Board as herein stated.
-2-
<PAGE> 3
2. Transferees; Legends on Certificates.
a. All transferees or assignees of shares of capital stock of the
Company from Shareholders and the Investors shall be bound by and subject to the
terms and conditions of this Agreement.
b. The Shareholders and Investors agree that all share
certificates now or hereafter held by them will be stamped or otherwise
imprinted with a legend in the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS IN REGARD
TO THEIR VOTING RIGHTS BY THE PROVISIONS OF AN AGREEMENT, A COPY OF WHICH IS ON
FILE IN THE OFFICE OF THE SECRETARY OF THE CORPORATION."
c. Upon the sale by the Company of Series D Preferred Stock to
Series D Investors, each such Series D Investors shall, without further action
required on the part of any then Investors or the Shareholders, become a party
to this Agreement and shall thereafter hold any shares of Series D Preferred
Stock held by such person subject to all of the terms, conditions and rights set
forth in this Agreement.
3. Term. This Agreement shall commence on the date first above written
and shall terminate upon the first to occur of the following events:
a. The agreement in writing to terminate this Agreement by (i)
the Company, (ii) Shareholders holding a majority of the shares of Common Stock
of the Company, and (iii) Investors holding a majority of the shares of Common
Stock and Preferred Stock (counted on an as-converted basis) of the Company then
held by all Investors;
b. The adjudication by a court of competent jurisdiction that the
Company is bankrupt or insolvent;
c. The filing of a certificate of dissolution of the Company; or
d. Upon the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Securities Act of 1933, as
amended, in connection with the firm commitment underwritten offering of its
securities to the general public;
e. The closing of the Company's sale of all or substantially all
of its assets or the acquisition of the Company by another entity by means of
merger or consolidation resulting in the exchange of fifty percent (50%) of the
shares of all outstanding classes of the Company's capital stock for securities
or consideration issued, or caused to be issued, by the acquiring entity or its
subsidiary; or
f. At such time as the Company is required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended.
-3-
<PAGE> 4
4. Assignment, Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of the executors, administrators, legal
representatives, heirs, successors, and assigns of the parties hereto; provided,
however, that no party may be assigned any of the foregoing rights unless the
Company is given written notice by the assigning party at the time of such
assignment stating the name and address of the assignee and identifying the
securities of the Company as to which the rights in question are being assigned;
and provided further that any such assignee shall receive such assigned rights
subject to all the terms and conditions of this Agreement. The numbers of shares
set forth in the foregoing provisions of this Agreement shall be subject to
automatic appropriate proportional adjustment to reflect any subsequent
subdivisions (stock splits), combinations (reverse stock splits), and dividends
of such shares and recapitalizations, reclassifications and other similar
corporate rearrangements affecting such shares after the date hereof.
5. Effectiveness. This Agreement shall become effective upon the first
closing of the sale of the Series D Preferred Stock pursuant to the Series D
Agreement.
6. Miscellaneous.
a. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts made among residents of, and wholly to be performed in, California.
b. Further Instruments. From time to time, each party hereto
shall execute and deliver such instruments and documents as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
c. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the executors, administrators, legal representatives,
heirs, successors, and assigns of the parties hereto.
d. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
e. Entire Agreement. This document constitutes and contains the
entire agreement of the parties and supersedes any and all prior negotiations,
correspondence, understandings and agreements among the parties respecting the
subjects matter hereof.
f. Amendments and Waivers. Any terms of this Agreement may be
amended and the observance of any term of the Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company, Shareholders holding a
majority of the total shares of the Capital Stock of the Company held by all
Shareholders and Investors holding a majority of the total shares of the Capital
Stock of the Company held by all Investors. Any amendment or waiver effected in
accordance with this Section shall be binding upon all Investors, all
Shareholders, their transferees and assignees, and the Company.
-4-
<PAGE> 5
7. Notices Etc. Except as otherwise specifically provided herein, all
notices and other communications required or permitted hereunder shall be in
writing and shall be deemed effectively given upon personal delivery to the
party to be notified or three (3) days after deposit with the United States
mail, by registered or certified mail, postage prepaid, addressed (a) if to an
Investor, at such Investor's address as set forth on the Schedule of Investors
attached to this Agreement, or at such other address as such Investor shall have
furnished to the Company in writing in accordance with this Section 7, (b) if to
any other holder of the Preferred Stock and Common Stock issued upon conversion
hereof to whom the Rights have been transferred in accordance with Section 4
hereof, at such address as such holder shall have furnished the Company in
writing in accordance with this Section 7, or, until any such holder so
furnishes an address to the Company, (c) if to a Shareholder, at such address as
such Shareholder shall have last furnished the Company in writing, or (d) if to
the Company, at its principal office.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
/s/ ALAIN ROSSMANN
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By: /s/ Alan J. Black
---------------------------------------- ----------------------------------
Title: Chief Financial Officer Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES B INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES D INVESTORS:
- -------------------------------------------
Print Name
- -------------------------------------------
Signature
- -------------------------------------------
Title
</TABLE>
VOTING AGREEMENT
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By:
---------------------------------------- ----------------------------------
Title: Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
MATRIX IV ENTERPRENEURS FUND, L.P.
- -------------------------------------------
Print Name of Investor/Entity
/s/ [SIG]
- -------------------------------------------
Signature of Authorized Representative
GENERAL PARTNER
- -------------------------------------------
Title
SERIES B INVESTORS:
MATRIX IV ENTERPRENEURS FUND, L.P.
- -------------------------------------------
Print Name of Investor/Entity
/s/ [SIG]
- -------------------------------------------
Signature of Authorized Representative
GENERAL PARTNER
- -------------------------------------------
Title
SERIES D INVESTORS:
MATRIX IV ENTERPRENEURS FUND, L.P.
- -------------------------------------------
Print Name
/s/ [SIG]
- -------------------------------------------
Signature
GENERAL PARTNER
- -------------------------------------------
Title
</TABLE>
VOTING AGREEMENT
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By:
---------------------------------------- ----------------------------------
Title: Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
C.V. SOFINNOVA VENTURES PARTNERS III
- -------------------------------------------
Print Name of Investor/Entity
/s/ ALAIN AZAN
- -------------------------------------------
Alain Azan
General Partner, Sofinnova Management L.P.
- -------------------------------------------
Title
SERIES B INVESTORS:
C.V. SOFINNOVA VENTURES PARTNERS III
- -------------------------------------------
Print Name of Investor/Entity
/s/ ALAIN AZAN
- -------------------------------------------
Alain Azan
General Partner, Sofinnova Management L.P.
- -------------------------------------------
Title
SERIES D INVESTORS:
C.V. SOFINNOVA VENTURES PARTNERS III
- -------------------------------------------
Print Name
/s/ ALAIN AZAN
- -------------------------------------------
Alain Azan
General Partner, Sofinnova Management L.P.
- -------------------------------------------
Title
</TABLE>
VOTING AGREEMENT
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By:
---------------------------------------- ----------------------------------
Title: Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
Greylock Equity Limited Partnership
by Greylock Equity GP Limited Partnership
- -------------------------------------------
Print Name of Investor/Entity
It General Partner
/s/ ROGER L. EVANS
- -------------------------------------------
Roger L. Evans
General Partner
- -------------------------------------------
Title
SERIES B INVESTORS:
Greylock Equity Limited Partnership
by Greylock Equity GP Limited Partnership
- -------------------------------------------
Print Name of Investor/Entity
Its General Partner
/s/ ROGER L. EVANS
- -------------------------------------------
Roger L. Evans
General Partner
- -------------------------------------------
Title
SERIES D INVESTORS:
Greylock Equity Limited Partnership
by Greylock Equity GP Limited Partnership
- -------------------------------------------
Print Name
/s/ ROGER L. EVANS
- -------------------------------------------
Roger L. Evans
General Partner
- -------------------------------------------
Title
</TABLE>
VOTING AGREEMENT
<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By:
---------------------------------------- ----------------------------------
Title: Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES B INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES D INVESTORS:
MASAHIRO UMEMURA
- -------------------------------------------
Print Name
/s/ MASAHIRO UMEMURA
- -------------------------------------------
Masahiro Umemura
Senior Managing Director, Kyocera Corporation
- -------------------------------------------
Title
</TABLE>
VOTING AGREEMENT
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By:
---------------------------------------- ----------------------------------
Title: Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES B INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES D INVESTORS:
B. STUIVINGA
- -------------------------------------------
Print Name
/s/ [SIG]
- -------------------------------------------
Signature
Director
ERLING CORPORATION, N.V.
- -------------------------------------------
Title
</TABLE>
VOTING AGREEMENT
<PAGE> 12
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By:
---------------------------------------- ----------------------------------
Title: Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES B INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES D INVESTORS:
REUTERS LIMITED
- -------------------------------------------
Print Name
/s/ [SIG]
- -------------------------------------------
Signature
France Director
- -------------------------------------------
Title
</TABLE>
VOTING AGREEMENT
<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By:
---------------------------------------- ----------------------------------
Title: Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES B INVESTORS:
WGP Venture Partners III, L.P., General Partner
Of WPG Enterprise Fund II, L.P. and Weiss, Peck
& Greer Venture Associates III, L.P.
by: /s/ GILL COGAN
----------------------------------------
Gill Cogan, General Partner
SERIES D INVESTORS:
WGP Venture Partners III, L.P., General Partner
Of WPG Enterprise Fund II, L.P. and Weiss, Peck
& Greer Venture Associates III, L.P.
by: /s/ GILL COGAN
----------------------------------------
Gill Cogan, General Partner
</TABLE>
VOTING AGREEMENT
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By:
---------------------------------------- ----------------------------------
Title: Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES B INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES D INVESTORS:
JK & B Capital, L.P.
By: JK & B Management, L.L.C
JK & B Capital, L.P.
Its: General Partner
/s/ David Kronfeld
- -------------------------------------------
Signature
Manager
- -------------------------------------------
Title
</TABLE>
VOTING AGREEMENT
<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By:
---------------------------------------- ----------------------------------
Title: Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES B INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES D INVESTORS:
Yusai Okuyama
- -------------------------------------------
Print Name
/s/ YUSAI OKUYAMA
- -------------------------------------------
Yusai Okuyama
DDI. President
- -------------------------------------------
Title
</TABLE>
VOTING AGREEMENT
<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By:
---------------------------------------- ----------------------------------
Title: Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES B INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES D INVESTORS:
JAMES YAO, Asio Tech Ventures
- -------------------------------------------
Print Name
/s/ JAMES YAO
- -------------------------------------------
James Yao
Executive Director
- -------------------------------------------
Title
</TABLE>
VOTING AGREEMENT
<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By:
---------------------------------------- ----------------------------------
Title: Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES B INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES D INVESTORS:
CITICORP
- -------------------------------------------
Print Name
/s/ RONALD A. WALTER
- -------------------------------------------
Ronald A. Walter
Vice President
- -------------------------------------------
Title
</TABLE>
VOTING AGREEMENT
<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By:
---------------------------------------- ----------------------------------
Title: Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES B INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES D INVESTORS:
- -------------------------------------------
Print Name
/s/ [SIG]
- -------------------------------------------
Signature
- -------------------------------------------
Title
</TABLE>
VOTING AGREEMENT
<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By:
---------------------------------------- ----------------------------------
Title: Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES B INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES D INVESTORS:
Nexus Capital Partners 1, L.P.
- -------------------------------------------
Print Name
/s/ WILLIAM WEATHERSBY
- -------------------------------------------
William Weathersby
Principal
- -------------------------------------------
Title
</TABLE>
VOTING AGREEMENT
<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By:
---------------------------------------- ----------------------------------
Title: Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES B INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES D INVESTORS:
TED MAKSIMOWSKI
- -------------------------------------------
Print Name
/s/ TED MAKSIMOWSKI
- -------------------------------------------
Ted Maksimowski
VP, Corporate Development
- -------------------------------------------
Title
</TABLE>
VOTING AGREEMENT
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By:
---------------------------------------- ----------------------------------
Title: Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES B INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES D INVESTORS:
Sienna Limited Partnership II
- -------------------------------------------
Print Name
/s/ DANIEL L. SKOFF
- -------------------------------------------
Daniel L. Skoff
Chairman of the GP
- -------------------------------------------
Title
</TABLE>
VOTING AGREEMENT
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By:
---------------------------------------- ----------------------------------
Title: Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES B INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES D INVESTORS:
MICHAEL MOH FOR ZAYUCEL LTD.
- -------------------------------------------
Print Name
/s/ MICHAEL MOH
- -------------------------------------------
Michael Moh
Officer
- -------------------------------------------
Title
</TABLE>
VOTING AGREEMENT
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC., ----------------------------------
a Delaware corporation Alain Rossmann
By:
---------------------------------------- ----------------------------------
Title: Charles M. Parrish
-------------------------------------
----------------------------------
Bruce V. Schwartz
SERIES A INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES B INVESTORS:
- -------------------------------------------
Print Name of Investor/Entity
- -------------------------------------------
Signature of Authorized Representative
- -------------------------------------------
Title
SERIES D INVESTORS:
Sienna Limited Partnership II
- -------------------------------------------
Print Name
/s/ DANIEL L. SKOFF
- -------------------------------------------
Daniel L. Skoff
Chairman of the GP
- -------------------------------------------
Title
</TABLE>
VOTING AGREEMENT
<PAGE> 24
UNWIRED PLANET, INC.
AMENDMENT TO VOTING AGREEMENT
This Amendment dated as of February 19, 1998 (the "Amendment") amends
that certain Voting Agreement dated as of January 23, 1998 (the "Voting
Agreement") by and among Unwired Planet, Inc., a Delaware corporation (the
"Company"), the shareholders as listed therein (the "Shareholders"), and the
investors (the "Investors") who are signatories thereto. Unless the context
otherwise requires, all capitalized terms used herein shall have the same
meanings as set forth in the Voting Agreement.
RECITAL:
The Company's Series D Preferred Stock Purchase Agreement dated January
23, 1998 is being amended concurrently herewith (the "Purchase Agreement
Amendment") to authorize the issuance of up to 811,761 additional shares of the
Company's Series D Preferred Stock (the "Additional Shares") and the parties
wish to provide that the Additional Shares will be considered "Series D
Preferred Stock" under such Voting Agreement. Section 6(f) of the Voting
Agreement permits the amendment of the Voting Agreement by the Company and the
consent of (a) the holders of a majority of the outstanding Capital Stock held
by the Shareholders and (b) the holders of a majority of the outstanding Capital
Stock held by the Investors.
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Amendment.
(a) The term "Series D Preferred Stock" as defined in the Voting
Agreement shall be deemed to include the Additional Shares.
(b) The term "Series D Investors" as defined in the Voting
Agreement shall be deemed to include the purchasers of the Additional Shares.
(c) The term "Series D Agreement" as defined in the Voting
Agreement is defined to mean the Series D Agreement, as amended by the Purchase
Agreement Amendment.
2. Required Signatures. The provisions of this Amendment shall be
effective upon execution by the Company and by the holders of a majority of the
Capital Stock held by the Shareholders and by the holders of a majority of the
Capital Stock held by the Investors.
3. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE> 25
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
<TABLE>
<S> <C>
COMPANY: SHAREHOLDERS:
UNWIRED PLANET, INC.,
a Delaware corporation ----------------------------------
Alain Rossmann
By:
-------------------------------------- ----------------------------------
Title: Charles M. Parrish
----------------------------------
Bruce V. Schwartz
INVESTORS:
- -----------------------------------------
Print Name of Investor/Entity
- -----------------------------------------
Signature of Authorized Representative
- -----------------------------------------
Title
</TABLE>
<PAGE> 1
EXHIBIT 10.8
LEASE AGREEMENT
between
SEAPORT CENTRE ASSOCIATES, LLC
as "LANDLORD"
and
UNWIRED PLANET, INC.
as "TENANT"
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1. PREMISES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. TERM; POSSESSION. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. SECURITY DEPOSIT. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5. USE AND COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . 8
6. TENANT IMPROVEMENTS & ALTERATIONS . . . . . . . . . . . . . . . . . . 11
7. MAINTENANCE AND REPAIRS . . . . . . . . . . . . . . . . . . . . . . . 13
8. TENANT'S TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9. UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10. EXCULPATION AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . 16
11. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
12. DAMAGE OR DESTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . 18
13. CONDEMNATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14. ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . . 21
15. DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . 25
16. LATE CHARGE AND INTEREST. . . . . . . . . . . . . . . . . . . . . . . 26
17. WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
18. ENTRY, INSPECTION AND CLOSURE . . . . . . . . . . . . . . . . . . . . 27
19. SURRENDER AND HOLDING OVER. . . . . . . . . . . . . . . . . . . . . . 28
20. ENCUMBRANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
21. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS. . . . . . . . . . . . 30
22. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
23. ATTORNEYS' FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
24. QUIET POSSESSION. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
25. SECURITY MEASURES . . . . . . . . . . . . . . . . . . . . . . . . . . 31
26. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
27. RULES AND REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . 31
28. LANDLORD'S LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . . 32
29. CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . 32
30. BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
31. RELOCATION OF PREMISES. . . . . . . . . . . . . . . . . . . . . . . . 33
32. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
33. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
34. AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
i
<PAGE> 3
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
ADDITIONAL RENT.......................................................... 7
ALTERATIONS.............................................................. 12
AWARD.................................................................... 20
BROKER................................................................... 33
BUILDING................................................................. 4
BUILDING RULES........................................................... 32
BUILDING SYSTEMS......................................................... 9
CLAIMS................................................................... 16
COMMENCEMENT DATE........................................................ 4
CONDEMNATION............................................................. 20
CONDEMNOR................................................................ 20
CONTROLS................................................................. 15
DATE OF CONDEMNATION..................................................... 20
DEVELOPMENT.............................................................. 4
ENCUMBRANCE.............................................................. 29
ENVIRONMENTAL LOSSES..................................................... 10
ENVIRONMENTAL REQUIREMENTS............................................... 9
EVENT OF DEFAULT......................................................... 25
EXPIRATION DATE.......................................................... 4
HANDLED BY TENANT........................................................ 9
HANDLING BY TENANT....................................................... 9
HAZARDOUS MATERIALS...................................................... 9
HVAC..................................................................... 9
INTEREST RATE............................................................ 27
LAWS..................................................................... 5
MORTGAGEE................................................................ 30
OPERATING COSTS.......................................................... 5
PARKING FACILITY......................................................... 4
PERMITTED HAZARDOUS MATERIALS............................................ 10
PREMISES................................................................. 4
PROJECT.................................................................. 4
PROPERTY................................................................. 4
PROPERTY MANAGER......................................................... 17
PROPOSED TRANSFEREE...................................................... 22
RENT..................................................................... 8
RENTAL TAX............................................................... 15
REPRESENTATIVES.......................................................... 9
SECURITY DEPOSIT......................................................... 8
SERVICE FAILURE.......................................................... 16
TAXES.................................................................... 6
TENANT'S SHARE........................................................... 6
TENANT'S TAXES........................................................... 15
TENANT IMPROVEMENTS...................................................... 12
TERM..................................................................... 4
TRADE FIXTURES........................................................... 13
TRANSFER................................................................. 22
TRANSFEREE............................................................... 23
VISITORS................................................................. 9
</TABLE>
ii
<PAGE> 4
BASIC LEASE INFORMATION
LEASE DATE: For identification purposes only, the date of this
Lease is March 10, 1998
LANDLORD: SEAPORT CENTRE ASSOCIATES, LLC, a California limited
liability company
TENANT: UNWIRED PLANET, INC. a Delaware corporation
PROJECT: Seaport Centre Phase Three (East Campus)
DEVELOPMENT: Seaport Centre Phases One, Two and Three, consisting
of 26 buildings, the underlying land and associated
land.
BUILDING ADDRESS: 800 Chesapeake, Building 15
Redwood City, California
RENTABLE AREA OF
BUILDING: Approximately 40,795 square feet
RENTABLE AREA OF
PROJECT: 135,245
PREMISES: Floor: Entire two story building
Building Number: 15
Rentable Area: Approximately 40,795 square feet
TERM: 84 full calendar months (plus any partial month at the
beginning of the Term)
COMMENCEMENT DATE: June 1, 1998
EXPIRATION DATE: The last day of the 84th full calendar month in the
Term
BASE RENT: Months 01-12: $2.55 per rentable square foot per month
Months 13-24: $2.65 per rentable square foot per month
Months 25-36: $2.75 per rentable square foot per month
Months 37-48: $2.85 per rentable square foot per month
Months 49-60: $2.95 per rentable square foot per month
Months 61-72: $3.05 per rentable square foot per month
Months 72-84: $3.15 per rentable square foot per month
MAINTENANCE, This is a "triple net lease" where Tenant is
OPERATING COSTS AND responsible for maintenance, operating costs and taxes,
all in accordance with the
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<PAGE> 5
TAXES: applicable provisions of the Lease.
TENANT'S SHARE: 30.16%
SECURITY DEPOSIT: A Letter of Credit as provided in Section 36 below.
LANDLORD'S ADDRESS Seaport Centre Associates, LLC
FOR PAYMENT OF RENT: Ten Almaden Boulevard, Suite 430
San Jose, CA 95113
LANDLORD'S ADDRESS Seaport Centre Associates, LLC
FOR NOTICES: c/o William Wilson & Associates
Ten Almaden Boulevard, #430
San Jose, CA 95113
with a copy to:
Seaport Centre Associates, LLC
c/o William Wilson & Associates
2929 Campus Drive, Suite 450
San Mateo, CA 94403
Attn: General Counsel
TENANT'S ADDRESS 800 Chesapeake
FOR NOTICES: Redwood City, California
BROKER(S): Wayne Mascia & Associates
GUARANTOR(S): (none)
PROPERTY MANAGER: William Wilson & Associates
ADDITIONAL PROVISIONS: 35. Letter of Credit
36. Parking
37. Extension Option
38. Right of First Offer - Building 14
39. Right of First Offer - Building 19
40. Landlord's Improvements
Exhibits:
- ---------
Exhibit A: The Premises
Exhibit B: Construction Rider
Exhibit C: Building Rules
-2-
<PAGE> 6
Exhibit D: Additional Provisions
The Basic Lease Information set forth above is part of the Lease. In the
event of any conflict between any provision in the Basic Lease Information and
the Lease, the Lease shall control.
-3-
<PAGE> 7
THIS LEASE is made as of the Lease Date set forth in the Basic Lease
Information, by and between the Landlord identified in the Basic Lease
Information ("LANDLORD"), and the Tenant identified in the Basic Lease
Information ("TENANT"). Landlord and Tenant hereby agree as follows:
1. PREMISES. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, upon the terms and subject to the conditions of this Lease, and
subject to covenants, conditions and restrictions recorded in the real estate
records in the county in which the Property is located, the space identified in
the Basic Lease Information as the Premises (the "PREMISES"), in the Building
located at the address specified in the Basic Lease Information (the
"BUILDING"). The approximate configuration and location of the Premises is
shown on Exhibit A. Landlord and Tenant agree that the rentable area of the
Premises for all purposes under this Lease shall be the Rentable Area specified
in the Basic Lease Information. The Building, together with the parking
facilities serving the Building (the "PARKING FACILITY"), and the parcel(s) of
land on which the Building and the Parking Facility are situated (collectively,
the "PROPERTY"), is part of the Project identified in the Basic Lease
Information (the "PROJECT"), which is part of the Development identified in the
Basic Lease Information (the "DEVELOPMENT").
2. TERM; POSSESSION. The term of this Lease (the "TERM") shall commence on
the Commencement Date as described below and, unless sooner terminated, shall
expire on the Expiration Date set forth in the Basic Lease Information (the
"EXPIRATION DATE"). The "COMMENCEMENT DATE" shall be June 1, 1998. The tenant
which previously leased the Building (the "Previous Tenant") has left personal
property, including furniture, in the Building. In accordance with its lease,
and an early lease termination agreement, the Existing Tenant is obligated to
remove such personal property, and repair any damage caused by such removal,
within thirty (30) days after Landlord enters into a replacement lease (such as
this Lease) for the Building. Landlord agrees to use good faith efforts to
cause the Previous Tenant to remove such personal property in a shorter period
of time than such thirty (30) days. Landlord will repair, or cause to be
repaired, any damage to the offices in the Building resulting from the removal
of such personal property.
3. RENT.
3.1 BASE RENT. Tenant agrees to pay Landlord the Base Rent set forth in
the Basic Lease Information, without prior notice or demand, on the first day
of each and every calendar month during the Term, except that Base Rent for the
first full calendar month in which Base Rent is payable shall be paid upon
Tenant's execution of this Lease and Base Rent for any partial month at the
beginning of the Term shall be paid on the Commencement Date. Base Rent for any
partial month at the beginning or end of the Term shall be prorated based on
the actual number of days in the month.
If the Basic Lease Information provides for any change in Base Rent by
reference to years or months (without specifying particular dates), the change
will take effect on the applicable annual or monthly anniversary of the
Commencement Date (which won't necessarily be the first day of a calendar
month).
-4-
<PAGE> 8
3.2 Additional Rent: Operating Costs and Taxes.
(a) Definitions.
(1) "OPERATING COSTS" means all costs of managing, operating,
maintaining and repairing the Project, including all costs, expenditures, fees
and charges for: (A) operation, maintenance and repair of the Project
(including maintenance, repair and replacement of glass, the roof covering or
membrane, and landscaping); (B) utilities and services (including
telecommunications facilities and equipment, recycling programs and trash
removal), and associated supplies and materials; (C) compensation (including
employment taxes and fringe benefits) for persons who perform duties in
connection with the operation, management, maintenance and repair of the
Project, such compensation to be appropriately allocated for persons who also
perform duties unrelated to the Project; (D) property (including coverage for
earthquake and flood if carried by Landlord), liability, rental income and
other insurance relating to the Project, and expenditures for deductible
amounts paid under such insurance; (E) licenses, permits and inspections; (F)
complying with the requirements of any law, statute, ordinance or governmental
rule or regulation or any orders pursuant thereto (collectively "LAWS"); (G)
amortization of capital replacements, repairs or improvements to the Project,
including capital replacements, repairs or improvements required to comply with
Laws, with interest on the unamortized balance at the rate paid by Landlord on
funds borrowed to finance such capital improvements (or, if Landlord finances
such improvements out of Landlord's funds without borrowing, the rate that
Landlord would have paid to borrow such funds, as reasonably determined by
Landlord), over such useful life as Landlord shall reasonably determine in
accordance with generally accepted accounting principles; (H) an office for the
management of the Project, including expenses of furnishing and equipping such
office and the rental value of any space occupied for such purposes; (I)
property management fees reasonably charged by owners of commercial projects in
the geographical area of the Project; (J) accounting, legal and other
professional services incurred in connection with the operation of the Project
and the calculation of Operating Costs and Taxes; (K) a reasonable allowance
for depreciation on machinery and equipment used to maintain the Project and on
other personal property owned by Landlord in the Project (including window
coverings and carpeting in common areas); (L) contesting the validity or
applicability of any Laws that may affect the Project; (M) the Project's share
of any shared or common area maintenance fees and expenses (including costs and
expenses of operating, managing, owning and maintaining the Parking Facility
and the common areas of the Project, any fitness center in the Development, the
fees and charges from the Seaport Centre Owners Association and any other fees
and expenses shared with the Development); and (N) any other cost, expenditure,
fee or charge, whether or not hereinbefore described, which in accordance with
generally accepted property management practices would be considered an expense
of managing, operating, maintaining and repairing the Project. Operating Costs
for any calendar year during which average occupancy of the Project is less
than one hundred percent (100%) shall be calculated based upon the Operating
Costs that would have been incurred if the Project had an average occupancy of
one hundred percent (100%) during the entire calendar year.
Operating Costs shall not include (i) costs of special services rendered
to individual tenants (including Tenant) for which a special charge is made;
(ii) interest and principal payments, including penalties and late charges
thereon, on loans or indebtedness secured by the Building; (iii)
-5-
<PAGE> 9
costs of improvements for Tenant or other tenants of the Project; (v) costs of
services or other benefits of a type which are not available to Tenant but
which are available to other tenants or occupants, and costs for which Landlord
is reimbursed by other tenants of the Project other than through payment of
tenants' shares of Operating Costs and Taxes; (vi) utility charges paid by
Tenant (and other tenants in the Project) directly to the applicable public
utility company; (vii) leasing commissions, attorneys' fees and other expenses
incurred in connection with leasing space in the Project or enforcing such
leases; (viii) depreciation or amortization, other than as specifically
enumerated in the definition of Operating Costs above; and (ix) costs, fines or
penalties incurred due to Landlord's violation of any Law. In no event shall
the Operating Costs used by Landlord in determining Tenant's Share of Operating
Costs exceed one hundred percent (100%) of the actual Operating Costs incurred
by Landlord in connection with the Project, and Landlord shall not recover the
costs of any items more than once.
(4) "TAXES" means: all real property taxes and general, special
or district assessments or other governmental impositions, of whatever kind,
nature or origin, imposed on or by reason of the ownership or use of the
Project; governmental charges, fees or assessments for transit or traffic
mitigation (including area-wide traffic improvement assessments and
transportation system management fees), housing, police, fire or other
governmental service or purported benefits to the Project; personal property
taxes assessed on the personal property of Landlord used in the operation of
the Project; service payments in lieu of taxes and taxes and assessments of
every kind and nature whatsoever levied or assessed in addition to, in lieu of
or in substitution for existing or additional real or personal property taxes
on the Project or the personal property described above; any increases in the
foregoing caused by changes in assessed valuation, tax rate or other factors or
circumstances; and the reasonable cost of contesting by appropriate proceedings
the amount or validity of any taxes, assessments or charges described above.
Taxes shall not include any state and federal personal or corporate income
taxes measured by the income of Landlord from all sources (other than taxes on
rent at the Property), as well as any franchise, inheritance, or estate,
succession, gift tax, or capital levy. Landlord agrees that for the purpose of
this Lease any special assessments or special taxes for public improvements to
the property will be amortized, with interest at the rate payable to the
assessing or taxing authority, over the maximum time Landlord is permitted to
pay such special assessment or special tax without penalty. To the extent paid
by Tenant or other tenants as "Tenant's Taxes" (as defined in Section 8 -
Tenant's Taxes), "Tenant's Taxes" shall be excluded from Taxes.
(5) TENANT'S SHARE" means the Rentable Area of the Premises
divided by the total Rentable Area of the Project, as set forth in the Basic
Lease Information. If the Rentable Area of the Project is changed or the
Rentable Area of the Premises is changed by Tenant's leasing of additional space
hereunder or for any other reason, Tenant's Share shall be adjusted accordingly.
(b) Additional Rent.
(1) Tenant shall pay Landlord as "ADDITIONAL RENT" for each
calendar year or portion thereof during the Term Tenant's Share of the sum of
(x) the amount of Operating Costs, and (y) the amount of Taxes.
-6-
<PAGE> 10
(2) Prior to the Commencement Date and each calendar year
thereafter, Landlord shall notify Tenant of Landlord's estimate of Operating
Costs, Taxes and Tenant's Additional Rent for the following calendar year (or
first partial year following the Commencement Date). Commencing on the
Commencement Date, and in subsequent calendar years, on the first day of January
of each calendar year and continuing on the first day of every month thereafter
in such year, Tenant shall pay to Landlord one-twelfth (1/12th) of the
Additional Rent, as reasonably estimated by Landlord for such full calendar
year. If Landlord thereafter reasonably estimates that Operating Costs or Taxes
for such year will vary from Landlord's prior estimate, Landlord may, by notice
to Tenant, revise the estimate for such year (and Additional Rent shall
thereafter be payable based on the revised estimate).
(3) As soon as reasonably practicable after the end of each
calendar year, Landlord shall furnish Tenant a statement with respect to such
year, showing Operating Costs, Taxes and Additional Rent for the year, and the
total payments made by Tenant with respect thereto. Unless Tenant raises any
objections to Landlord's statement within ninety (90) days after receipt of the
same, such statement shall conclusively be deemed correct and Tenant shall have
no right thereafter to dispute such statement or any item therein or the
computation of Additional Rent based thereon. If Tenant does object to such
statement, then Landlord shall provide Tenant with reasonable verification of
the figures shown on the statement and the parties shall negotiate in good faith
to resolve any disputes. Any objection of Tenant to Landlord's statement and
resolution of any dispute shall not postpone the time for payment of any amounts
due Tenant or Landlord based on Landlord's statement, nor shall any failure of
Landlord to deliver Landlord's statement in a timely manner relieve Tenant of
Tenant's obligation to pay amounts due Landlord based on Landlord's statement.
(4) If Tenant's Additional Rent as finally determined for
any calendar year exceeds the total payments made by Tenant on account thereof,
Tenant shall pay Landlord the deficiency within twenty (20) days of Tenant's
receipt of Landlord's statement. If the total payments made by Tenant on account
thereof exceed Tenant's Additional Rent as finally determined for such year,
Tenant's excess payment shall be credited toward the rent next due from Tenant
under this Lease. For any partial calendar year at the beginning or end of the
Term, Additional Rent shall be prorated on the basis of a 365-day year by
computing Tenant's Share of the Operating Costs and Taxes for the entire year
and then prorating such amount for the number of days during such year included
in the Term. Notwithstanding the termination of this Lease, Landlord shall pay
to Tenant or Tenant shall pay to Landlord, as the case may be, within twenty
(20) days after Tenant's receipt of Landlord's final statement for the calendar
year in which this Lease terminates, the difference between Tenant's Additional
Rent for that year, as finally determined by Landlord, and the total amount
previously paid by Tenant on account thereof.
If for any reason Taxes for any year during the Term are reduced,
refunded or otherwise changed, Tenant's Additional Rent shall be adjusted
accordingly. If taxes are temporarily reduced as a result of space in the
Project being leased to a tenant that is entitled to an exemption from property
taxes or other taxes, then for purposes of determining Additional Rent for each
year in which Taxes are reduced by any such exemption, Taxes for such year
shall be calculated on the basis of the amount the Taxes for the year would
have been in the absence of the exemption. The
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<PAGE> 11
obligations of Landlord to refund any overpayment of Additional Rent and of
Tenant to pay any Additional Rent not previously paid shall survive the
expiration of the Term.
3.3 Payment of Rent. All amounts payable or reimbursable by Tenant
under this Lease, including late charges and interest (collectively, "RENT"),
shall constitute rent and shall be payable and recoverable as rent in the
manner provided in this Lease. All sums payable to Landlord on demand under the
terms of this Lease shall be payable within twenty (20) days after receipt of
notice from Landlord of the amounts due. All rent shall be paid without offset,
recoupment or deduction in lawful money of the United States of America to
Landlord at Landlord's Address for Payment of Rent as set forth in the Basic
Lease Information, or to such other person or at such other place as Landlord
may from time to time designate.
4. SECURITY DEPOSIT. On execution of this Lease, Tenant shall deposit with
Landlord the amount specified in the Basic Lease Information as the Security
Deposit, if any (the "SECURITY DEPOSIT"), as security for the performance of
Tenant's obligations under this Lease. Landlord may (but shall have no
obligation to) use the Security Deposit or any portion thereof to cure any
Event of Default under this Lease or to compensate Landlord for any damage
Landlord incurs as a result of Tenant's failure to perform any of Tenant's
obligations hereunder. In such event Tenant shall pay to Landlord on demand an
amount sufficient to replenish the Security Deposit. If Tenant is not in
default at the expiration or termination of this Lease, then within thirty (30)
days after Tenant vacates the Premises Landlord shall return to Tenant the
Security Deposit or the balance thereof then held by Landlord and not applied
as provided above. Landlord may commingle the Security Deposit with Landlord's
general and other funds. Landlord shall not be required to pay interest on the
Security Deposit to Tenant.
5. USE AND COMPLIANCE WITH LAWS.
5.1 Use. The Premises shall be used and occupied solely for the
purposes of (a) general business offices, (b) and research and development, and
for no other use or purpose. Tenant shall comply with all present and future
Laws relating to Tenant's use or occupancy of the Premises (and make any
repairs, alterations or improvements as required to comply with all such Laws),
and shall observe the "Building Rules" (as defined in Section 27 -- Rules and
Regulations); provided, however, that the foregoing shall not be interpreted to
require Tenant to perform structural or capital work except to the extent
required as a result of Tenant's specific use of the Premises. Tenant shall not
do, bring, keep or sell anything in or about the Premises that is prohibited
by, or that will cause a cancellation of or an increase in the existing premium
for, any insurance policy covering the Property or any part thereof. Tenant
shall not permit the Premises to be occupied or used in any manner that will
constitute waste or a nuisance, or disturb the quiet enjoyment of or otherwise
annoy other tenants in the Building. Without limiting the foregoing, the
Premises shall not be used to manufacture goods or products (other than
computer software products), for educational activities (other than occasional
training sessions for Tenant's customers), practice of medicine or any of the
healing arts, providing social services, for any governmental use (including
embassy or consulate use), or for personnel agency, customer service office,
studios for radio, television or other media, travel agency or reservation
center operations or uses. Tenant shall not, without the prior consent of
Landlord, (i) bring into the Building or the Premises anything that may cause
substantial noise, odor or vibration, overload the floors in the Premises or
the Building or any
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<PAGE> 12
of the heating, ventilating and air-conditioning ("HVAC"), mechanical,
elevator, plumbing, electrical, fire protection, life safety, security or other
systems in the Building ("BUILDING SYSTEMS"), or jeopardize the structural
integrity of the Building or any part thereof; (ii) connect to the utility
systems of the Building any apparatus, machinery or other equipment other than
typical office equipment; or (iii) connect to any electrical circuit in the
Premises any equipment or other load with aggregate electrical power
requirements in excess of 80% of the rated capacity of the circuit.
Tenant shall honor and comply with the terms of all recorded covenants,
conditions and restrictions relating to the Property.
5.2 Hazardous Materials.
(a) Definitions.
(1) "HAZARDOUS MATERIALS" shall meet any substance: (A) that now
or in the future is regulated or governed by, requires investigation or
remediation under, or is defined as a hazardous waste, hazardous substance,
pollutant or contaminant under any governmental statute, code, ordinance,
regulation, rule or order, and any amendment thereto, including the
Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., and the Resource Conservation Recovery Act, 42 U.S.C.
Section 6901 et seq., or (B) that is toxic, explosive, corrosive, flammable,
radioactive, carcinogenic, dangerous or otherwise hazardous, including
gasoline, diesel fuel, petroleum hydrocarbons, polychlorinated biphenyls
(PCBs), asbestos, radon and urea formaldehyde foam insulation.
(2) "ENVIRONMENTAL REQUIREMENTS" shall mean all present and
future Laws, orders, permits, licenses, approvals, authorizations and other
requirements of any kind applicable to Hazardous Materials.
(3) "HANDLED BY TENANT" and "HANDLING BY TENANT" shall mean and
refer to any installation, handling, generation, storage, use, disposal,
discharge, release, abatement, removal, transportation, or any other activity
of any type by Tenant or its agents, employees, contractors, licensees,
sublessees, transferees or representatives (collectively, "REPRESENTATIVES") or
its guests, customers, invitees, or visitors (collectively, "VISITORS"), at or
about the Premises in connection with or involving Hazardous Materials.
(4) "ENVIRONMENTAL LOSSES" shall mean all costs and expenses of
any kind, damages, including foreseeable and unforeseeable consequential
damages, fines and penalties incurred in connection with any violation of and
compliance with Environmental Requirement and all losses of any kind
attributable to the diminution of value, loss of use or adverse effects on
marketability or use of any portion of the Premises or Property.
(b) Tenant's Covenants. No Hazardous Materials shall be Handled by
Tenant at or about the Premises or Property without Landlord's prior written
consent, which consent may be granted, denied, or conditioned upon compliance
with Landlord's requirements, all in Landlord's absolute discretion.
Notwithstanding the foregoing, normal quantities and use of those Hazardous
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Materials customarily used in the conduct of general office activities, such as
copier fluids and cleaning supplies ("PERMITTED HAZARDOUS MATERIALS"), may be
used and stored at the Premises without Landlord's prior written consent,
provided that Tenant's activities at or about the Premises and Property and the
Handling by Tenant of all Hazardous Materials shall comply at all times with
all Environmental Requirements. At the expiration or termination of the Lease,
Tenant shall promptly remove from the Premises and Property all Hazardous
Materials Handled by Tenant at the Premises or the Property. Tenant shall keep
Landlord fully and promptly informed of all Handling by Tenant of Hazardous
Materials other than Permitted Hazardous Materials. Tenant shall be responsible
and liable for the compliance with all of the provisions of this Section by all
of Tenant's Representatives and Visitors, and all of Tenant's obligations under
this Section (including its indemnification obligations under paragraph (e)
below) shall survive the expiration or termination of this Lease.
(c) Compliance. Tenant shall at Tenant's expense promptly take all
actions required by any governmental agency or entity in connection with or as
a result of the Handling by Tenant of Hazardous Materials at or about the
Premises or Property, including inspection and testing, performing all cleanup,
removal and remediation work required with respect to those Hazardous
Materials, complying with all disclosure requirements and post-closure
monitoring, and filing all required reports or plans. All of the foregoing work
and all Handling by Tenant of all Hazardous Materials shall be performed in a
good, safe and workmanlike manner by consultants qualified and licensed to
undertake such work and in a manner that will not interfere with any other
tenant's quiet enjoyment of the Property or Landlord's use, operation, leasing
and sale of the Property. Tenant shall deliver to Landlord prior to delivery to
any governmental agency, or promptly after receipt from any such agency, copies
of all permits, manifests, closure or remedial action plans, notices, and all
other documents relating to the Handling by Tenant of Hazardous Materials at or
about the Premises or Property. If any lien attaches to the Premises or the
Property in connection with or as a result of the Handling by Tenant of
Hazardous Materials, and Tenant does not cause the same to be released, by
payment, bonding or otherwise, within twenty (20) days after the attachment
thereof, Landlord shall have the right but not the obligation to cause the same
to be released and any sums expended by Landlord (plus Landlord's
administrative costs) in connection therewith shall be payable by Tenant on
demand.
(d) Landlord's Rights. Landlord shall have the right, but not the
obligation, to enter the Premises at any reasonable time, upon reasonable
notice (and without any notice requirement for any emergency) (i) to confirm
Tenant's compliance with the provisions of this Section 5.2, and (ii) to
perform Tenant's obligations under this Section if Tenant has failed to do so
after reasonable notice to Tenant. Landlord shall have the right to engage
qualified Hazardous Materials consultants to inspect the Premises and review
the Handling by Tenant of Hazardous Materials, including review of all permits,
reports, plans, and other documents regarding same. Tenant shall pay to
Landlord on demand the costs of Landlord's consultants' fees and all costs
incurred by Landlord in performing Tenant's obligations under this Section.
Landlord shall use reasonable efforts to minimize any interference with
Tenant's business caused by Landlord's entry into the Premises, but Landlord
shall not be responsible for any interference caused thereby.
(e) Tenant's Indemnification. Tenant agrees to indemnify, defend,
protect and hold harmless Landlord and its partners or members and its or their
partners, members, directors,
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officers, shareholders, employees and agents from all Environmental Losses and
all other claims, actions, losses, damages, liabilities, costs and expenses of
every kind, including reasonable attorneys', experts' and consultants' fees and
costs, incurred at any time and arising from or in connection with the Handling
by Tenant of Hazardous Materials at or about the Property or Tenant's failure
to comply in full with all Environmental Requirements with respect to the
Premises.
(f) Landlord's Responsibilities. Landlord shall not use any of
the Land or Building for any activities involving the use, generation,
handling, release, threatened release, treatment, storage, discharge, disposal
or transportation of any Hazardous Materials, except in such quantity or
concentration that is customarily used, stored or disposed in the ordinary
course of the business so long as such activity duly complies with applicable
Laws and good business practice. If Landlord violates the foregoing covenant
resulting in an Environmental Claim (as hereinafter defined) with respect to
the Premises, then Landlord agrees to (a) notify Tenant immediately of any such
Environmental claim and (b) clean up any contamination in full compliance with
all applicable Laws. The costs of any Environmental Claim for Hazardous
Materials (x) existing on the Land, or included in the Building, on the
Commencement Date of this Lease, (y) caused by underground flow of Hazardous
Materials shall not be included in Operating Costs. "Environmental Claim" means
any claim, demand, action, cause of action, suit, damage, punitive damage,
fine, penalty, expense, liability, criminal liability, judgment, or
governmental investigation relating to remediation or compliance with
requirements of Laws covering Hazardous Materials. The term "Environmental
Claim" also includes any costs incurred in responding to efforts to require
remediation and any claim based upon any asserted or actual breach or violation
of any requirements of any Laws covering Hazardous Materials.
(g) Third Parties. Except as provided in the immediately
preceding subsection (f), if any third party (other than Landlord or its
representatives, or any other tenant in the Project, or Tenant or its
representatives) places Hazardous Materials on the Property, then Landlord
shall have the right to include the costs of remediation and removal in
Operating Costs, subject to the provisions of Section 3.2 of this Lease.
6. TENANT IMPROVEMENTS & ALTERATIONS.
6.1 Landlord and Tenant shall perform their respective obligations
with respect to design and construction of any improvements to be constructed
and installed in the Premises (the "TENANT IMPROVEMENTS"), as provided in the
Construction Rider. Except for any Tenant Improvements to be constructed by
Tenant as provided in the Construction rider, Tenant shall not make any
alterations, improvements or changes to the Premises, including installation of
any security system or telephone or data communication wiring, ("ALTERATIONS"),
without Landlord's prior written consent, which consent shall not be
unreasonably withheld or delayed. Notwithstanding any other provision contained
herein, Tenant shall not be required to obtain Landlord's prior consent for
minor, non-structural Alterations that (a) do not affect any of the Building
Systems, (b) are not visible from the exterior of the Premises, and (c) cost
less than Ten Thousand Dollars ($10,000), so long as Tenant gives Landlord
notice of the proposed Alterations at least ten (10) days prior to commencing
the Alterations and complies with all of the following provisions (except that
Tenant shall not be required to obtain Landlord's approval of any plans or
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specifications therefor). Any such Alterations shall be completed by Tenant at
Tenant's sole cost and expense: (i) with due diligence, in a good and
workmanlike manner, using new materials; (ii) in compliance with plans and
specifications approved by Landlord; (iii) in compliance with reasonable
construction rules and regulations promulgated by Landlord from time to time;
(iv) in accordance with all applicable Laws (including all work, whether
structural or non-structural, inside or outside the Premises, required to comply
fully with all applicable Laws and necessitated by Tenant's work); and (v)
subject to all conditions which Landlord may in Landlord's discretion impose.
Such conditions may include requirements for Tenant to: (i) provide payment or
performance bonds or additional insurance (from Tenant or Tenant's contractors,
subcontractors or design professionals); (ii) use contractors or subcontractors
approved by Landlord, which approval shall not be unreasonably withheld, and use
contractors designated by Landlord for Alterations affecting the structure of
the Building, the Building Systems and the life safety systems of the Building;
and (iii) remove all or part of the Alterations prior to or upon expiration or
termination of the Term, as designated in writing by Landlord at the time Tenant
requests Landlord's consent to the Alteration. If any work outside the Premises,
or any work on or adjustment to any of the Building Systems, is required in
connection with or as a result of Tenant's work, such work shall be performed at
Tenant's expense by contractors designated by Landlord. Landlord's right to
review and approve (or withhold approval of) Tenant's plans, drawings,
specifications, contractors(s) and other aspects of construction work proposed
by Tenant is intended solely to protect Landlord, the Property and Landlord's
interests. No approval or consent by Landlord shall be deemed or construed to
be a representation or warranty by Landlord as the adequacy, sufficiency,
fitness or suitability thereof or compliance thereof with applicable Laws and
other requirements. Except as otherwise provided in Landlord's consent, all
Alterations shall upon installation become part of the realty and be the
property of Landlord.
6.2 Before making any Alterations, Tenant shall submit to Landlord for
Landlord's prior approval reasonably detailed final plans and specifications
prepared by a licensed architect or engineer, a copy of the construction
contract, including the name of the contractor and all subcontractors proposed
by Tenant to make the Alterations and a copy of the contractor's license. Tenant
shall reimburse Landlord upon demand for any reasonable expenses incurred by
Landlord in connection with any Alterations made by Tenant, including reasonable
fees charged by Landlord's contractors or consultants to review plans and
specifications prepared by Tenant and to update the existing as-built plans and
specifications of the Building to reflect the Alterations. Tenant shall obtain
all applicable permits, authorizations and governmental approvals and deliver
copies of the same to Landlord before commencement of any Alterations.
6.3 Tenant shall keep the Premises and the Project free and clear of all
liens arising out of any work performed, materials furnished or obligations
incurred by Tenant. If any such lien attaches to the Premises or the Project,
and Tenant does not cause the same to be released by payment, bonding or
otherwise within twenty (20) days after the attachment thereof, Landlord shall
have the right but not the obligation to cause the same to be released, and any
sums expended by Landlord (plus Landlord's reasonable administrative costs) in
connection therewith shall be payable by Tenant on demand with interest thereon
from the date of expenditure by Landlord at the Interest Rate (as defined in
Section 16.2 - Interest). Tenant shall give Landlord at least ten (10) days'
notice prior to the commencement of any Alterations and cooperate with Landlord
in posting and maintaining notices of non-responsibility in connection
therewith.
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6.4 Subject to the provisions of Section 5 - Use and Compliance with Laws
and the foregoing provisions of this Section, Tenant may install and maintain
furnishings, equipment, movable partitions, business equipment and other trade
fixtures ("TRADE FIXTURES") in the Premises, provided that Trade fixtures do
not become an integral part of the Premises or the Building. Tenant shall
promptly repair any damage to the Premise or the Building caused by any
installation or removal of such Trade Fixtures.
7. MAINTENANCE AND REPAIRS.
7.1 By taking possession of the Premises Tenant agrees that the Premises
are then in a good and tenantable condition. Tenant shall be responsible to
clean, maintain and repair the Premises, including providing janitorial services
and disposal of trash; and to that end, during the Term, Tenant, at Tenant's
expense but under the direction of Landlord, shall repair and maintain the
Premises, including, without limitation, any elevator, the heating, ventilating
and air conditioning system or systems serving the Premises, the electrical and
plumbing systems serving the Premises, including the lighting and plumbing
fixtures, the restrooms serving the Premises, interior stairways in the
Premises, the interior and exterior glass, plate glass skylights, interior
walls, floor coverings, ceiling (ceiling tiles and grid), Tenant Improvements,
Alterations, fire extinguishers, outlets and fixtures, and any appliances
(including dishwashers, hot water heaters and garbage disposers) in the
Premises, in a first class condition, and keep the Premises in an clean, safe
and orderly condition. Prior to the Commencement Date Tenant shall provide
Landlord with a copy of a service contract with a licensed commercial Heating,
Ventilating and Air-conditioning maintenance company (which contract and company
shall be subject to Landlord's prior approval, which shall not be unreasonably
withheld or delayed), to maintain, on an ongoing basis (at least quarterly), the
heating, ventilating and air-conditioning system serving the Premises. Prior to
the Commencement Date Landlord shall (a) re-caulk the Building, (b) repaint the
exterior of the Building, (c) repair and re-coat the roof of the Building, and
(d) cause the following systems (collectively, the "Building Systems") to be
inspected and placed in good working order and repair: (i) electrical, (ii)
plumbing, (iii) heating, ventilating and air-conditioning, and (iv) life safety
systems. If, during the thirty (30) days following the Commencement date, any of
the Building Systems cease being in good working order and repair, and Tenant
gives Landlord written notice of such failure within such thirty (30) days
following the Commencement Date, then Landlord shall cause such Building System
to be placed in good working condition and repair, at no cost to Tenant. Except
for any repairs and maintenance which are the responsibility of Landlord
pursuant to the immediately preceding sentence, Tenant shall be responsible for
all repairs and maintenance of the Building System commencing on the
thirty-first (31st) day following the Commencement Date.
Tenant acknowledges that the sewer piping at the Development is made of ABS
plastic. Accordingly, without Landlord's prior written consent, which consent
may be granted or withheld in Landlord's sole discretion, Tenant shall allow
only ordinary domestic sewage to be placed in the sewer system from the
Premises. UNDER NO CIRCUMSTANCES SHALL TENANT EVER PLACE, OR ALLOW TO BE PLACED,
ANY ESTERS OR KETONES (USUALLY FOUND IN SOLVENTS TO CLEAN UP PETROLEUM PRODUCTS)
IN THE DRAINS OR SEWER SYSTEM, FROM THE PREMISES.
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7.2 Landlord shall (a) maintain or cause to be maintained in reasonably
good order, condition and repair, the structural portions of the roof,
foundations, floors and exterior walls of the Building, and the public and
common areas outside of the Building, (b) that portion of the electrical, water
and sanitary sewer systems serving the Building and located outside the
Building, (c) wash the exterior windows of the Building on a periodic basis, (d)
caulk exterior window joints and concrete slabs and (e) paint the exterior of
the Building, all of which shall be included as a part of Operating Costs,
subject to the terms and conditions contained in Section 3.2 of this Lease;
provided, however, if any maintenance or repair of electrical, water and
sanitary sewer systems outside the Building is caused by Tenant's misuse of such
system, the costs of such maintenance and repair shall not constitute a capital
expenditure for the purposes of Section 3.2 of this Lease. Landlord shall be
under no obligation to inspect the Premises. Tenant shall promptly report in
writing to Landlord any defective condition known to Tenant which Landlord is
required to repair. As a material part of the consideration for this Lease,
Tenant hereby waives any benefits of any applicable existing or future law,
including the provisions of California Civil Code Sections 1932(1), 1941 and
1942, that allows a tenant to make repairs at its landlord's expense.
7.3 Landlord hereby reserves the right, at any time and from time to
time, without liability to Tenant, and without constituting an eviction,
constructive or otherwise, or entitling Tenant to any abatement of rent or to
terminate this Lease or otherwise releasing Tenant from any of Tenant's
obligations under this Lease:
(a) To make alterations, additions, repairs, improvements to or in
or to decrease the size of area of, all or any part of the Building, the
fixtures and equipment therein, and the Building Systems (except that Landlord
shall not have any right under this provision to materially reduce the size of
the Building, or permanently, materially and adversely affect Tenant's access to
and use of the Premises, except only as may be required to comply with Laws or
as a result of any fire or other casualty, or Condemnation);
(b) To change the Building's name or street address;
(c) To install and maintain any and all signs on the exterior and
interior of the Building;
(d) To reduce, increase, enclose or otherwise change at any time
and from time to time the size, number, location, lay-out and nature of the
common areas (including the Parking Facility) and other tenancies and premises
in the Property and to create additional rentable areas through use or enclosure
of common areas; and
(e) If any governmental authority promulgates or revises any Law or
imposes mandatory or voluntary controls or guidelines on Landlord or the
Property relating to the use or conservation of energy or utilities or the
reduction of automobile or other emissions or reduction or management of traffic
or parking on the Property (collectively "CONTROLS"), to comply with such
Controls, whether mandatory or voluntary, or make any alterations to the
Property related thereto.
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(f) In exercising its rights under this Section 7.3, Landlord agrees to
use reasonable efforts to minimize any interruption or disruption of Tenant's
use of the Premises.
8. TENANT'S TAXES. "TENANT'S TAXES" shall mean (a) all taxes, assessments,
license fees and other governmental charges or impositions levied or assessed
against or with respect to Tenant's personal property or Trade Fixtures in the
Premises, whether any such imposition is levied directly against Tenant or
levied against Landlord or the Property, (b) all rental, excise, sales or
transaction privilege taxes arising out of this Lease (excluding, however,
state and federal personal or corporate income taxes measured by the income of
Landlord from all sources) imposed by any taxing authority upon Landlord or
upon Landlord's receipt of any rent payable by Tenant pursuant to the terms of
this Lease ("RENTAL TAX"), and (c) any increase in Taxes attributable to
inclusion of a value placed on Tenant's personal property, Trade Fixtures or
Alterations. Tenant shall pay any Rental Tax to Landlord in addition to and at
the same time as Base Rent is payable under this Lease, and shall pay all other
Tenant's Taxes before delinquency (and, at Landlord's request, shall furnish
Landlord satisfactory evidence thereof). If Landlord pays Tenant's Taxes or any
portion thereof, Tenant shall reimburse Landlord upon demand for the amount of
such payment, together with interest at the Interest Rate from the date of
Landlord's payment to the date of Tenant's reimbursement.
9. UTILITIES.
9.2 Payment for Utilities and Services.
(a) If the temperature otherwise maintained in any portion of the
Premises by the HVAC systems of the Building is affected as a result of any
lights, machines or equipment used by Tenant in the Premises, then Landlord
shall have the right to install any machinery or equipment reasonably necessary
to restore the temperature, including modifications to the standard
air-conditioning equipment. The cost of any such equipment and modifications,
including the cost of installation and any additional cost of operation and
maintenance of the same, shall be paid by Tenant to Landlord upon demand.
(b) Electricity, water, sanitary sewer and any gas will be
separately metered for the Premises. Tenant shall pay prior to delinquency all
charges for water, gas, electricity, telephone and other telecommunication
services, janitorial service, trash pick-up, sewer and all other services
consumed on or supplied to the Premises, and all taxes, levies, fee and
surcharges thereon.
9.3 Interruption of Services. In the event of an interruption in or
failure or inability to provide any services or utilities to the Premises or
Building for any reason (a "SERVICE FAILURE"), such Service Failure shall not,
regardless of its duration, impose upon Landlord any liability whatsoever,
constitute an eviction of Tenant, constructive or otherwise, entitle Tenant to
an abatement of rent or to terminate this Lease or otherwise release Tenant
from any of Tenant's obligations under this Lease. Tenant hereby waives any
benefits of any applicable existing or future Law, including the provisions of
California Civil Code Section 1932(1), permitting the termination of this Lease
due to such interruption, failure or inability.
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10. EXCULPATION AND INDEMNIFICATION.
10.1 Landlord's Indemnification of Tenant. Landlord shall indemnify,
protect, defend and hold Tenant harmless from and against any claims, actions,
liabilities, damages, costs or expenses, including reasonable attorneys' fees
and costs incurred in defending against the same ("CLAIMS") asserted by any
third party against Tenant for loss, injury or damage, to the extent such loss,
injury or damage is caused by the willful misconduct or negligent acts or
omissions of Landlord or its authorized representatives.
10.2 Tenant's Indemnification of Landlord. Tenant shall indemnify,
protect, defend and hold Landlord and Landlord's authorized representatives
harmless from and against Claims arising from (a) the acts or omissions of
Tenant or Tenant's Representatives or Visitors in or about the Property, or
(b) any construction or other work undertaken by Tenant on the Premises
(including any design defects), or (c) any breach or default under this Lease
by Tenant, or (d) any loss, injury or damage, howsoever and by whomsoever
caused, to any person or property, occurring in or about the Premises during
the Term, excepting only Claims described in this clause (d) to the extent they
are caused by the willful misconduct or negligent acts or omissions of Landlord
or its authorized representatives.
10.3 Damage to Tenant and Tenant's Property. Landlord shall not be liable
to Tenant for any loss, injury or other damage to Tenant or to Tenant's
property in or about the Premises or the Property from any cause (including
defects in the Property or in any equipment in the Property; fire, explosion or
other casualty; bursting, rupture, leakage or overflow of any plumbing or
other pipes or lines, sprinklers, tanks, drains, drinking fountains or
washstands in, above, or about the Premises or the Property; or acts of other
tenants in the Property). Tenant hereby waives all claims against Landlord for
any such loss, injury or damage and the cost and expense of defending against
claims relating thereto, including any loss, injury or damage caused by
Landlord's negligence (active or passive) or willful misconduct.
Notwithstanding any other provision of this Lease to the contrary, in no event
shall Landlord or Tenant be liable to the other party for any punitive or
consequential damages or damages for loss of business by Tenant or Landlord
except for any liability which Tenant might have for holding over in the
Premises beyond the expiration of the Term in accordance with the provisions of
Section 19.2 of this Lease.
10.4 Survival. The obligations of the parties under this Section 10 shall
survive the expiration or termination of this Lease.
11. INSURANCE.
11.1 Tenant's Insurance.
(a) Liability Insurance. Tenant shall maintain in full force
throughout the Term, commercial general liability insurance providing coverage
on an occurrence form basis with limits of not less than two Million Dollars
($2,000,000.00) each occurrence for bodily injury and property damage combined,
Two Million Dollars ($2,000,000.00) annual general aggregate, and Two Million
Dollars ($2,000,000.00) products and completed operations annual aggregate.
Tenant's liability insurance policy or policies shall: (i) include premises and
operations liability
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coverage, products and completed operations liability coverage, broad form
property damage coverage including completed operations, blanket contractual
liability coverage including, to the maximum extent possible, coverage for the
indemnification obligations of Tenant under this Lease, and personal and
advertising injury coverage; (ii) provide that the insurance company has the
duty to defend all insureds under the policy; (iii) provide that defense costs
are paid in addition to and to not deplete any of the policy limits; (iv) cover
liabilities arising out of or incurred in connection with Tenant's use or
occupancy of the Premises or the Property; (v) extend coverage to cover
liability for the actions of Tenant's Representatives and Visitors; and (iv)
designate separate limits for the Property. Each policy of liability insurance
required by this Section shall: (i) contain a cross liability endorsement or
separation of insureds clause; (ii) provide that any waiver of subrogation
rights or release prior to a loss does not void coverage; (iii) provide that it
is primary to and not contributing with, any policy of insurance carried by
Landlord covering the same loss; (iv) provide that any failure to comply with
the reporting provisions shall not affect coverage provided to Landlord, its
partners, property managers and Mortgagees; and (v) name Landlord, its partners,
the Property Manager identified in the Basic Lease Information (the "PROPERTY
MANAGER"), and such other parties in interest as Landlord may from time to time
reasonably designate to Tenant in writing, as additional insureds. Such
additional insureds shall be provided at least the same extent of coverage as is
provided to Tenant under such policies. All endorsements effecting such
additional insureds status shall be at least as broad as additional insured
endorsement form number CG 20 11 11 85 promulgated by the Insurance Services
Office.
(b) Property Insurance. Tenant shall at all times maintain in effect with
respect to any Alterations and Tenant's Trade Fixtures and personal property,
commercial property insurance providing coverage, on an "all risk" or "special
form" basis, in an amount equal to at least 90% of the full replacement cost of
the covered property. Tenant may carry such insurance under a blanket policy
provided that such policy provides coverage equivalent to a separate policy.
During the Term, the proceeds from any such policies of insurance shall be used
for the repair or replacement of the Alterations, Trade Fixtures and personal
property so insured. Landlord shall be provided coverage under such insurance to
the extent of its insurable interest and, if requested by Landlord, both
Landlord and Tenant shall sign all documents reasonably necessary or proper in
connection with the settlement of any claim or loss under such insurance.
Landlord will have no obligation to carry insurance on any Alterations or on
Tenant's Trade Fixtures or personal property.
(c) Requirements For All Policies. Each policy of insurance required
under this Section 11.1 shall: (i) be in a form, and written by an insurer,
reasonably acceptable to Landlord, (ii) be maintained at Tenant's sole cost and
expense, and (iii) require at least thirty (30) days' written notice to
Landlord prior to any cancellation, nonrenewal or modification of insurance
coverage. Insurance companies issuing such policies shall have rating
classifications of "A" or better and financial size category ratings of "VII"
or better according to the latest edition of the A.M. Best Key Rating Guide.
All insurance companies issuing such policies shall be admitted carriers
licensed to do business in the state where the Property is located. Any
deductible amount under such insurance shall not exceed $5,000. Tenant shall
provide to Landlord, upon request, evidence that the insurance required to be
carried by Tenant pursuant to this Section, including any endorsement effecting
the additional insured status, is in full force and effect and that premiums
therefor have been paid.
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(d) Updating Coverage. Tenant shall increase the amounts of insurance as
required by any Mortgage, and, not more frequently than once every three (3)
years, as recommended by Landlord's insurance broker, if, in the reasonable
opinion of either of them, the amount of insurance then required under this
Lease is not adequate.
(e) Certificates of Insurance. Prior to occupancy of the Premises
by Tenant, and not less than thirty (30) days prior to expiration of any policy
thereafter, Tenant shall furnish to Landlord a certificate of insurance
reflecting that the insurance required by this Section is in force, accompanied
by an endorsement showing the required additional insureds satisfactory to
Landlord in substance and form. Notwithstanding the requirements of this
paragraph, Tenant shall at Landlord's request provide to Landlord a certified
copy of each insurance policy required to be in force at any time pursuant to
the requirements of this Lease or its Exhibits.
11.2 Landlord's Insurance. During the Term, to the extent such coverages
are available at a commercially reasonable cost, Landlord shall maintain in
effect insurance on the Building with responsible insurers, on an "all risk" or
"special form" basis, insuring the Building and the Tenant Improvements in an
amount equal to at least 90% of the replacement cost thereof, excluding land,
foundations, footings and underground installations. Landlord may, but shall not
be obligated to, carry insurance against additional perils and/or in greater
amounts. Landlord shall maintain in full force throughout the Term, commercial
general liability insurance providing coverage with limits of not less than Two
Million Dollars ($2,000,000.00) each occurrence for bodily injury and property
damage combined covering the Property (the cost of premiums for which shall be
included in Operating costs).
11.3 Mutual Waiver of Right of Recovery & Waiver of Subrogation. Landlord
and Tenant each hereby waive any right of recovery against each other and the
partners, managers, members, shareholders, officers, directors and authorized
representatives of each other for any loss or damage that is covered by any
policy of property insurance maintained by either party (or required by this
lease to be maintained) with respect to the Premises or the Property or any
operation therein, regardless of cause, including negligence (active or passive)
of the party benefiting from the waiver. If any such policy of insurance
relating to this Lease or to the Premises or the Property does not permit the
foregoing waiver or if the coverage under any such policy would be invalidated
as a result of such waiver, the party maintaining such policy shall obtain from
the insurer under such policy a waiver of all right of recovery by way of
subrogation against either party in connection with any claim, loss or damage
covered by such policy.
12. DAMAGE OR DESTRUCTION.
12.1 Landlord's Duty to Repair.
(a) If all or a substantial part of the Premises are rendered
untenantable or inaccessible by damage to all or any part of the Property from
fire or other casualty then, unless either party is entitled to and elects to
terminate this lease pursuant to Sections 12.2 - Landlord's Right to Terminate
and 12.3 - Tenant's Right to Terminate, Landlord shall, at its expense, use
reasonable efforts to repair and restore the Premises and/or the Property, as
the case may be, to substantially their former condition to the extent permitted
by then applicable Laws; provided,
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however, in no event shall Landlord have any obligation for repair or
restoration: (i) beyond the extent of the sum of (x) the insurance proceeds
received by Landlord for such repair or restoration plus (y) $10,000, or (ii)
for any of Tenant's personal property, Trade Fixtures or Alterations.
(b) If Landlord is required or elects to repair damage to the
Premises and/or the Property, this Lease shall continue in effect, but Tenant's
Base Rent and Additional Rent shall be abated with regard to any portion of the
Premises that Tenant is prevented from using by reason of such damage or its
repair from the date of the casualty until substantial completion of Landlord's
repair of the affected portion of the Premises as required under this Lease. In
no event shall Landlord be liable to Tenant by reason of any injury to or
interference with Tenant's business or property arising from fire or other
casualty or by reason of any repairs to any part of the Property necessitated by
such casualty.
12.2 Landlord's Right to Terminate. Landlord may elect to terminate
this Lease following damage by fire or other casualty under the following
circumstances:
(a) If, in the reasonable judgment of Landlord, the Premises
and the Property cannot be substantially repaired and restored under applicable
Laws within one (1) year from the date of the casualty;
(b) If, in the reasonable judgment of Landlord, adequate
proceeds are not, for any reason (except for Landlord's failure to maintain the
insurance coverage required to be maintained by Landlord under this Lease), made
available to Landlord from Landlord's insurance policies (and/or from
Landlord's funds made available for such purpose, at Landlord's sole option) to
make the required repairs;
(c) If the Building is damaged or destroyed to the extent
that, in the reasonable judgment of Landlord, the cost to repair and restore
the Building would exceed twenty-five percent (25%) of the full replacement cost
of the Building, whether or not the Premises are at all damaged or destroyed; or
(d) If the fire or other casualty occurs during the last year
of the Term.
If any of the circumstances described in subparagraphs (a), (b), (c) or (d) of
this Section 12.2 occur or arise, Landlord shall give Tenant notice within one
hundred and twenty (120) days after the date of the casualty, specifying whether
Landlord elects to terminate this Lease as provided above and, if not,
Landlord's estimate of the time required to complete Landlord's repair
obligations under this Lease.
12.3 Tenant's Right to Terminate. If all or a substantial part of
the Premises are rendered untenantable or inaccessible by damage to all or any
part of the Property from fire or other casualty, and Landlord does not elect
to terminate as provided above, then Tenant may elect to terminate this Lease if
Landlord's estimate of the time required to complete Landlord's repair
obligations under this Lease is greater than one (1) year, in which event Tenant
may elect to terminate this Lease by giving Landlord notice of such election to
terminate within thirty (30) days after Landlord's notice to Tenant pursuant to
Section 12.2 - Landlord's Right to Terminate.
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12.4 Waiver. Landlord and Tenant each hereby waive the provisions of
California Civil Code Sections 1932(2), 1933(4) and any other applicable
existing or future Law permitting the termination of a lease agreement in the
event of damage or destruction under any circumstances other than as provided in
Sections 12.2 - Landlord's Right to Terminate and 12.3 - Tenant's Right to
Terminate.
13. CONDEMNATION.
13.1 Definitions.
(a) "AWARD" shall mean all compensation, sums, or anything of value
awarded, paid or received on a total or partial Condemnation.
(b) "CONDEMNATION" shall mean (i) a permanent taking (or a temporary
taking for a period extending beyond the end of the Term) pursuant to the
exercise of the power of condemnation or eminent domain by any public or
quasi-public authority, private corporation or individual having such power
("CONDEMNOR"), whether by legal proceedings or otherwise, or (ii) a voluntary
sale or transfer by Landlord to any such authority, either under threat of
condemnation or while legal proceedings for condemnation are pending.
(c) "DATE OF CONDEMNATION" shall mean the earlier of the date that
title to the property taken is vested in the Condemnor or the date the Condemnor
has the right to possession of the property being condemned.
13.2 Effect on Lease.
(a) If more than one-third (1/3) of the Premises is taken by
Condemnation, this Lease shall terminate as of the Date of Condemnation. If
one-third (1/3) or less of the Premises is taken by Condemnation, this Lease
shall remain in effect; provided, however, that if the portion of the Premises
remaining after the Condemnation will be unsuitable for Tenant's continued use,
then upon notice to Landlord within thirty (30) days after Landlord notifies
Tenant of the Condemnation, Tenant may terminate this Lease effective as of the
Date of Condemnation.
(b) If twenty-five percent (25%) or more of the Project or of the
parcel(s) of land on which the Building is situated or of the Parking Facility
or of the floor area in the Building is taken by Condemnation, or if as a result
of any Condemnation the Building is not longer reasonably suitable for use as an
office building, whether or not any portion of the Premises is taken, Landlord
may elect to terminate this Lease, effective as of the Date of Condemnation, by
notice to Tenant within thirty (30) days after the Date of Condemnation.
(c) If all or a portion of the Premises is temporarily taken by a
Condemnor for a period not extending beyond the end of the Term, this Lease
shall remain in full force and effect.
13.3 Restoration. If this Lease is not terminated as provided in Section
13.2 - Effect on Lease, Landlord, at its expense, shall diligently proceed to
repair and restore the Premises to
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substantially its former condition (to the extent permitted by then applicable
Laws) and/or repair and restore the Building to an architecturally complete
office building; provided, however, that Landlord's obligations to so repair and
restore shall be limited to the amount of any Award received by Landlord and not
required to be paid to any Mortgagee (as defined in Section 20.2 below). In no
event shall Landlord have any obligation to repair or replace any improvements
in the Premises beyond the amount of any Award received by Landlord for such
repair or to repair or replace any of Tenant's personal property, Trade
Fixtures, or Alterations.
13.4 Abatement and Reduction of Rent. If any portion of the Premises is
taken in a Condemnation or is rendered permanently untenantable by repairs
necessitated by the Condemnation, and this Lease is not terminated, the Base
Rent and Additional Rent payable under this Lease shall be proportionally
reduced as of the Date of Condemnation based upon the percentage of rentable
square feet in the Premises so taken or rendered permanently untenantable. In
addition, if this Lease remains in effect following a Condemnation and Landlord
proceeds to repair and restore the Premises, the Base Rent and Additional Rent
payable under this Lease shall be abated during the period of such repair or
restoration to the extent such repairs prevent Tenant's use of the Premises.
13.5 Awards. Any Award made shall be paid to Landlord, and Tenant hereby
assigns to Landlord, and waives all interest in or claim to, any such Award,
including any claim for the value of the unexpired Term; provided, however, that
Tenant shall be entitled to receive, or to prosecute a separate claim for, an
Award for a temporary taking of the Premises or a portion thereof by a Condemnor
where this Lease is not terminated (to the extent such Award relates to the
unexpired Term), or an Award or portion thereof separately designated for
relocation and moving expenses or the interruption of or damage to Tenant's
business or as compensation for Tenant's personal property, Trade Fixtures or
Alterations.
13.6 Waiver. Landlord and Tenant each hereby waive the provisions of
California Code of Civil Procedure Section 1265.130 and any other applicable
existing or future Law allowing either party to petition for a termination of
this Lease upon a partial taking of the Premises and/or the Property.
14. ASSIGNMENT AND SUBLETTING.
14.1 Landlord's Consent Required. Tenant shall not assign this Lease or any
interest therein, or sublet or license or permit the use or occupancy of the
Premises or any part thereof by or for the benefit of anyone other than Tenant,
or in any other manner transfer all or any part of Tenant's interest under this
Lease (each and all a "TRANSFER"), without the prior written consent of
Landlord, which consent (subject to the other provisions of this Section 14)
shall not be unreasonably withheld. If Tenant is a business entity, any direct
or indirect transfer of fifty percent (50%) or more of the ownership interest of
the entity (whether in a single transaction or in the aggregate through more
than one transaction) shall be deemed a Transfer. A public offering of Tenant's
stock shall not constitute a Transfer under the provisions of this Lease.
Notwithstanding any provision in this Lease to the contrary, Tenant shall not
mortgage, pledge, hypothecate or otherwise encumber this Lease or all or any
party of Tenant's interest under this Lease.
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14.2 Reasonable Consent.
(a) Prior to any proposed Transfer, Tenant shall submit in writing
to Landlord (i) the name and legal composition of the proposed assignee,
subtenant, user or other transferee (each a "PROPOSED TRANSFEREE"); (ii) the
nature of the business proposed to be carried on in the premises; (iii) a
current balance sheet, income statements for the last two years and such other
reasonable financial and other information concerning the Proposed Transferee
as Landlord may request; and (iv) a copy of the proposed assignment, sublease
or other agreement governing the proposed Transfer. Within fifteen (15)
Business Days after Landlord receives all such information it shall notify
Tenant whether it approves or disapproves such Transfer or if it elects to
proceed under Section 14.7 - Landlord's Right to Space.
(b) Tenant acknowledges and agrees that, among other circumstances
for which Landlord could reasonably withhold consent to a proposed Transfer, it
shall be reasonable for Landlord to withhold consent where (i) the Proposed
Transferee does not intend itself to occupy the entire portion of the Premises
assigned or sublet, (ii) Landlord reasonably disapproves of the Proposed
Transferee's business operating ability or history, reputation or
creditworthiness or the nature or character of the business to be conducted by
the Proposed Transferee at the Premises, (iii) the Proposed Transferee is a
governmental agency or unit or an existing tenant in the Project, unless, in the
case of an existing tenant, Landlord does not have space available for lease
containing the same or more square feet as is contained in the Premises to
accommodate the existing tenant's expansion or renewal in the Project, (iv) the
proposed Transfer would violate any "exclusive" rights of any tenants in the
Project, (v) Landlord or Landlord's agent has shown space in the Project to the
Proposed Transferee or responded to any inquiries from the Proposed Transferee
or the Proposed Transferee's agent concerning availability of space in the
Project, at any time within the preceding six months, or (vi) Landlord otherwise
determines that the proposed Transfer would have the effect of materially
decreasing the financial value of the Project or increasing the expenses
associated with operating, maintaining and repairing the Project. In no event
may Tenant publicly advertise all or any portion of the Premises for assignment
or sublease at a rental less than that then sought by Landlord for a direct
lease (non-sublease) of comparable space in the Project. Notwithstanding the
foregoing, Tenant may employ a broker who advertises on a commercial multiple
listing service in order to offer the Premises for assignment or sublease.
14.3 Excess Consideration. If Landlord consents to the Transfer, Landlord
shall be entitled to receive as Additional Rent hereunder, fifty percent (50%)
of all "Sublease Profits" (as defined below). "Sublease Profits" shall mean any
consideration paid by the Transferee for the assignment or sublease and, in the
case of a sublease, the excess of the rent and other consideration payable by
the subtenant over the amount of Base Rent and Additional Rent payable
hereunder applicable to the subleased space, less any and all direct,
out-of-pocket expenses and cash concessions, including costs for necessary
Alterations, attorneys' fees (not to exceed One Thousand and 00/100 Dollars
[$1,000.000] in attorneys' fees) and brokerage commission, paid by Tenant to
procure the assignee or subtenant. Tenant shall pay to Landlord as additional
rent, within twenty (20) days after receipt by Tenant, any such excess
consideration paid by any transferee (the "TRANSFEREE") for the Transfer
provided any capital expenditures and brokerage commissions in connection with
any sublease shall be amortized over the term of the sublease.
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14.4 No Release Of Tenant. No consent by Landlord to any Transfer shall
relieve Tenant of any obligations to be performed by Tenant under this Lease,
whether occurring before or after such consent, assignment, subletting or other
Transfer. Each Transferee shall be jointly and severally liable with Tenant (and
Tenant shall be jointly and severally liable with each Transferee) for the
payment of rent (or, in the case of a sublease, rent in the amount set forth in
the sublease) and for the performance of all other terms and provisions of this
Lease. The consent by Landlord to any Transfer shall not relieve Tenant or any
such Transferee from the obligation to obtain Landlord's express prior written
consent to any subsequent Transfer by Tenant or any Transferee. The acceptance
of rent by Landlord from any other person (whether or not such person is an
occupant of the Premises) shall not be deemed to be a waiver by Landlord of any
provision of this Lease or to be a consent to any Transfer.
14.5 Expenses and Attorney's Fees. Tenant shall pay to Landlord on
demand all costs and expenses (including reasonable attorneys' fees not to
exceed One Thousand and 00/100 Dollars [$1,000.00] for each request for
Landlord's consent to a proposed Transfer) incurred by Landlord in connection
with reviewing or consenting to any proposed Transfer (including any request for
consent to, or any waiver of Landlord's rights in connection with, any security
interest in any of Tenant's property at the Premises).
14.6 Effectiveness of Transfer. Prior to the date on which any
permitted Transfer (whether or not requiring Landlord's consent) becomes
effective, Tenant shall deliver to Landlord a counterpart of the fully executed
Transfer document and Landlord's standard form of Consent to Assignment or
Consent to Sublease executed by Tenant and the Transferee in which each of
Tenant and the Transferee confirms its obligations pursuant to this Lease.
Failure or refusal of a Transferee to execute any such instrument shall not
release or discharge the Transferee from liability as provided herein. The
voluntary, involuntary or other surrender of this Lease by Tenant, or a mutual
cancellation by Landlord and Tenant, shall not work a merger, and any such
surrender or cancellation shall, at the option of Landlord, either terminate all
or any existing subleases or operate as an assignment to Landlord of any or all
of such subleases.
14.7 Landlord's Right to Space. Notwithstanding any of the above
provisions of this Section to the contrary, if Tenant notifies Landlord that it
desires to enter into a Transfer, Landlord, in lieu of consenting to such
Transfer, may elect(x) in the case of an assignment or a sublease of the entire
Premises, to terminate this Lease, or (y) in the case of a sublease of less than
the entire Premises, to terminate this Lease as it relates to the space proposed
to be subleased by Tenant. In such event, this Lease will terminate (or the
space proposed to be subleased will be removed from the Premises subject to this
Lease and the Base Rent and Tenant's Share under this Lease shall be
proportionately reduced) on the date the Transfer was proposed to be effective,
and Landlord may lease such space to any party, including the prospective
Transferee identified by Tenant. Landlord acknowledges that within twelve (12)
months following the Commencement Date Tenant intents to sublease up to 15,000
rentable square feet on the ground floor of the Premises, and, notwithstanding
the provisions of this Section 14.7 to the contrary, Landlord shall not have the
right to terminate this Lease as it relates to Tenant subleasing up to 15,000
rentable square feet on the ground floor of the Premises during the initial
twelve (12) months following the Commencement Date. Notwithstanding the
provisions of this Section 14.7 to the contrary, if (i) Tenant proposes to
assign this Lease, or to sublease all or a portion of the Premises, and (ii)
Landlord notifies Tenant
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that Landlord elects to terminate this Lease due to such proposed assignment,
or Landlord elects to terminate this Lease with respect to the space Tenant
proposes to sublease, then Tenant shall have the right to rescind any such
termination by Landlord by giving Landlord written notice ("Tenant's Rescission
Notice") only within five (5) Business Days following Landlord's written notice
of termination pursuant to the provisions of this Section 14.7. Upon Tenant
giving Tenant's Rescission Notice, (iii) this Lease shall remain in full force
and effect in accordance with the provisions contained herein, and (iv) Tenant
shall be deemed to have withdrawn the request for consent to a Transfer, and
the proposed Transfer which was the basis for Landlord's termination under the
provisions of this Section 14.7 shall be void, and of no force and effect.
14.8 Assignment of Sublease Rents. Tenant hereby absolutely and
irrevocably assigns to Landlord any and all rights to receive rent and other
consideration from any sublease and agrees that Landlord, as assignee or as
attorney-in-fact for Tenant solely for purposes of collecting rent and other
consideration from any sublessee, or a receiver for Tenant appointed on
Landlord's application may (but shall not be obligated to) collect such rents
and other consideration and apply the same toward Tenant's obligations to
Landlord under this Lease; provided, however, that Landlord grants to Tenant at
all times prior to occurrence of any breach or default by Tenant a revocable
license to collect such rents (which license shall automatically and without
notice be and be deemed to have been revoked and terminated immediately upon
any Event of Default).
14.9 Transfer to Affiliate. Notwithstanding any provision contained in the
Section 14 to the contrary, Tenant shall have the right, without the consent of
Landlord, upon ten (10) days prior written notice to Landlord, to transfer
Tenant's interest in this Lease to an "Affiliate" of Tenant, and the provisions
of Sections 14.2, 14.3 and 14.7 shall not apply with respect to the transfer to
the Affiliate, but the transfer to the Affiliate shall be subject to all other
terms and conditions of this Lease, including the provisions of this Section
14.9. Tenant shall remain liable under this Lease after any such transfer. For
the purposes of this Article 14, the term "Affiliate" of Tenant shall mean and
refer to any entity controlling, controlled by or under common control with
Tenant or Tenant's parent, as the case may be, or any corporation or other
entity resulting from a merger or consolidation with Tenant, or to any person
or entity which acquires at least ninety percent (90%) of all the assets of
Tenant as a going concern. "Control" as used herein shall mean the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of such controlled entity; and the ownership, or
possession of the right to vote, in the ordinary direction of its affairs, of
at least fifty percent (50%) of the voting interest in any entity.
Notwithstanding Tenant's right to Transfer to an Affiliate pursuant to the
provisions of this Section 14.9, Tenant may not, through use of its rights
under this Article 14 in two or more transactions (whether separate
transactions or steps or phases of a single transaction), at one time or over
time, whether by first assigning this Lease to a subsidiary and then merging
the subsidiary into another entity or selling the stock of the subsidiary or by
other means, assign or sublease the Premises, or transfer control of Tenant, to
any person or entity which is not a subsidiary, affiliate or controlling
corporation of the original Tenant, as then constituted, existing prior to the
commencement of such transactions, without first obtaining Landlord's prior
written consent pursuant to the provisions of Section 14.2.
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15. DEFAULT AND REMEDIES.
15.1 Events of Default. The occurrence of any of the following shall
constitute an "EVENT OF DEFAULT" by Tenant:
(a) Tenant fails to make any payment of rent when due, or
any amount required to replenish the security deposit as provided in Section 4
above, if payment in full is not received by Landlord within three (3) days
after written notice that it is due.
(b) Tenant abandons the Premises, together with Tenant's
failure to pay Rent when due.
(c) Tenant fails timely to deliver any subordination
document, estoppel certificate or financial statement requested by Landlord
within the applicable time period specified in Sections 20 - Encumbrances - and
21 - Estoppel Certificates and Financial Statements - below.
(d) Tenant violates the restrictions on Transfer set forth
in Section 14 - Assignment and Subletting.
(e) Tenant ceases doing business as a going concern; makes
an assignment for the benefit of creditors; is adjudicated an insolvent, files a
petition (or files an answer admitting the material allegations of a petition)
seeking relief under any state or federal bankruptcy or other statute, law or
regulation affecting creditors' rights; all or substantially all of Tenant's
assets are subject to judicial seizure or attachment and are not released within
60 days, or Tenant consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for Tenant or for all or any substantial part of Tenant's
assets.
(f) Tenant fails, within ninety (90) days after the
commencement of any proceedings against Tenant seeking relief under any state or
federal bankruptcy or other statute, law or regulation affecting creditors'
rights, to have such proceedings dismissed, or Tenant fails, within ninety (90)
days after an appointment, without Tenant's consent or acquiescence, of any
trustee, receiver or liquidator for Tenant or for all or any substantial part of
Tenant's assets, to have such appointment vacated.
(g) Tenant fails to perform or comply with any provision of
this Lease other than those described in (a) through (f) above, and does not
fully cure such failure within thirty (30) days after notice to Tenant or, if
such failure cannot be cured within such thirty (30)-day period, Tenant fails
within such thirty (30)-day period to commence, and thereafter diligently
proceed with, all actions necessary to cure such failure as soon as reasonably
possible but in all events within one hundred twenty (120) days of such notice;
provided, however, that if Landlord in Landlord's reasonable judgment determines
that such failure will not be cured by Tenant within such one hundred twenty
(120) days, then such failure shall constitute an Event of Default immediately
upon such notice to Tenant.
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15.2 Remedies. Upon the occurrence of an Event of Default, Landlord shall
have the following remedies, which shall not be exclusive but shall be
cumulative and shall be in addition to any other remedies now or hereafter
allowed by law:
(a) Landlord may terminate Tenant's right to possession of the
Premises at any time by written notice to Tenant. Tenant expressly acknowledges
that in the absence of such written notice from Landlord, no other act of
Landlord, including re-entry into the Premises, efforts to relet the Premises,
relettting of the Premises for Tenant's account, storage of Tenant's personal
property and Trade Fixtures, acceptance of keys to the Premises from Tenant or
exercise of any other rights and remedies under this Section, shall constitute
an acceptance of Tenant's surrender of the Premises or constitute a termination
of this Lease or of Tenant's right to possession of the Premises. Upon such
termination in writing of Tenant's right to possession of the Premises, as
herein provided, this Lease shall terminate and Landlord shall be entitled to
recover damages from Tenant as provided in California Civil Code Section 1951.2
and any other applicable existing or future Law providing for recovery of
damages for such breach, including the worth at the time of award of the amount
by which the rent which would be payable by Tenant hereunder for the remainder
of the Term after the date of the award of damages, including Additional Rent as
reasonably estimated by Landlord, exceeds the amount of such rental loss as
Tenant proves could have been reasonably avoided, discounted at the discount
rate published by the Federal Reserve Bank of San Francisco for member banks at
the time of the award plus one percent (1%).
(b) Landlord shall have the remedy described in California Civil
Code Section 1951.4 (Landlord may continue this Lease in effect after Tenant's
breach and abandonment and recover rent as it becomes due, if Tenant has the
right to sublet or assign, subject only to reasonable limitations).
(c) Landlord may cure the Event of Default at Tenant's expense. If
Landlord pays any sum or incurs any expense in curing the Event of Default,
Tenant shall reimburse Landlord upon demand for the amount of such payment or
expense with interest at the Interest Rate from the date the sum is paid or the
expense is incurred until Landlord is reimbursed by Tenant.
(d) Landlord may remove all Tenant's property from the Premises, and
such property may be stored by Landlord in a public warehouse or elsewhere at
the sole cost and for the account of Tenant. If Landlord does not elect to
store any or all of Tenant's property left in the Premises, Landlord may
consider such property to be abandoned by Tenant, and Landlord may thereupon
dispose of such property in any manner deemed appropriate by Landlord. Any
proceeds realized by Landlord on the disposal of any such property shall be
applied first to offset all expenses of storage and sale, then credited against
Tenant outstanding obligations to Landlord under this Leas, and any balance
remaining after satisfaction of all obligations of Tenant under this Lease
shall be delivered to Tenant.
16. LATE CHARGE AND INTEREST.
16.1 Late Charge. If any payment of rent is not received by Landlord
within five (5) days after written notice from Landlord to Tenant that the
payment is past due, Tenant shall pay to Landlord on demand as a late charge an
additional amount equal to four percent (4%) of the
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overdue payment; provided, however, if Landlord has given Tenant written notice
two (2) or more times in any consecutive twelve (12) month period that a payment
of rent is past due, then Tenant shall pay to Landlord on demand commencing with
the third (3rd) part due payment in any twelve (12) month period, and continuing
with each past due payment thereafter in such twelve (12) month period, as a
late charge an additional amount equal to four percent (4%) of the overdue
payment without any requirement of additional notice that such payment is past
due. A late charge shall not be imposed more than once on any particular
installment not paid when due, but imposition of a late charge on any payment
not made when due does not eliminate or supersede late charges imposed on other
(prior) payments not made when due or preclude imposition of a late charge on
other installments or payments not made when due.
16.2 Interest. In addition to the late charges referred to above, which are
intended to defray Landlord's costs resulting from late payments, any payment
from Tenant to Landlord not paid when due shall at Landlord's option bear
interest from the date due until paid to Landlord by Tenant at the rate of
fifteen percent (15%) per annum or the maximum lawful rate that Landlord may
charge to Tenant under applicable laws, whichever is less (the "INTEREST RATE").
Acceptance of any late charge and/or interest shall not constitute a waiver of
Tenant's default with respect to the overdue sum or prevent Landlord from
exercising any of its other rights and remedies under this Lease.
17. WAIVER. No provisions of this Lease shall be deemed waived by either party
unless such waiver is in a writing signed by the waiving party. The waiver by
either party of any breach of any provision of this Lease shall not be deemed a
waiver of such provision or of any subsequent breach of the same or any other
provision of this Lease. No delay or omission in the exercise of any right or
remedy of either party upon any default by the other party shall impair such
right or remedy or be construed as a waiver. Landlord's acceptance of any
payments of rent due under this Lease shall not be deemed a waiver of any
default by Tenant under this Lease (including Tenant's recurrent failure to
timely pay rent) other than Tenant's nonpayment of the accepted sums, and no
endorsement or statement on any check or on any letter accompanying any check or
payment shall be deemed an accord and satisfaction. The consent to or approval
by either party of any act by the other party requiring the first party's
consent or approval shall not be deemed to waive or render unnecessary the
consenting or approving party's consent to or approval of any subsequent act by
the other party.
18. ENTRY, INSPECTION AND CLOSURE. Upon reasonable oral or written notice to
Tenant (and without notice in emergencies), Landlord and its authorized
representatives may enter the Premises at all reasonable times to: (a) determine
whether the Premises are in good condition, (b) determine whether Tenant is
complying with its obligations under this Lease, (c) perform any maintenance or
repair of the Premises or the Building that Landlord has the right or obligation
to perform, (d) install or repair improvements for other tenants where access to
the Premises is required for such installation or repair, (e) serve, post or
keep posted any notices required or allowed under the provisions of this Lease,
(f) show the Premises to prospective brokers, agents, buyers, transferees, or
Mortgagees, or (g) do any other act or thing necessary for the safety or
preservation of the Premises or the Building. In addition, Landlord shall show
the Premises to prospective tenants upon prior reasonable oral or notice to
Tenant during the last twelve (12) months of the Term. When reasonably necessary
Landlord may temporarily close entrances, doors,
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corridors, elevators or other facilities in the Building without liability to
Tenant by reason of such closure. Landlord shall conduct its activities under
this Section in a manner that will minimize inconvenience to Tenant without
incurring additional expense to Landlord. In no event shall Tenant be entitled
to an abatement of rent on account of any entry by Landlord, and Landlord shall
not be liable in any manner for any inconvenience, loss of business or other
damage to Tenant or other persons arising out of Landlord's entry on the
Premises in accordance with this Section. No action by Landlord pursuant to this
paragraph shall constitute an eviction of Tenant, constructive or otherwise,
entitle Tenant to an abatement of rent or to terminate this Lease or otherwise
release Tenant from any of Tenant's obligations under this Lease.
19. SURRENDER AND HOLDING OVER.
19.1 Surrender. Upon the expiration or termination of this Lease, Tenant
shall surrender the Premises and all Tenant Improvements and Alternations to
Landlord broom-clean and in good condition, except for reasonable wear and tear,
damage from casualty or condemnation and any changes resulting from approved
Alterations; provided, however, that on or before the expiration or termination
of this Lease Tenant shall remove all telephone and other cabling installed in
this Building by Tenant and remove from the Premises all Tenant's personal
property and any Trade Fixtures and all Alternations that Landlord has elected
to require Tenant to remove as provided in Section 6.1 - Tenant Improvements &
Alterations, and repair any damage caused by such removal; provided, however,
upon expiration or termination of this Lease Tenant shall not be obligated to
remove any Hazardous Material from the Property unless Handled by Tenant at the
Property. If such removal is not completed on or before the expiration or
termination of the Term, Landlord shall have the right (but no obligation) to
remove the same, and Tenant shall pay Landlord on demand for all costs of
removal and storage thereof and for the rental value of the Premises for the
period from the end of the Term through the end of the time reasonably required
for such removal. Landlord shall also have the right to retain or dispose of all
or any portion of such property if Tenant does not pay all such costs and
retrieve the property within ten (10) days after notice from Landlord (in which
event title to all such property described in Landlord notice shall be
transferred to and vest in Landlord). Tenant waives all Claims against Landlord
for any damage or loss to Tenant resulting from Landlord's removal, storage,
retention, or disposition of any such property. Upon expiration or termination
of this Lease or of Tenant's possession, whichever is earliest, Tenant shall
surrender all keys to the Premises or any other part of the Building and shall
deliver to Landlord all keys for or make known to Landlord the combination of
locks on all safes, cabinets and vaults that may be located in the Premises.
Tenant's obligations under this Section shall survive the expiration or
termination of this Lease.
19.2 Holding Over. If Tenant (directly or through any Transferee or
other successor-in-interest of Tenant) remains in possession of the Premises
after the expiration or termination of this Lease, Tenant's continued possession
shall be on the basis of a tenancy at the sufferance of Landlord. No act or
omission by Landlord, other than its specific written consent, shall constitute
permission for Tenant to continue in possession of the Premises, and if such
consent is given or declared to have been given by a court judgement, Landlord
may terminate Tenant's holdover tenancy at any time upon seven (7) days written
notice. In such event, Tenant shall continue to comply with or perform all the
terms and obligations of Tenant under this Lease, except that the monthly Base
Rent during Tenant's holding over shall be twice the Base Rent payable in the
last
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<PAGE> 32
full month prior to the termination hereof. Acceptance by Landlord of rent
after such termination shall not constitute a renewal or extension of this
Lease; and nothing contained in this provision shall be deemed to waive
Landlord's right of re-entry or any other right hereunder or at law. Tenant
shall indemnify, defend and hold Landlord harmless from and against all Claims
arising or resulting directly or indirectly from Tenant's failure to timely
surrender the Premises, including (i) any rent payable by or any loss, cost, or
damages claimed by any prospective tenant of the Premises, and (ii) Landlord's
damages as a result of such prospective tenant rescinding or refusing to enter
into the prospective lease of the Premises by reason of such failure to timely
surrender the Premises.
20. ENCUMBRANCES.
20.1 Subordination. This Lease is expressly made subject and subordinate
to any mortgage, deed of trust, ground lease, underlying lease or like
encumbrance affecting any part of the Property or any interest of Landlord
therein which is now existing or hereafter executed or recorded
("ENCUMBRANCE"); provided, however, that such subordination shall only be
effective, as to future Encumbrances, if the holder of the Encumbrance agrees
in writing that this Lease shall survive the termination of the Encumbrance by
lapse of time, foreclosure or otherwise so long as Tenant is not in default
under this Lease beyond any applicable notice and cure period. Provided the
conditions of the preceding sentence are satisfied, Tenant shall execute and
deliver to Landlord, within ten (10) Business Days after written request
therefor by Landlord and in a form reasonably requested by Landlord, any
additional documents evidencing the subordination of this Lease with respect to
any such Encumbrance and the nondisturbance agreement of the holder of any such
Encumbrance. If the interest of Landlord in the Property is transferred
pursuant to or in lieu of proceedings for enforcement of any Encumbrance,
Tenant shall immediately and automatically attorn to the new owner, and this
Lease shall continue to full force and effect as a direct lease between the
transferee and Tenant on the terms and conditions set forth in this Lease.
Landlord agrees to use reasonable good faith efforts to obtain, at Tenant's
cost and expense, within 60 days after execution of this Lease, a
Subordination, Attornment and Non-Disturbance Agreement (the "SNDA") from the
holder of any Encumbrance existing at the date of this Lease pursuant to the
provisions contained above; provided, however, Landlord's failure to obtain an
SNDA shall not affect the validity of this Lease.
20.2 Mortgagee Protection. Tenant agrees to give any holder of any
Encumbrance covering any part of the Property ("MORTGAGEE"), by registered
mail, a copy of any notice of default served upon Landlord, provided that prior
to such notice Tenant has been notified in writing (by way of notice of
assignment of rents and leases, or otherwise) of the address of such Mortgagee.
If Landlord shall have failed to cure such default within thirty (30) days from
the effective date of such notice of default, then the Mortgagee shall have an
additional thirty (30) days within which to cure such default or if such
default cannot be cured within that time, then such additional time as may be
necessary to cure such default (including the time necessary to foreclose or
otherwise terminate its Encumbrance, if necessary to effect such cure), and
this Lease shall not be terminated so long as such remedies are being
diligently pursued.
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<PAGE> 33
21. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS.
21.1 Estoppel Certificates. Within ten (10) Business Days after written
request therefor, Tenant shall execute and deliver to Landlord, in a form
provided by or satisfactory to Landlord, a certificate stating that this Lease
is in full force and effect, describing any amendments or modifications hereto,
acknowledging that this Lease is subordinate or prior, as the case may be, to
any Encumbrance and stating any other information Landlord may reasonably
request, including the Term, the monthly Base Rent, the date to which Rent has
been paid, the amount of any security deposit or prepaid rent, whether either
party hereto is in default under the terms of the Lease, and whether Landlord
has completed its construction obligations hereunder (if any). If Tenant fails
timely to execute and deliver such certificate as provided above, then Landlord
and the addressee of such certificate shall be entitled to rely upon the
information contained in the certificate submitted to Tenant as true, correct
and complete, and Tenant shall be estopped from later denying, contradicting or
taking any position inconsistent with the information contained in such
certificate. Any person or entity purchasing, acquiring an interest in or
extending financing with respect to the Property shall be entitled to rely upon
any such certificate. If Tenant fails to deliver such certificate within ten
(10) Business Days after Landlord's second written request therefor, Tenant
shall be liable to Landlord for any damages incurred by Landlord including any
profits or other benefits from any financing of the Property or any interest
therein which are lost or made unavailable as a result, directly or indirectly,
of Tenant's failure or refusal to timely execute or deliver such estoppel
certificate.
21.2 Financial Statements. Within ten (10) Business Days after written
request therefor, but not more than once a year, Tenant shall deliver to
Landlord a copy of the financial statements (including at least a year end
balance sheet and a statement of profit and loss) of Tenant (and of each
guarantor of Tenant's obligations under this Lease) for each of the two most
recently completed years, prepared in accordance with generally accepted
accounting principles (and, if such is Tenant's normal practice, audited by an
independent certified public accountant), all then available subsequent interim
statements, and such other financial information as may reasonably be requested
by Landlord or required by any Mortgagee. Landlord shall not disclose details of
such financial statements except (x) pursuant to court proceedings, and (y) to
Landlord's (a) directors, (b) shareholders, (c) officers, (d) those employees of
Landlord and of Landlord's agents who have a need to know, (e) accountants, (f)
auditors, (g) lenders and/or Mortgagee, (h) purchasers, (i) potential lenders
and/or Mortgagees and purchasers, and (j) attorneys. Landlord shall use all
reasonable efforts to prevent such persons or employees of such entities from
disclosing details of Tenant's financial statements.
22. NOTICES. Any notice, demand, request, consent or approval that either
party desires or is required to give to the other party under this Lease shall
be in writing and shall be served personally, delivered by messenger or courier
service, or sent by U.S. certified mail, return receipt requested, postage
prepaid, addressed to the other party at the party's address for notices set
forth in the Basic Lease Information. Any notice required pursuant to any Laws
may be incorporated into, given concurrently with or given separately from any
notice required under this Lease. Notices shall be deemed to have been given and
be effective on the earlier of (a) receipt (or refusal of delivery or receipt);
or (b) one (1) day after acceptance by the independent service for delivery, if
sent by independent messenger or courier service, or three (3) days after
mailing if sent by mail in
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<PAGE> 34
accordance with this Section. Either party may change its address for notices
hereunder, effective fifteen (15) days after notice to the other party
complying with this Section. If Tenant sublets the Premises, notices from
Landlord shall be effective on the subtenant when given to Tenant pursuant to
this Section.
23. ATTORNEYS' FEES. In the event of any dispute between Landlord and Tenant
in any way related to this Lease, the non-prevailing party shall pay to the
prevailing party all reasonable attorneys' fees and costs and expenses of any
type incurred by the prevailing party in connection with any action or
proceeding (including any appeal and the enforcement of any judgment or award),
whether or not the dispute is litigated or prosecuted to final judgment. The
"prevailing party" shall be determined based upon an assessment of which
party's major arguments or positions taken in the action or proceeding could
fairly be said to have prevailed (whether by compromise, settlement,
abandonment by the other party of its claim or defense, final decision, after
any appeals, or otherwise) over the other party's major arguments or positions
on major disputed issues.
24. QUIET POSSESSION. Subject to Tenant's full and timely performance of all
of Tenant's obligations under this Lease and subject to the terms of this
Lease, including Section 20 - Encumbrances, Tenant shall have the quiet
possession of the Premises throughout the Term as against any persons or
entities lawfully claiming by, through or under Landlord.
25. SECURITY MEASURES. Tenant shall be responsible for all security measures
for the Premises, such as the registration or search of all persons entering or
leaving the Building, requiring identification for access to the Building,
evacuation of the Building for cause, suspected cause, or for drill purposes,
the issuance of magnetic pass cards or keys for Building or elevator access to
prevent any threat of property loss or damage, bodily injury or business
interruption. Landlord shall have no security responsibility for the Premises
or the Project. Landlord, its agents and employees shall have no liability to
Tenant or its Representatives or Visitors for the implementation or exercise
of, or the failure to implement or exercise, any security measures for the
Premises or the Project, or for any resulting disturbance of Tenant's use or
enjoyment of the Premises.
26. FORCE MAJEURE. If either Landlord or Tenant is delayed, interrupted or
prevented from performing any of its obligations under this Lease (other than,
with respect to Tenant the payment of Base Rent, Additional Rent or any other
charge payable by Tenant to Landlord under this Lease), including Landlord's
obligations under the Construction Rider and such delay, interruption or
prevention is due to fire, act of God, governmental act or failure to act,
labor dispute, unavailability of materials or any cause outside the reasonable
control of Landlord or Tenant, then the time for performance of the affected
obligations of Landlord or Tenant, as the case may be, shall be extended for a
period equivalent to the period of such delay, interruption or prevention. The
inability to pay money shall in no event constitute force majeure.
27. RULES AND REGULATIONS. Tenant shall be bound by and shall comply with the
rules and regulations attached to and made a part of this Lease as Exhibit C to
the extent those rules and regulations are not in conflict with the terms of
this Lease, as well as any reasonable rules and regulations hereafter adopted by
Landlord for all tenants of the Building, upon notice to Tenant thereof
(collectively, the "BUILDING RULES"). Landlord shall not be responsible to
Tenant or to any
-31-
<PAGE> 35
other persons for any violation of, or failure to observe, the Building Rules
by any other tenant or other person.
28. LANDLORD'S LIABILITY. The term "Landlord," as used in this Lease, shall
mean only the owner or owners of the Building at the time in question. In the
event of any conveyance of title to the Building, then from and after the date
of such conveyance, upon such transferee's written recognition of this Lease,
the transferor Landlord shall be relieved of all liability with respect to
Landlord's obligations to be performed under this Lease after the date of such
conveyance. Notwithstanding any other term or provision of this Lease, the
liability of Landlord for its obligations under this Lease is limited solely to
Landlord's interest in the Building as the same may from time to time be
encumbered, and no personal liability shall at any time be asserted or
enforceable against any other assets of Landlord or against Landlord's partners
or members or its or their respective partners, shareholders, members,
directors, officers or managers on account of any of Landlord's obligations or
actions under this Lease.
29. CONSENTS AND APPROVALS.
29.1 Determination in Good Faith. Wherever the consent, approval, judgment
or determination of Landlord is required or permitted under this Lease,
Landlord may exercise its good faith business judgment in granting or
withholding such consent or approval or in making such judgment or
determination without reference to any extrinsic standard of reasonableness,
unless the specific provision contained in this Lease providing for such
consent, approval, judgment or determination specifies that Landlord's consent
or approval is not to be unreasonably withheld, or that such judgment or
determination is to be reasonable, or otherwise specifies the standards under
which Landlord may withhold its consent. If it is determined that Landlord
failed to give its consent where it was required to do so under this Lease,
Tenant shall be entitled to injunctive relief but shall not be entitled to
monetary damages or to terminate this Lease for such failure.
29.2 No Liability Imposed on Landlord. The review and/or approval by
Landlord of any item or matter to be reviewed or approved by Landlord under the
terms of this Lease or any Exhibits or Addenda hereto shall not impose upon
Landlord any liability for the accuracy or sufficiency of any such item or
matter or the quality or suitability of such item for its intended use. Any
such review or approval is for the sole purpose of protecting Landlord's
interest in the Property, and no third parties, including Tenant or the
Representatives and Visitors of Tenant or any person or entity claiming by,
through or under Tenant, shall have any rights as a consequence thereof.
30. BROKERS. Landlord shall pay the fee or commission of the broker or brokers
identified in the Basic Lease Information (the "BROKER") in accordance with
Landlord's separate written agreement with the Broker, if any. Tenant warrants
and represents to Landlord that in the negotiating or making of this Lease
neither Tenant nor anyone acting on Tenant's behalf has dealt with any broker
or finder who might be entitled to a fee or commission for this Lease other
than the Broker. Tenant shall indemnify and hold Landlord harmless from any
claim or claims, including costs, expenses and attorney's fees incurred by
Landlord asserted by any other broker or finder for a fee or commission based
upon any dealings with or statements made by Tenant or Tenant's
Representatives. Landlord shall indemnify and hold Tenant harmless from any
claim or claims,
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<PAGE> 36
including costs, expenses and attorney's fees incurred by Tenant asserted by any
other broker or finder for a fee or commission based upon any dealings with or
statements made by Landlord or Landlord's Representatives.
31. RELOCATION OF PREMISES. [Intentionally Deleted].
32. ENTIRE AGREEMENT. This Lease, including the Exhibits and any Addenda
attached hereto, and the documents referred to herein, if any, constitute the
entire agreement between Landlord and Tenant with respect to the leasing of
space by Tenant in the Building, and supersede all prior or contemporaneous
agreements, understandings, proposals and other representations by or between
Landlord and Tenant, whether written or oral, all of which are merged herein.
Neither Landlord nor Landlord's agents have made any representations or
warranties with respect to the Premises, the Building, the Project or this
Lease except as expressly set forth herein, and no rights, easements or
licenses shall be acquired by Tenant by implication or otherwise unless
expressly set forth herein. The submission of this Lease for examination does
not constitute an option for the Premises and this Lease shall become effective
as a binding agreement only upon execution and delivery thereof by Landlord to
Tenant.
33. MISCELLANEOUS. This Lease may not be amended or modified except by a
writing signed by Landlord and Tenant. Subject to Section 14 - Assignment and
Subletting and Section 28 - Landlord's Liability, this Lease shall be binding
on and shall inure to the benefit of the parties and their respective
successors, assigns and legal representatives. The determination that any
provisions hereof may be void, invalid, illegal or unenforceable shall not
impair any other provisions hereof and all such other provisions of this Lease
shall remain in full force and effect. The unenforceability, invalidity or
illegality of any provision of this Lease under particular circumstances shall
not render unenforceable, invalid or illegal other provisions of this Lease, or
the same provisions under other circumstances. This Lease shall be construed
and interpreted in accordance with the laws (excluding conflict of laws
principles) of the State in which the Building is located. The provisions of
this Lease shall be construed in accordance with the fair meaning of the
language used and shall not be strictly construed against either party, even if
such party drafted the provision in question. When required by the context of
this Lease, the singular includes the plural. Wherever the term "including" is
used in this Lease, it shall be interpreted as meaning "including, but not
limited to" the matter or matters thereafter enumerated. The captions contained
in this Lease are for purposes of convenience only and are not to be used to
interpret or construe this Lease. If more than one person or entity is
identified as Tenant hereunder, the obligations of each and all of them under
this Lease shall be joint and several. Time is of the essence with respect to
this Lease, except as to the conditions relating to the delivery of possession
of the Premises to Tenant. Neither Landlord nor Tenant shall record this Lease.
34. AUTHORITY. If Tenant is a corporation, partnership, limited liability
company or other form of business entity, each of the persons executing this
Lease on behalf of Tenant warrants and represents that Tenant is a duly
organized and validly existing entity, that Tenant has full right and
authority to enter into this Lease and that the persons signing on behalf of
Tenant are authorized to do so and have the power to bind Tenant to this Lease.
Tenant shall provide Landlord upon request with evidence reasonably
satisfactory to Landlord confirming the foregoing representations.
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<PAGE> 37
IN WITNESS WHEREOF, Landlord and Tenant have entered into this Lease as of
the date first above written.
TENANT: LANDLORD:
UNWIRED PLANET, INC., SEAPORT CENTRE ASSOCIATES, LLC
a Delaware corporation a California limited liability
company
By: Signature By: OPPORTUNITY CAPITAL
------------------------- PARTNERS IV, LLC,
Name: a California limited
-------------------- liability company Manager
Title:
-------------------
By: By: /s/ William Wilson Jr.
------------------------- ---------------------------
Name: Name:
-------------------- -------------------
Title: Title:
------------------- -------------------
By: Signature
-------------------------
Name:
-------------------
Title:
-------------------
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<PAGE> 38
EXHIBIT A
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF MARCH 10, 1998
BETWEEN
SEAPORT CENTRE ASSOCIATES, LLC, AS LANDLORD,
AND
UNWIRED PLANET, INC., AS TENANT ("LEASE")
SEAPORT CENTRE III
800 CHESAPEAKE DR., REDWOOD CITY
TWO-STORY OFFICE / R&D BUILDING
[floorplan]
First Floor
[floorplan]
Second Floor
<PAGE> 39
EXHIBIT B
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF MARCH 10, 1998
BETWEEN
SEAPORT CENTRE ASSOCIATES, LLC, AS LANDLORD,
AND
UNWIRED PLANET, INC., AS TENANT ("LEASE")
CONSTRUCTION RIDER
1. Tenant Improvements. Upon Tenant's written request made at any time
within three (3) years after the Commencement Date of this Lease, and after
completion of Final Construction Documents (as hereinafter defined), Landlord
shall with reasonable diligence through Commercial Interior Contractors ("CIC")
construct and install in the Premises the improvements and fixtures provided
for in this Construction Rider ("TENANT IMPROVEMENTS"). Tenant recognizes and
agrees that CIC is an affiliate of Landlord. Upon request by Landlord, Tenant
shall designate in writing an individual authorized to act as Tenant's
Representative with respect to all approvals, directions and authorizations
pursuant to this Construction Rider.
1.1 Plans. The Tenant Improvements shall be constructed substantially
as shown on the conceptual space plan for the Premises prepared by a space
planner mutually agreeable to Landlord and Tenant, which space planner will be
retained by Tenant (after Tenant's notice pursuant to the provisions of Section
1 above) as the space planner for the Premises ("SPACE PLANNER"), to prepare a
space plan ("SPACE PLAN") reasonably acceptable to Landlord and Tenant.
As soon as may be reasonably practicable after requested by Tenant,
the Space Planner will prepare and deliver to Tenant detailed plans and
specifications sufficient to permit the construction of the Tenant Improvements
by Landlord's contractor ("CONSTRUCTION DOCUMENTS"), Landlord will provide
Tenant with a cost estimate for the work shown in the Construction Documents.
Tenant shall respond to the Construction Documents and cost estimate within
three (3) Business Days after receipt thereof, specifying any changes or
modifications Tenant desires in the Construction Documents. The Space Planner
will then revise the Construction Documents and resubmit them to Tenant for its
approval and Landlord will provide Tenant with a revised cost estimate. Tenant
shall approve or disapprove the same within three (3) Business Days after
receipt. The revised Construction Documents and cost estimate, as approved by
Tenant and Landlord, are hereinafter referred to as the "FINAL CONSTRUCTION
DOCUMENTS" and "FINAL COST ESTIMATE," respectively.
Additional interior decorating services and advice on the furnishing
and decoration of the Premises, such as the selection of fixtures, furnishings
or design of mill work, shall be provided by Tenant at its expense, but shall
be subject to the reasonable approval of Landlord.
Exhibit B, Page 1
<PAGE> 40
1.2 Construction. Upon approval by Landlord and Tenant of the Final
Construction Documents and the Final Cost Estimate, Landlord shall proceed with
reasonable diligence to cause the Tenant Improvements to be Substantially
Completed. CIC will construct the Tenant Improvements at competitive prices,
with a fee not to exceed the market rate for other similar sized and type of
construction contracts in the Redwood City, California area. CIC will
competitively bid subcontracts, using at least three (3) subcontractors for each
proposed subcontract. Tenant may add names to the subcontractor bid list prior
to such subcontracts being put to bid, subject to the reasonable right of CIC
and Landlord to review and approve subcontractors based on their qualifications,
including quality of work, creditworthiness, and experience. Tenant agrees to
cooperate with Landlord and CIC in planning and scheduling the construction of
Tenant Improvements to allow CIC to proceed with construction of Tenant
Improvements in an efficient manner, but Landlord will use, the cause CIC to
use, reasonable efforts to not unreasonably disrupt Tenant's business operations
during construction of Tenant Improvements.
The Tenant Improvements shall be deemed to be "SUBSTANTIALLY COMPLETED"
when they have been completed in accordance with the Final Construction
Documents except for finishing details, minor omissions, decorations and
mechanical adjustments of the type normally found on an architectural "punch
list". (The definition of Substantially Completed shall also define the terms
"SUBSTANTIAL COMPLETION" and "SUBSTANTIALLY COMPLETE.")
Following Substantial Completion of the Tenant Improvements, Landlord and
Tenant shall inspect the Premises and jointly prepare a "punch list" of agreed
items of construction remaining to be completed. Landlord shall cause CIC to
complete the items set forth in the punch list as soon as reasonably possible
using commercially reasonable efforts. Tenant shall cooperate with and
accommodate Landlord and CIC in completing the items on the punch list.
1.3 Cost of Tenant Improvements. Landlord shall contribute up to Two
Hundred Three Thousand Nine Hundred Seventy-Five and 00/100 Dollars
($203,975.00) (the "ALLOWANCE"), based upon $5.00 per rentable square foot in
the Premises toward the cost of the design (including preparation of space plans
and Construction Documents), construction and installation of the Tenant
Improvements. Tenant may use up to Fifty Thousand and 00/100 Dollars
($50,000.00) out of the Allowance for wiring and cabling in the Building. The
balance, if any, of the cost of the Tenant Improvements ("ADDITIONAL COST"),
including, but not limited to, usual markups for overhead, supervision and
profit, shall be paid by Tenant. Tenant shall pay Landlord 50% of the Additional
Cost based upon the Final Cost Estimate prior to the commencement of
construction of the Tenant Improvements. The balance of the actual Additional
Cost shall be paid to Landlord upon Substantial Completion of the Tenant
Improvements, within twenty (20) days after receipt of Landlord's invoice
therefor. Landlord will use reasonable care in preparing the cost estimates, but
they are estimates only and do not limit Tenant's obligation to pay for the
actual Additional Cost of the Tenant Improvements, whether or not it exceeds the
estimated amounts.
Exhibit B, Page 2
<PAGE> 41
1.4. Changes. If Tenant requests any change, addition or alteration in
or to any Final Construction Documents ("CHANGES") Landlord shall cause the
Space Planner to prepare additional Plans implementing such Change. Tenant shall
pay the cost of preparing additional Plans within twenty (20) days after receipt
of Landlord's invoice therefor. As soon as practicable after the completion of
such additional Construction Documents, Landlord shall notify Tenant of the
estimated cost of the Changes. Within three (3) Business Days after receipt of
such cost estimate, Tenant shall notify Landlord in writing whether Tenant
approves the Change. If Tenant approves the Change, Landlord shall proceed with
the Change and Tenant shall be liable for any Additional Cost resulting from the
Change. If Tenant fails to approve the Change within such three (3) Business Day
period, construction of the Tenant Improvements shall proceed as provided in
accordance with the original Construction Documents.
1.5. Delays. Tenant shall be responsible for, and shall pay to
Landlord, any and all costs and expenses incurred by Landlord in connection with
any delay in the commencement or completion of any Tenant Improvements and any
increase in the cost of Tenant Improvements caused by (i) Tenant's failure to
submit information to the Space Planner or approve any Space Plan, Construction
Documents or cost estimates within the time periods required herein, (ii) any
delays in obtaining any items or materials constituting part of the Tenant
Improvements requested by Tenant, (iii) any Changes, or (iv) any other delay
requested or caused by Tenant (collectively, "TENANT DELAYS").
2. Delivery of Premises. [Intentionally Deleted].
3. Access to Premises. Landlord shall allow Tenant and Tenant's
Representatives to enter the Premises prior to the Commencement Date to permit
Tenant to make the Premises ready for its use and occupancy; provided, however,
that prior to such entry of the Premises, Tenant shall provide evidence
reasonably satisfactory to Landlord that Tenant's insurance, as described in
Section 11.1 - Tenant's Insurance of the Lease, shall be in effect as of the
time of such entry. Such permission may be reasonably revoked at any time upon
twenty-four (24) hours' notice, and Tenant and its Representatives shall not
interfere with Landlord or Landlord's contractor in completing Landlord's work
at the Building or the Tenant Improvements.
Tenant agrees that Landlord shall not be liable in any way for any
injury, loss or damage which may occur to any of Tenant's property placed upon
or installed in the Premises prior to the Commencement Date, the same being at
Tenant's sole risk, and Tenant shall be liable for all injury, loss or damage
to persons or property arising as a result of such entry into the Premises by
Tenant or its Representatives.
4. Ownership of Tenant Improvements. All Tenant Improvements, whether
installed by Landlord or Tenant, shall become a part of the Premises, shall be
the property of Landlord and, subject to the provisions of the Lease, shall be
surrendered by Tenant with the Premises, without any compensation to Tenant, at
the expiration or termination of the Lease in accordance with the provisions of
the Lease.
Exhibit B, Page 3
<PAGE> 42
EXHIBIT B, PAGE 4
INITIALS:
Landlord Sig.
-----------
Tenant Sig.
-----------
<PAGE> 43
EXHIBIT C
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF MARCH 10, 1998
BETWEEN
SEAPORT CENTRE ASSOCIATES, LLC, AS LANDLORD,
AND
UNWIRED PLANET, INC., AS TENANT ("LEASE")
BUILDING RULES
The following Building Rules are additional provisions of the foregoing
Lease to which they are attached. The capitalized terms used herein have the
same meanings as these terms are given in the Lease.
1. Use of Common Areas. Tenant will not obstruct the sidewalks, halls,
passages, exits, entrances, elevators or stairways of the Building ("COMMON
AREAS"), and Tenant will not use the Common Areas for any purpose other than
ingress and egress to and from the Premises. The Common Areas, except for the
sidewalks, are not open to the general public and Landlord reserves the right to
control and prevent access to the Common Areas of any person whose presence, in
Landlord's opinion, would be prejudicial to the safety, reputation and interests
of the Building and its tenants.
2. No Access to Roof. Tenant has no right of access to the roof of the
Building and will not install, repair or replace any antenna, aerial, aerial
wires, fan, air-conditioner or other device on the roof of the Building,
without the prior written consent of Landlord. Any such device installed
without such written consent is subject to removal at Tenant's expense without
notice at any time. In any event Tenant will be liable for any damages or
repairs incurred or required as a result of its installation, use, repair,
maintenance or removal of such devices on the roof and agrees to indemnify and
hold harmless Landlord from any liability, loss, damage, cost or expense,
including reasonable attorneys' fees, arising from any activities of Tenant or
of Tenant's Representatives on the roof of the Building. Notwithstanding the
foregoing, Landlord hereby consents to entry by Tenant's HVAC contractor onto
the roof for service of the HVAC units, subject to reasonable rules and
regulations of Landlord, and provided that such contractor shall be
responsible for any damage such contractor causes to the roof.
3. Signage. Tenant shall have the right, at Tenant's sole cost and
expense, to install a sign upon a monument to be located in front of the
Building, subject to Landlord's reasonable approval, and subject to ordinances,
regulations and any approval from the City of Redwood City. Landlord shall, at
Landlord's sole cost and expense, construct a monument, subject to approval of
the City of Redwood City. No sign, placard, picture, name, advertisement or
notice visible from the exterior of the Premises will be inscribed, painted,
affixed or otherwise displayed by Tenant on or in any part of the Building
without the prior written consent of
Exhibit C, Page 1
<PAGE> 44
Landlord. Landlord reserves the right to adopt and furnish Tenant with general
guidelines relating to signs in or on the Building. All approved signage will be
inscribed, painted or affixed at Tenant's expense by a person approved by
Landlord, which approval will not be unreasonably withheld.
4. Prohibited Uses. The Premises will not be used for manufacturing, for
the storage of merchandise held for sale to the general public, for lodging or
for the sale of goods to the general public. Tenant will not permit any food
preparation on the Premises except that Tenant may use Underwriters' Laboratory
approved equipment for brewing coffee, tea, hot chocolate and similar beverages
so long as such use is in accordance with all applicable federal, state and city
laws, codes, ordinances, rules and regulations.
5. Janitorial Services. Tenant will be responsible, at Tenant's expense,
to keep the Premises clean, including daily janitorial service. Tenant shall
enter into an agreement with a janitorial service to clean the Premises during
week-days, which contract and janitorial company shall be subject to Landlord's
prior written consent, which consent shall not be unreasonably withheld or
delayed.
6. Keys and Locks. Landlord will furnish Tenant, free of charge, two keys
to each door or lock in the Premises. Landlord may make a reasonable charge for
any additional or replacement keys. Tenant will not duplicate any keys, alter
any locks or install any new or additional lock or bolt on any door of its
Premises or on any other part of the Building without the prior written consent
of Landlord, which consent shall not be unreasonably withheld or delayed and, in
any event, Tenant will provide Landlord with a key for any such lock (except for
secure areas designated reasonably by Tenant). On the termination of the Lease,
Tenant will deliver to Landlord all keys to any locks or doors in the Building
which have been obtained by Tenant.
7. Freight. Tenant shall not transport freight in loads exceeding the
weight limitations of any elevator in the Building. Landlord reserves the right
to prescribe the weight, size and position of all equipment, materials,
furniture or other property brought into the Building, and no property will be
received in the Building except along such routes as may be designated by
Landlord. Landlord reserves the right to require that heavy objects will stand
on wood strips of such length and thickness as is necessary to properly
distribute the weight. Landlord will not be responsible for loss of or damage to
any such property from any cause, and Tenant will be liable for all damage or
injuries caused by moving or maintaining such property.
8. Nuisances and Dangerous Substances. Tenant will not conduct itself or
permit Tenant's Representatives or Visitors to conduct themselves, in the
Premises or anywhere on or in the Project in a manner which is offensive or
unduly annoying to any other Tenant or Landlord's property managers. Tenant will
not install or operate any phonograph, radio receiver, musical instrument, or
television or other similar device in any part of the Common Areas and shall not
operate any such device installed in the Premises in such manner as to disturb
or unreasonably annoy other tenants of the Project. Tenant will not use or keep
in the Premises or the Property any kerosene, gasoline, or other combustible
fluid or material other than limited quantities thereof
Exhibit C, Page 2
<PAGE> 45
reasonably necessary for the maintenance of office equipment, or, without
Landlord's prior written approval, use any method of heating or air conditioning
other than that supplied by Landlord. Tenant will not use or keep any foul or
noxious gas or substance in the Premises or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to the Landlord or other
occupants of the Project by reason of noise, odors or vibrations, or interfere
in any way with other tenants or those having business therein. Tenant will not
bring or keep any animals in or about the Premises or the Project, except for
animals trained to assist, and assisting Tenant's disabled Visitors.
9. Building Name and Address. Without Landlord's prior written consent,
Tenant will not use the name of the Building in connection with or in promoting
or advertising Tenant's business except as Tenant's address.
10. Building Directory. A directory for the Building will be provided for
the display of the name and location of tenants. Landlord reserves the right to
approve any additional names Tenant desires to place in the directory and, if so
approved, Landlord may assess a reasonable charge for adding such additional
names.
11. Window Coverings. No curtains, draperies, blinds, shutters, shades,
awnings, screens or other coverings, window ventilators, hangings, decorations
or similar equipment shall be attached to, hung or placed in, or used in or with
any window of the Building without the prior written consent of Landlord, and
Landlord shall have the right to control all lighting within the Premises that
may be visible from the exterior of the Building.
12. Floor Coverings. Tenant will not lay or otherwise affix linoleum, tile,
carpet or any other floor covering to the floor of the Premises in any manner
except as approved in writing by Landlord. Tenant will be liable for the cost of
repair of any damage resulting from the violation of this rule or the removal
of any floor covering by Tenant or its contractors, employees or invitees.
13. Wiring and Cabling Installations. Landlord will direct Tenant's
electricians and other vendors as to where and how data, telephone, and
electrical wires and cables are to be installed. No boring or cutting for wires
or cables will be allowed without the prior written consent of Landlord. The
location of burglar alarms, smoke detectors, telephones, call boxes and other
office equipment affixed to the Premises shall be subject to the written
approval of Landlord, which approval shall not be unreasonably withheld or
delayed.
14. Office Closing Procedure. Tenant will see that the doors of the
Premises are closed and locked and that all water faucets, water apparatus and
utilities are shut off before Tenant or its employees leave the Premises, so as
to prevent waste or damage. Tenant will be liable for all damages or injuries
sustained by other tenants or occupants of the Building or Landlord resulting
from Tenant's carelessness in this regard or violation of this rule. Tenant will
keep the doors to the Building corridors closed at all times except for ingress
and egress.
Exhibit C, Page 3
<PAGE> 46
15. Plumbing Facilities. The toilet rooms, toilets, urinals, wash bowls and
other apparatus shall not be used for any purpose other than that for which they
were constructed and no foreign substance of any kind whatsoever shall be
disposed of therein. Tenant will be liable for any breakage, stoppage or damage
resulting from the violation of this rule by Tenant, its employees or invitees.
16. Use of Hand Trucks. Tenant will not use or permit to be used in the
Premises or in the Common Areas any hand trucks, carts or dollies except those
equipped with rubber tires and side guards or such other equipment as Landlord
may approve.
17. Refuse. Tenant shall store all Tenant's trash and garbage within the
Premises or in other facilities designated By Landlord for such purpose. Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of removing and disposing of
trash and garbage in the city in which the Building is located without being in
violation of any law or ordinance governing such disposal. All trash and garbage
removal shall be made in accordance with directions issued from time to time by
Landlord, only through such Common Areas provided for such purposes and at such
times as Landlord may designate. Tenant shall be responsible for removing trash
from the Premises. Tenant shall comply with the requirements of any recycling
program adopted by Landlord for the Building.
18. Soliciting. Canvassing, peddling, soliciting and distribution of
handbills or any other written materials in the Building are prohibited, and
Tenant will cooperate to prevent the same.
19. Parking. Tenant will use, and cause Tenant's Representatives and
Visitors to use, any parking spaces to which Tenant is entitled under the Lease
in a manner consistent with Landlord's directional signs and markings in the
Parking Facility. Specifically, but without limitation, Tenant will not park, or
permit Tenant's Representatives or Visitors to park, in a manner that impedes
access to and from the Building or the Parking Facility or that violates space
reservations for handicapped drivers registered as such with the California
Department of Motor Vehicles. Landlord may use such reasonable means as may be
necessary to enforce the directional signs and markings in the Parking Facility,
including but not limited to towing services, and Landlord will not be liable
for any damage to vehicles towed as a result of non-compliance with such parking
regulations.
20. Fire, Security and Safety Regulations. Tenant will comply with all
safety, security, fire protection and evacuation measures and procedures
established by Landlord or any governmental agency.
21. Responsibility for Theft. Tenant assumes any and all responsibility for
protecting the Premises from theft, robbery and pilferage, which includes
keeping doors locked and other means of entry to the Premises closed.
Exhibit C, Page 4
<PAGE> 47
22. Sales and Auctions. Tenant will not conduct or permit to be conducted
any sale by auction in, upon or from the Premises or elsewhere in the Property,
whether said auction be voluntary, involuntary, pursuant to any assignment for
the payment of creditors or pursuant to any bankruptcy or other insolvency
proceeding.
23. Waiver of Rules. Landlord may waive any one or more of these Building
Rules for the benefit of any particular tenant or tenants, but no such waiver by
Landlord will be construed as a waiver of such Building Rules in favor of any
other tenant or tenants nor prevent Landlord from thereafter enforcing these
Building Rules against any or all of the tenants of the Building.
24. Effect on Lease. These Building Rules are in addition to, and shall not
be construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of the Lease. Violation of these Building
Rules constitutes a failure to fully perform the provisions of the Lease, as
referred to in Section 15.1 -- "Events of Default".
25. Non-Discriminatory Enforcement. Subject to the provisions of the Lease
(and the provisions of other leases with respect to other tenants), Landlord
shall use reasonable efforts to enforce these Building Rules in a
non-discriminatory manner, but in no event shall Landlord have any liability for
any failure or refusal to do so (and Tenant's sole and exclusive remedy for any
such failure or refusal shall be injunctive relief preventing Landlord from
enforcing any of the Building Rules against Tenant in a manner that
discriminates against Tenant).
26. Additional and Amended Rules. Landlord reserves the right to rescind or
amend these Building Rules and/or adopt any other and reasonable rules and
regulations as in its judgment may from time to time be needed for the safety,
care and cleanliness of the Building and for the preservation of good order
therein.
INITIALS:
Landlord Signature
----------------------
Tenant Signature
----------------------
Exhibit C, Page 5
<PAGE> 48
EXHIBIT D
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF MARCH 10, 1998
BETWEEN
SEAPORT CENTRE ASSOCIATES, LLC, AS LANDLORD,
AND
UNWIRED PLANET, INC., AS TENANT ("LEASE")
ADDITIONAL PROVISIONS RIDER
---------------------------
35. LETTER OF CREDIT.
(a) Tenant shall deliver to Landlord a clean, unconditional, irrevocable,
transferable letter of credit (the "Letter of Credit") in form, and issued by a
financial institution ("Issuer") satisfactory to Landlord. The Letter of Credit
shall be provided to Landlord as set forth in Section (b) below, and shall be in
the amount of $800,000.00, name Landlord as the beneficiary thereunder, and
provide that draws thereunder will be honored upon receipt by Issuer of a
written statement signed by Landlord stating that Landlord is entitled to draw
down on the Letter of Credit. Landlord shall be entitled to draw the entire
amount under the Letter of Credit if either (i) Tenant does not deliver to
Landlord a replacement letter of credit from Issuer or another financial
institution satisfactory to Landlord in the amount and form of the initial
Letter of Credit no later than one month before the expiration date of the then
existing Letter of Credit, or (ii) upon a proposed sale or lease of the Building
Tenant does not deliver to any the new landlord a replacement Letter of Credit
pursuant to the provisions of (d) below. If Tenant is in default under the Lease
beyond any applicable notice and cure period, Landlord shall be entitled to draw
under the Letter of Credit only an amount equal to the amount of any monetary
default as defined below (or, only if partial draws are not permitted, the
entire amount of the Letter of Credit). As used herein, "monetary default" means
any delinquent installment of Base Rent, Additional Rent or Rent under this
Lease (as and when Tenant fails to pay the same beyond any applicable notice and
cure period contained in this Lease), plus any damages to which Landlord is
entitled under the Lease. Landlord agrees that the Letter of Credit may also
provide for partial draws by Landlord. To the extent not applied by Landlord
pursuant to the provisions of the Lease any amount drawn under the Letter of
Credit shall be held or applied by Landlord as a Security Deposit, subject to
the terms of Section 4 of this Lease.
(b) The Letter of Credit shall be issued and delivered to Landlord within
fifteen (15) days after complete execution of this Lease by Landlord and Tenant.
If Tenant Fails to deliver to Landlord the Letter of Credit when required, such
failure shall constitute an Event of Default under the Lease.
Exhibit D, Page 1
<PAGE> 49
(c) Provided that (x) there has been no Event of Default under the Lease
within the preceding twelve (12) months, and (y) on the respective following
dates Tenant is not in default under the Lease beyond any applicable notice and
cure period, the amount remaining available to be drawn under the Letter of
Credit shall be reduced in twelve month increments, beginning twelve months
after the Commencement Date, so the amount available to be drawn under the
Letter of Credit shall be as follows:
<TABLE>
<CAPTION>
Months (counting from the Commencement Date Amount Available
through applicable monthly anniversary of Under the Letter of Credit
Commencement Date)
- ------------------------------------------- --------------------------
<S> <C>
01-12 $800,000.00
13-24 685,714.29
25-36 571,428.58
37-48 457,142.87
49-60 342,857.16
61-72 228,571.45
73-end of Term 114,285.74
</TABLE>
In addition:
(A) Provided there has been no Event of Default under the Lease during the
eighteen (18) months preceding such request, then if either (i) an initial
public offering of Tenant's stock is made on any public stock exchange and
Tenant's publicly traded common stock has a market value of at least $200
million (as averaged over the first five [5] days of public trading of Tenant's
common stock), or (ii)(1) Tenant is acquired by an entity traded on any public
stock exchange, (2) such acquiring entity has a market value of at least $200
million on the date of such acquisition, and (3) such acquiring entity becomes
liable under this Lease, then the amount available under the Letter of Credit
for the applicable period contained above shall be reduced to the greater of
one-half (1/2) of the applicable amount contained above, or $114,285.74, and
(B) Provided there has been no Event of Default under the Lease during the
eighteen (18) months prior to the last day of the sixtieth (60th) full calendar
month following the Commencement Date, then if prior to the end of the sixtieth
(60th) full calendar month following the Commencement Date either (i) an initial
public offering of Tenant's stock is made on any public stock exchange and
Tenant's publicly traded common stock has a market value of at least $200
million, as averaged over the last five [5] days of public trading of Tenant's
common stock immediately prior to the last day of the sixtieth (60th) full
calendar month following the Commencement Date, or (ii)(1) Tenant is acquired by
an entity traded on any public stock exchange, (2) such acquiring entity has a
market value of at least $200 million on the last day of the sixtieth (60th)
full calendar month following the Commencement Date, and (3) such acquiring
entity becomes liable under this Lease, then effective on the first day after
the last day of the sixtieth (60th) full calendar month following the
Commencement Date, the amount available under the Letter of Credit shall be
reduced to $104,027.00
(d) If Landlord shall be holding the Letter of Credit as security, then,
in the event of a proposed sale or lease of the Building by Landlord, Tenant
will, upon ten (10) Business Days'
Exhibit D, Page 2
<PAGE> 50
notice, at its sole cost and expense, cause the issuing bank to consent to the
assignment or to issue a substitute letter of credit on identical terms except
for the stated beneficiary, from the same issuing bank or another bank
acceptable to Landlord in Landlord's sole discretion, naming the new landlord
as the beneficiary thereof upon delivery by Landlord of the then outstanding
Letter of Credit.
36. PARKING.
(a) Tenant's Parking Rights. Landlord shall provide Tenant, on an
unassigned and non-exclusive basis, for use by Tenant and Tenant's
Representatives and Visitors, at the users' sole risk, one (1) parking space in
the Parking Facility, for each three hundred thirty-three (333) rentable square
feet of space leased to Tenant. The parking spaces to be made available to
Tenant hereunder may contain a reasonable mix of spaces for compact cars and up
to ten percent (10%) of the unassigned spaces may also be designated by
Landlord as Building visitors' parking.
(b) Availability of Parking Spaces. Landlord shall take reasonable actions
to ensure the availability of the parking spaces leased by Tenant, but
Landlord does not guarantee the availability of those spaces at all times
against the actions of other tenants of the Building and users of the Parking
Facility. Access to the Parking Facility may, at Landlord's option, be
regulated by card, pass, bumper sticker, decal or other appropriate
identification issued by Landlord. Landlord retains the right to revoke the
parking privileges of any user of the Parking Facility who violates the rules
and regulations governing use of the Parking Facility (and Tenant shall be
responsible for causing any employee of Tenant or other person using parking
spaces allocated to Tenant to comply with all parking rules and regulations).
(c) Assignment and Subletting. Notwithstanding any other provision of the
Lease to the contrary, Tenant shall not assign its rights to the parking spaces
or any interest therein, or sublease or otherwise allow the use of all or any
part of the parking spaces to or by any other person, except either (i) to a
Permitted Transferee, or (ii) with Landlord's prior written consent, which may
be granted or withheld by Landlord in its sole discretion. In the event of any
separate assignment or sublease of parking space rights that is approved by
Landlord, Landlord shall be entitled to receive, as additional Rent hereunder,
one hundred percent (100%) of any profit received by Tenant in connection with
such assignment or sublease of parking spaces.
(d) Condemnation Damage or Destruction. In the event the Parking Facility
is the subject of a Condemnation, or is damaged or destroyed, and this Lease is
not terminated, and if in such event the available number of parking spaces in
the Parking Facility is permanently reduce, then Tenant's rights to use parking
spaces hereunder may, at the election of Landlord, thereafter be reduced
in proportion to the reduction of the total number of parking spaces in the
Parking Facility. In such event, Landlord reserves the right to reduce the
number of parking spaces to which Tenant is entitled or to relocate some or all
of the parking spaces to which Tenant is entitled to other areas in the Parking
Facility.
Exhibit D, Page 3
<PAGE> 51
37. EXTENSION OPTION
Provided that Unwired Planet has not assigned this Lease or sublet any or
all of the Premises other than to an Affiliate (it being intended that all
rights pursuant to this provision are and shall be personal to the original
Tenant under this Lease and its Affiliates and shall not be transferable or
exercisable for the benefit of any Transferee), and provided Tenant is not in
default under this Lease beyond any applicable notice and cure periods at the
time of exercise or at any time thereafter until the beginning of any extension
of the Term, Tenant shall have the option (the "EXTENSION OPTION") to extend
the Term for one additional consecutive period of five (5)years (the "EXTENSION
PERIOD"), by giving written notice to Landlord of the exercise of any such
Extension Option at least twelve (12) months, but not more than eighteen (18)
months, prior to the expiration of the initial Term. The exercise of any
Extension Option by Tenant shall be irrevocable and shall cover the entire
Premises leased by Tenant pursuant to this Lease. Upon such exercise, the term
of the Lease shall automatically be extended for the applicable Extension
Period without the execution of any further instrument by the parties; provided
that Landlord and Tenant shall, if requested by either party, execute and
acknowledge an instrument confirming the exercise of the Extension Option. Any
Extension Option shall terminate if not exercised precisely in the manner
provided herein. Any extension of the Term shall be upon all the terms and
conditions set forth in this Lease and all Exhibits thereto, except that; (i)
Tenant shall have no further option to extend the Term of the Lease, other than
as specifically set forth herein; (ii) Landlord shall not be obligated to
contribute funds toward the cost of any remodeling, renovation, alteration or
improvement work in the Premises; and (iii) Base Rent for any such Extension
Period shall be the then Fair Market Base Rental (as defined below) for the
Premises for the space and term involved, which shall be determined as set
forth below.
(a) "FAIR MARKET BASE RENTAL" shall mean the "fair market" Base Rent at
the time or times in question for the applicable space, based on the prevailing
rentals then being charged to tenants in the Project and tenants in other
similar type buildings in the general vicinity of the Project of comparable
size, location, quality and age as the Building for leases with terms equal to
the Extension Period, taking into account the creditworthiness and financial
strength of the tenant, the financial guaranties provided by the tenant (if
any), the value of market concessions (including the value of construction,
renovation, moving and other allowances or rent credits), the desirability,
location in the building, size and quality of the space, tenant finish
allowance and/or tenant improvements, included services, operating expenses and
tax and expense stops or other escalation clauses, and brokerage commissions,
for the space in the Building for which Fair Market Base Rental is being
determined and for comparable space in the buildings which are being used for
comparison. Fair Market Base Rental shall also reflect the then prevailing
rental structure for comparable buildings in the general vicinity of the
Property, so that if, for example, at the time Fair Market Base Rental is being
determined the prevailing rental structure for comparable space and for
comparable lease terms includes periodic rental adjustments or escalations,
Fair Market Base Rental shall reflect such rental structure.
(b) Landlord and Tenant shall endeavor to agree upon the Fair Market Base
Rental. If they are unable to so agree within thirty (30) days after receipt by
Landlord of
Exhibit D, Page 4
<PAGE> 52
Tenant's notice of exercise of the Extension Option, Landlord and Tenant shall
mutually select a licensed real estate broker who is active in the leasing of
space similar to the Building in the general vicinity of the Project. Landlord
shall submit Landlord's determination of Fair Market Base Rental and Tenant
shall submit Tenant's determination of Fair Market Base Rental to such broker,
at such time or times and in such manner as Landlord and Tenant shall agree (or
as directed by the broker if Landlord and Tenant do not promptly agree). The
broker shall select either Landlord's or Tenant's determination as the Fair
Market Base Rental, and such determination shall be binding on Landlord and
Tenant. If Tenant's determination is selected as the Fair Market Base Rental,
then Landlord shall bear all of the broker's costs and fees. If Landlord's
determination is selected as the Fair Market Base Rental, then Tenant shall
bear all of the broker's cost and fees.
(c) In the event the Fair Market Base Rental for any Extension
Period has not been determined at such time as Tenant is obligated to pay Base
Rent for such Extension Period, Tenant shall pay as Base Rent pending such
determination, the Base Rent in effect for such space immediately prior to the
Extension Period; provided, that upon the determination of the applicable Fair
Market Base Rental, any shortage of Base Rent paid, together with interest at
the rate specified in the Lease, shall be paid to Landlord by Tenant.
(d) In no event shall the Base Rent during any Extension Period be
less than the Base Rent in effect immediately prior to such Extension Period.
(e) The term of this Lease, whether consisting of the Initial Term
alone or the Initial Term as extended by any Extension Period (if any Extension
Option is exercised), is referred to in this Lease as the "Term."
38. RIGHT OF FIRST OFFER - BUILDING 14.
(a) Provided that Unwired Planet has not assigned this Lease or
sublet any or all of the Premises other than to an Affiliate (it being intended
that all rights pursuant to this provision are and shall be personal to the
original Tenant under this Lease and its Affiliates and shall not be
transferable or exercisable for the benefit of any Transferee), and provided
Tenant is not in default beyond any applicable notice and cure period under this
Lease at the time of the exercise of any such right or at any time thereafter
until delivery of possession of the space to Tenant, and subject to any and all
rights of other tenants in the Project with respect to such space (including
renewal and extension rights and rights of first offer, first negotiation, first
refusal or other expansion rights) existing as of the date of this Lease, Tenant
shall have a one-time right of first offer to lease Building 14 ("Building 14"),
containing approximately 40,897 rentable square feet, located at 900 Chesapeake,
in the Project.
(b) Such right of first offer (i) may only be exercised with
respect to vacant space or space which has been previously leased and as to
which an existing tenant of Building 14 has elected not to extend its lease or
re-lease such space and (ii) may only be exercised with respect to all of
Building 14 being offered by Landlord. If building 14 becomes available,
Landlord
Exhibit D, Page 5
<PAGE> 53
shall offer to lease the entire Building 14 to Tenant at the same rent and on
the same terms that Landlord intends to offer to other prospective tenants.
Tenant shall have ten (10) days following receipt of Landlord's offer with
respect to Building 14 within which to notify Landlord in writing of its
intention to lease Building 14, and such notice, if given by Tenant, shall
constitute an acceptance of Landlord's terms for the lease of such space. If
Tenant exercises such right of first offer, the space to be leased by Tenant
shall be leased on the same terms and conditions as are contained in this Lease
except for the economic and other terms specifically set forth in Landlord's
notice, and the parties shall execute an amendment to this Lease to include
Building 14 in the Premises and otherwise to provide for the leasing of Building
14 on such terms. If Tenant fails so to exercise Tenant's right of first offer
within such ten (10) day period, Landlord may thereafter lease Building 14 to
other prospective tenants.
(c) If Tenant does not lease Building 14 from Landlord when it is
first offered to Tenant by Landlord, then this right of first offer shall
terminate and Tenant shall have no further rights to lease any of Building 14.
39. RIGHT OF FIRST OFFER - BUILDING 19.
(a) Provided that Unwired Planet has not assigned this Lease or
sublet any or all of the Premises other than to an Affiliate (it being intended
that all rights pursuant to this provision are and shall be personal to the
original Tenant under this Lease and its Affiliates and shall not be
transferable or exercisable for the benefit of any Transferee), and provided
Tenant is not in default beyond any applicable notice and cure period under this
Lease at the time of the exercise of any such right or at any time thereafter
until delivery of possession of the space to Tenant, and subject to any and all
rights of other tenants in the Project with respect to such space (including
renewal and extension rights and rights of first offer, first negotiation, first
refusal or other expansion rights) existing as of the date of this Lease, Tenant
shall have a one-time right of first offer to lease Building 19 ("Building 19"),
containing approximately 25,250 rentable square feet, located at 700 Chesapeake,
in the Project.
(b) Such right of first offer (i) may only be exercised with respect
to vacant space or space which has been previously leased and as to which an
existing tenant of Building 19 has elected not to extend its lease or re-lease
such space and (ii) may only be exercised with respect to all of Building 19
being offered by Landlord. If Building 19 becomes available, Landlord shall
offer to lease the entire Building 19 to Tenant at the same rent and on the same
terms that Landlord intends to offer to other prospective tenants. Tenant shall
have ten (10) days following receipt of Landlord's offer with respect to
Building 19 within which to notify Landlord in writing of its intention to lease
building 19, and such notice, if given by Tenant, shall constitute an acceptance
of Landlord's terms for the lease of such space. If Tenant exercises such right
of first offer, the space to be leased by Tenant shall be leased on the same
terms and conditions as are contained in this Lease except for the economic and
other terms specifically set forth in Landlord's notice, and the parties shall
execute an amendment to this Lease to include Building 19 in the Premises and
otherwise to provide for the leasing of Building 19 on such terms. If Tenant
fails so to exercise Tenant's right of first offer within such ten (10) day
period, Landlord may thereafter lease Building 19 to other prospective tenants.
Exhibit D, Page 6
<PAGE> 54
(c) If Tenant does not lease Building 19 from Landlord when it is first
offered to Tenant by Landlord, then this right of first offer shall terminate
and Tenant shall have no further rights to lease any of Building 19.
40. LANDLORD'S IMPROVEMENTS.
Notwithstanding any provision in the Lease to the contrary, Landlord shall,
at Landlord's sole cost and expense, (a) repair the Parking Facility in the
vicinity of the Building, and (b) if required by applicable Law, (i) install two
(2) ramps to the Building, and (ii) bring in to compliance or, if necessary,
replace up to five (5) exterior doors at the Building. Landlord shall use
commercially reasonable efforts to promptly complete such work, although the
parties hereto agree that the repairs of the Parking Facility will probably not
be completed by the Commencement Date of this Lease. Throughout the Term of the
Lease Landlord shall maintain such Parking Facility, the costs of which
maintenance shall be included in Operating Costs in accordance with the
provisions of Section 3.2 of this Lease.
INITIAL:
Landlord Sig.
-----------
Tenant Sig.
-----------
Exhibit D, Page 7
<PAGE> 55
EXHIBIT A
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF MARCH 10, 1998
BETWEEN
SEAPORT CENTRE ASSOCIATES, LLC, AS LANDLORD,
AND
UNWIRED PLANET, INC., AS TENANT ("LEASE")
SEAPORT CENTRE III
800 CHESAPEAKE DR., REDWOOD CITY
TWO-STORY OFFICE / R&D BUILDING
[floorplan]
First Floor
[floorplan]
Second Floor
EXHIBIT B- PREMISES
<PAGE> 56
EXHIBIT C -- SUBLEASED PREMISES
[FLOORPLAN]
SUBTENANT SPACE: 14,035 SF
1st FLOOR RESTROOMS: 817 SF (1/2 ALLOCATED TO TENANT)
<PAGE> 57
SCHEDULE I
[floorplan]
SUBTENANT SPACE: 14,035 SF
1ST FLOOR RESTROOMS: 817 SF (1/2 ALLOCATED TO TENANT)
<PAGE> 58
SCHEDULE 2
LIST OF FURNITURE
(to be provided)
<PAGE> 1
Exhibit 10.9
UNWIRED PLANET, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made and
entered into by and between ____________(the "Employee") and Unwired Planet,
Inc., a Delaware corporation (the "Company"), effective as of_________,
________.
RECITALS
A. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control. The
Board of Directors of the Company (the "Board") recognizes that such
consideration can be a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes that it is in the best interests of the Company
and its shareholders to provide the Employee with an incentive to continue his
or her employment and to motivate the Employee to maximize the value of the
Company upon a Change of Control for the benefit of its shareholders.
C. The Board believes that it is imperative to provide the Employee with
certain benefits upon Employee's termination of employment following a Change of
Control that provide the Employee with enhanced financial security and incentive
and encouragement to the Employee to remain with the Company notwithstanding the
possibility of a Change of Control.
D. Certain capitalized terms used in the Agreement are defined in
Section 6 below.
The parties hereto agree as follows:
1. TERM OF AGREEMENT. This Agreement shall terminate upon the date that
all obligations of the parties hereto with respect to this Agreement have been
satisfied.
2. AT-WILL EMPLOYMENT. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control, the
Employee shall not be entitled to any benefits, damages, awards or compensation
other than as may otherwise be available in accordance with the Company's
established employee plans and practices or pursuant to other agreements with
the Company.
<PAGE> 2
3. SEVERANCE BENEFITS.
(a) TERMINATION FOLLOWING A CHANGE OF CONTROL. If the
Employee's employment terminates as a result of Involuntary Termination other
than for Cause at any time within 18 months following a Change of Control, then,
subject to Section 5, 100% of the unvested portion of any stock option or
restricted stock then held by the Employee shall automatically be accelerated in
full so as to become completely vested; provided, however, that if such
potential vesting acceleration would cause a contemplated Change of Control
transaction that was intended to be accounted for as a "pooling-of-interests"
transaction to become ineligible for such accounting treatment under generally
accepted accounting principles, as determined by the Company's independent
public accountants (the "Accountants") prior to the Change of Control,
Employee's stock options and restricted stock shall not have their vesting so
accelerated.
(b) VOLUNTARY RESIGNATION; TERMINATION FOR CAUSE. If the
Employee's employment terminates by reason of the Employee's voluntary
resignation (and is not an Involuntary Termination), or if the Employee is
terminated for Cause, then the Employee shall not be entitled to receive any
benefits except for those (if any) as may then be established under the
Company's then existing severance and benefits plans and practices or pursuant
to other agreements with the Company.
(c) DISABILITY; DEATH. If the Company terminates the Employee's
employment as a result of the Employee's Disability, or such Employee's
employment is terminated due to the death of the Employee, then the Employee
shall not be entitled to receive any benefits except for those (if any) as may
then be established under the Company's then existing severance and benefits
plans and practices or pursuant to other agreements with the Company.
(d) TERMINATION APART FROM CHANGE OF CONTROL. In the event the
Employee's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twelve-month period following a
Change of Control, then the Employee shall be entitled to receive severance and
any other benefits only as may then be established under the Company's existing
severance and benefits plans and practices or pursuant to other agreements with
the Company.
4. ATTORNEY FEES, COSTS AND EXPENSES. The Company shall promptly
reimburse Employee, on a monthly basis, for the reasonable attorney fees, costs
and expenses incurred by the Employee in connection with any action brought by
Employee to enforce his or her rights hereunder. In the event Employee is not
the prevailing party, determined without regard to whether or not the action
results in a final judgment, Employee shall repay such reimbursements.
5. LIMITATION ON PAYMENTS. In the event that the severance and other
benefits provided for in this Agreement or otherwise payable to the Employee (i)
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) but for this
Section 5, would be subject to the excise tax
-2-
<PAGE> 3
imposed by Section 4999 of the Code (or any corresponding provisions of state
income tax law), then the Employee's severance benefits under Section 3(a) shall
be either
(a) delivered in full, or
(b) delivered as to such lesser extent which would result in no
portion of such severance benefits being subject to excise tax under Section
4999 of the Code, whichever of the foregoing amounts, taking into account the
applicable federal, state and local income taxes and the excise tax imposed by
Section 4999, results in the receipt by the Employee on an after-tax-basis, of
the greater amount of severance benefits, notwithstanding that all or some
portion of such severance benefits may be taxable under Section 4999 of the
Code. Unless the Company and the Employee otherwise agree in writing, any
determination required under this Section 5 shall be made in writing by the
Accountants, whose determination shall be conclusive and binding upon the
Employee and the Company for all purposes. For purposes of making the
calculations required by this Section 5, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of Sections
280G and 4999 of the Code. The Company and the Employee shall furnish to the
Accountants such information and documents as the Accountants may reasonably
request in order to make a determination under this Section. The Company shall
bear all costs the Accountants may reasonably incur in connection with any
calculations contemplated by this Section 5. In the event that subsection (a)
above applies, then Employee shall be responsible for any excise taxes imposed
with respect to such severance and other benefits. In the event that subsection
(b) above applies, then each benefit provided hereunder shall be proportionately
reduced to the extent necessary to avoid imposition of such excise taxes.
6. DEFINITION OF TERMS. The following terms used in this Agreement shall
have the following meanings:
(a) CAUSE. "Cause" shall mean (i) gross negligence or willful
misconduct in the performance of the Employee's duties to the Company; (ii)
repeated unexplained or unjustified absence from the Company; (iii) a material
and willful violation of any federal or state law; (iv) refusal or failure to
act in accordance with any specific direction or order of the Company; (v)
commission of any act of fraud with respect to the Company; or (vi) conviction
of a felony or a crime involving moral turpitude causing material harm to the
standing and reputation of the Company, in each case as determined by the Board
of Directors of the Company.
(b) CHANGE OF CONTROL. "Change of Control" means the occurrence
of any of the following events:
(i) The shareholders of the Company approve an agreement
for the sale of all or substantially all of the assets of the Company; or
(ii) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation
-3-
<PAGE> 4
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least fifty percent (50%) of the total voting power represented by
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or
(iii) Completion of a tender or exchange offer or other
transaction or series of transactions resulting in less than a majority of the
outstanding voting shares of the surviving corporation being held, immediately
after such transaction or series of transactions, by the holders of the voting
shares of the Company outstanding immediately prior to such transaction or
series of transactions.
(c) DISABILITY. "Disability" shall mean that the Employee has
been unable to perform his or her Company duties as the result of his or her
incapacity due to physical or mental illness, and such inability, at least 26
weeks after its commencement, is determined to be total and permanent by a
physician selected by the Employee or the Employee's legal representative and
acceptable to the Company or its insurers (such Agreement as to acceptability
not to be unreasonably withheld). Termination resulting from Disability may only
be effected after at least 30 days' written notice by the Company of its
intention to terminate the Employee's employment. In the event that the Employee
resumes the performance of substantially all of his or her duties hereunder
before the termination of his or her employment becomes effective, the notice of
intent to terminate shall automatically be deemed to have been revoked.
(d) INVOLUNTARY TERMINATION. "Involuntary Termination" shall mean
(i) without the Employee's express written consent, the significant reduction of
the Employee's duties, authority or responsibilities, relative to the Employee's
duties, authority or responsibilities as in effect immediately prior to such
reduction, or the assignment to Employee of such reduced duties, authority or
responsibilities; (ii) without the Employee's express written consent, a
substantial reduction, without good business reasons, of the facilities and
prerequisites (including office space and location) available to the Employee
immediately prior to such reduction; (iii) a reduction by the Company in the
base salary of the Employee as in effect immediately prior to such reduction;
(iv) a material reduction by the Company in the kind or level of employee
benefits, including bonuses, to which the Employee was entitled immediately
prior to such reduction with the result that the Employee's overall benefits
package is significantly reduced; (v) the relocation of the Employee to a
facility or a location more than thirty (30) miles from the Employee's then
present location, without the Employee's express written consent; (vi) any
purported termination of the Employee by the Company which is not effected for
Disability or for Cause, or any purported termination for which the grounds
relied upon are not valid; (vii) the failure of the Company to obtain the
assumption of this Agreement by any successors contemplated in Section 7(a)
below; or (viii) any act or set of facts or circumstances which would, under
California case law or statute, constitute a constructive termination of the
Employee. For purposes of clause (i) of the immediately preceding sentence, (x)
the Employee's responsibilities shall be deemed to be significantly reduced if
the Employee ceases to report to the Chief Executive Officer of the Company as
of the time of the Change of Control, and (y) the Employee shall not be deemed
to have a significant reduction of duties,
-4-
<PAGE> 5
authority or responsibilities or to be assigned reduced duties, authority or
responsibilities if, following a Change of Control, the Employee continues in
the position of [Title to be filled in] of a business unit, division, subsidiary
or corporation and continues to report directly to the Chief Executive Officer
of the Company at the time of the Change of Control.
(e) TERMINATION DATE. "Termination Date" shall mean (i) if this
Agreement is terminated by the Company for Disability, thirty (30) days after
notice of termination is given to the Employee (provided that the Employee shall
not have returned to the performance of the Employee's duties on a full-time
basis during such thirty (30)-day period), (ii) if the Employee's employment is
terminated by the Company for any other reason, the date on which a notice of
termination is given, provided that if within thirty (30) days after the Company
gives the Employee notice of termination, the Employee notifies the Company that
a dispute exists concerning the termination or the benefits due pursuant to this
Agreement, then the Termination Date shall be the date on which such dispute is
finally determined, either by mutual written agreement of the parties, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected), or
(iii) if the Agreement is terminated by the Employee, the date on which the
Employee delivers the notice of termination to the Company.
7. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. Any successor to the Company (whether
direct or indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
7(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) EMPLOYEE'S SUCCESSORS. The terms of this Agreement and all
rights of the Employee hereunder shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
8. NOTICE.
(a) GENERAL. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or five (5) days after being mailed by U.S. registered
or certified mail, return receipt requested and postage prepaid. In the case of
the Employee, mailed notices shall be addressed to him or her at the home
address which he or she most recently communicated to the Company in writing. In
the case of the Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its
Secretary.
-5-
<PAGE> 6
(b) NOTICE OF TERMINATION. Any termination by the Company for
Cause or by the Employee as a result of a voluntary resignation and any
Involuntary Termination shall be communicated by a notice of termination to the
other party hereto given in accordance with Section 8(a) of this Agreement. Such
notice shall indicate the specific termination provision in this Agreement
relied upon, shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination under the provision so indicated, and
shall specify the termination date (which shall be not more than 30 days after
the giving of such notice). The failure by the Employee to include in the notice
any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his or her rights
hereunder.
9. MISCELLANEOUS PROVISIONS.
(a) NO DUTY TO MITIGATE. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Employee may receive from any
other source.
(b) WAIVER. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Employee and by an authorized officer of the
Company (other than the Employee). No waiver by either party of any breach of,
or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the
same condition or provision at another time.
(c) WHOLE AGREEMENT. This Agreement represents the entire
agreement between the Employee and the Company with respect to the matters set
forth herein. No agreements, representations or understandings (whether oral or
written and whether express or implied) which are not expressly set forth in
this Agreement have been made or entered into by either party with respect to
the subject matter hereof.
(d) CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California as applied to agreements entered into and performed within California
solely by residents of that state.
(e) SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(f) WITHHOLDING. All payments made pursuant to this Agreement
will be subject to withholding of applicable income and employment taxes, if
applicable.
(g) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
-6-
<PAGE> 7
IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Company by its duly authorized officer, as of the
date set forth above.
<TABLE>
<S> <C>
COMPANY: UNWIRED PLANET, INC.
By:
--------------------------------------
Title:
-----------------------------------
EMPLOYEE: Signature:
-------------------------------
</TABLE>
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<PAGE> 1
EXHIBIT 10.10
RELOCATION AGREEMENT
This RELOCATION AGREEMENT (this "Agreement") is made and entered into as
of December 23, 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 last 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.
-1-
<PAGE> 2
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 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 for 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 gives 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.
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<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.
UNWIRED PLANET, INC.
By: /s/ Rick Smith
------------------------------------------
Title: CFO
Address: 390 Bridge Parkway
Redwood Shores, CA 94065
/s/ Charles Parrish
- ------------------------------------------
Charles Parrish
Address: 390 Bridge Parkway
Redwood Shores, CA 94065
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<PAGE> 4
EXHIBIT A
MOVING AND OTHER RELOCATION EXPENSES
A. Moving Expenses
The following expenses are eligible for reimbursement/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. 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.
-1-
<PAGE> 1
EXHIBIT 10.11
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933. AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
UNWIRED PLANET, INC.
Dated as of May 29, 1997 (the "Effective Date")
WHEREAS, Unwired Planet, Inc., a Delaware corporation (the "Company") has
entered into a Master Lease Agreement dated as of May 29, 1997, Equipment
Schedules No. VL-1 dated as of May 29, 1997, and related Summary Equipment
Schedules (collectively, the "Leases") with Comdisco, Inc., a Delaware
corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Series C Preferred Stock:
NOW, THEREFORE, in consideration of the Warrantholders executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT TO THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder
is entitled, upon the terms and subject to the conditions hereinafter set forth,
to subscribe to and purchase, from the Company, 16,530 fully paid and
non-assessable shares of the Company's Series C Preferred Stock ("Preferred
Stock") at a purchase price to 2.5407 per share (the "Exercise Price"). The
number and purchase price of such shares to adjustment as provided in Section 8
hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period of (i) ten
(10) years or (ii) five (5) years from the effective date of the Company's
initial public offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are
exercisable by the Warrantholder, in whole or in part, at any time, or from time
to time, prior to the expiration of the term set forth in Section 2 above, by
tendering to the Company at its principal office a notice of exercise in the
form attached hereto as Exhibit I (the "Notice of Exercise"), duly completed and
executed. Promptly upon receipt of the Notice of Exercise and the payment of
the purchase price in accordance with the terms set forth below, and in no event
later than twenty-one (21) days thereafter, the Company shall issue to the
Warrantholder a certificate for the number of shares of Preferred Stock
purchased and shall execute the acknowledgment of exercise in the form attached
hereto as Exhibit II (the "Acknowledgment of Exercise") indicating the number of
shares which remain subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either
(i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X=Y(A-B)
-----
A
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<PAGE> 2
Where: X = the number of shares of Preferred Stock to be issued
to the Warrantholder.
Where: Y = the number of shares of Preferred Stock requested
to be exercised under this Warrant Agreement.
A = the fair market value of one (1) share of
Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's
Registration Statement relating to such public offering has been
declared effective by the SEC, then the fair market value per share
shall be the product of (x) the initial "Price to Public" specified in
the final prospectus with respect to the offering and (y) the number of
shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise:
(ii) if this Warrant is exercised after, and not in
connection with the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair
market value shall be deemed to be the product of (x) the
average of the closing prices over a twenty-one (21) day period
ending three days before the day the current fair market value
of the securities is being determined and (y) the number of
shares of Common Stock into which each share of Preferred Stock
is convertible at the time of such exercise; or
(b) if actively traded over-the-counter, the fair
market value shall be deemed to be the product of (x) the
average of the closing bid and asked prices quoted on the NASDAQ
system (or similar system) over the twenty-one (21) day period
ending three days before the day the current fair market value
of the securities is being determined and (y) the number of
shares of Common Stock into which each share of Preferred Stock
is convertible at the time of such exercise:
(iii) if at any time the Common Stock is not listed on any
securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the current fair market value of Preferred
Stock shall be the product of (x) the highest price per share which the
Company could obtain from a willing buyer (not a current employee or
director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by its
Board of Directors and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such
exercise, unless the Company is not the surviving party, in which case
the fair market value of Preferred Stock shall be deemed to be the
value received by the holders of the Company's Preferred Stock on a
common equivalent basis pursuant to such merger or acquisition.
Upon partial exercise by either cash or Net issuance, the Company
shall promptly issue an amended Warrant Agreement representing the remaining
number of shares purchasable hereunder. All other items and conditions of such
amended Warrant Agreement shall be identical to those contained herein,
including, but not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of
this Warrant Agreement, the Company will at all times have authorized and
reserved a sufficient number of shares of its Preferred Stock to provide for
the exercise of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock
required to be reserved hereunder require registration with or approval of any
governmental authority under any Federal or State law (other than any
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<PAGE> 3
registration under the Securities Act of 1933, as amended ("1933 Act"), as then
in effect, or any similar Federal Statute then enforced, or any state
securities law, required by reason of any transfer involved in such
conversion), or listing on any domestic securities exchange, before such shares
may be issued upon conversion, the Company will, at its expense and as
expeditiously as possible, use its best efforts to cause shares to be duly
registered, listed or approved for listing on such domestic securities
exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of the Warrant, but in lieu of such fractional
shares the Company shall make a cash payment therefor upon the basis of the
Exercise Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of
the registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred
Stock purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a
capital reorganization of the shares of the Company's stock (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), or a merger or consolidation of the Company with or into
another corporation whether or not the Company is the surviving corporation, or
the sale of all or substantially all of the Company's properties and assets to
any other person (hereinafter referred to as a "Merger Event"), then as a part
of such Merger Event, lawful provision shall be made so that the Warrantholder
shall thereafter be entitled to receive, upon exercise of the Warrant, the
number of shares of preferred stock or other securities of the successor
corporation resulting from such Merger Event, equivalent in value to that which
would have been issuable if Warrantholder had exercised this Warrant
immediately prior to the Merger Event. In any such case, appropriate adjustment
(as determined in good faith by the Company's Board of Directors) shall be made
in the application of the provisions of this Warrant Agreement with respect to
rights and interest of the Warrantholder after the Merger Event to end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of
any other class or classes, this Warrant Agreement shall thereafter represent
the right to acquire such number and kind of securities as would have been
issuable as the result of such change with respect to the securities which were
subject to the purchase rights under this Warrant Agreement immediately prior
to such combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution
specifically provided for in the foregoing subsections (a) or (b)) of the
Company's stock, then the Exercise Price shall be adjusted, from and after the
record date of such dividend or distribution, to that price determined by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction (i) the numerator of which shall be the total number of all
shares of the Company's stock outstanding immediately prior to such dividend or
distribution, and (ii) the denominator of which shall be the total number of
all shares of the Company's stock outstanding immediately after such dividend
or distribution. The Warrantholder shall thereafter be
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<PAGE> 4
entitled to purchase, at the Exercise Price resulting from such adjustment, the
number of shares of Preferred Stock (calculated to the nearest whole share)
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Preferred Stock issuable upon the exercise
hereof immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable to the
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit_(the"Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold, (b)
the number of shares to be issued, and (c) such other information as necessary
for the Warrantholder to determine if a dilutive event has occurred.
(f) Notice of Adjustments. If: (i) the Company shall declare any dividend
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event;
(iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:(A)
at least twenty (20) days' prior notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribution,
subscription rights (specifying the date on which the holders of Preferred Stock
shall be entitled thereto) or for determining rights to vote in respect of such
Merger Event, dissolution, liquidation or winding up; (B) in the case of any
Merger Event, dissolution, liquidation or winding up, at least twenty (20) days'
prior written notice of the date when the same shall take place (and specifying
the date on which the holders of Preferred Stock shall be entitled to exchange
their Preferred Stock for securities or other property deliverable upon such
Merger Event, dissolution, liquidation or winding up); and (C) in the case of a
public offering, the Company shall give the Warrantholder at least twenty (20)
days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and
(v) the number of shares subject to purchase hereunder after giving effect to
such adjustment, and shall be given by first class mail, postage prepaid,
addressed to the Warrantholder, at the address as shown on the books of the
Company.
(g) Timely Notice. Failure to timely provide such notice required by
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall
begin on the date Warrantholder actually receives a written notice containing
all the information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws,do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene
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<PAGE> 5
any provision of, or constitute a default under, any indenture, mortgage,
contract or other instrument to which it is a party or by which it is bound,
and the Leases and this Warrant Agreement constitute legal, valid and binding
agreements of the Company, enforceable in accordance with their respective
terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities
law, which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all federal and applicable state securities
laws. In addition:
(i) The authorized capital of the Company consists of (A) 34,000,000
shares of Common Stock, of which 8,528,811 shares are issued and
outstanding, and (B) 17,098,000 shares of Preferred Stock, of which (1)
7,098,000 have been designated Series A Preferred Stock, 7,098,000 shares
of which are issued and outstanding, (2) 6,000,000 have been designated
Series B Preferred Stock, 5,999,994 of which are issued and outstanding,
and (3) 4,000,000 have been designated Series C Preferred Stock, 3,808,152
of which are issued and outstanding. All shares of Preferred Stock are
currently convertible into Common Stock on a share-for-share basis.
(ii) The Company has reserved 3,269,604 shares of Common Stock for
issuance under its 1995 Stock Plan, under which (A) 1,307,004 shares have
been issued as Restricted Common Stock, (B) options to purchase 1,456,036
shares of Common Stock have been issued and are outstanding, (C) options to
purchase 100,062 shares of Common Stock have been issued and exercised and
(D) 1,605,983 shares are remaining for issuance.
(iii) The Company has reserved 2,181,228 shares of Common Stock for
issuance under its 1996 Stock Plan, under which (A) 7,245 shares have been
issued as Restricted Common Stock, (B) options to purchase 568,000 shares
of Common Stock have been issued and are outstanding, (C) no options to
purchase shares have been exercised and (D) 1,605,983 shares are remaining
for issuance.
(iv) The Company's Articles of Incorporation contain no provision
providing any shareholder of the Company with preemptive rights to purchase
new issuances of the Company's capital stock. There are no contractual
rights of first refusal to purchase this Warrant or the Series C Preferred
Stock issuable upon exercise thereof, except such as have been amended or
waived.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in the
Company's Second Amended and Restated Investor Rights Agreement effective
October 16, 1996 and in this Warrant Agreement, the Company is not, pursuant to
the terms of any other agreement currently in existence, under any obligation
to register under the 1933 Act any of its presently outstanding securities or
any of its securities which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon
Section 4(2) thereof, and (ii) the qualification requirements of the applicable
state securities laws.
(h) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt of such request, a written statement confirming the
Company's compliance with the filing requirements of the Securities and
Exchange Commission as set forth in such Rule, as such Rule may be amended from
time to time.
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<PAGE> 6
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder;
(a) INVESTMENT PURPOSE. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present
intention of selling or engaging in any public distribution of the same except
pursuant to a registration or exemption.
(b) PRIVATE ISSUE. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) DISPOSITION OF WARRANTHOLDER'S RIGHTS. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred
Stock or Preferred Stock issuable upon exercise of such rights unless and until
(i) it shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion
of counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act
is available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from
the beneficial owner of any of the aforementioned securities to its nominee or
from such nominee to its beneficial owner, and shall terminate as to any
particular share of Preferred Stock when (1) such security shall have been
effectively registered under the 1933 Act and sold by the holder thereof in
accordance with such registration or (2) such security shall have been sold
without registration in compliance with Rule 144 under the 1933 Act, or (3) a
letter shall have been issued to the Warrantholder at its request by the staff
of the Securities and Exchange Commission or a ruling shall have been issued to
the Warrantholder at its request by the staff of the Securities and Exchange
Commission or a ruling shall have been issued to the Warrantholder at its
request such Commission stating that no action shall be recommended by such
staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever
the restrictions imposed hereunder shall terminate, as hereinabove provided,
the Warrantholder or holder of a share of Preferred Stock then outstanding as
to which such restrictions have terminated shall be entitled to receive from
the Company, without expense to such holder, one or more new certificates for
the Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) FINANCIAL RISK. The Warrantholder has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits
and risks of its investment, and has the ability to bear the economic risks
of its investment.
(e) RISK OF NO REGISTRATION. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of this 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act, or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) ACCREDITED INVESTOR. Warrantholder is an "accredited investor" within
the meaning of the Securities and Exchange Rule 501 of Registration D, as
presently in effect.
11. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the
books of the Company upon receipt by the Company of a notice of
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<PAGE> 7
transfer in the form attached hereto as Exhibit III (the "Transfer Notice"),
at its principal offices and the payment to the Company of all transfer taxes
and other governmental charges imposed on such transfer.
12. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State
of Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail
as hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, attention: James Labe, Venture
Group, cc: Legal Department, attn: General Counsel, (and/or, if by facsimile,
(847) 518-5465 and (847) 518-5088) and (ii) to the Company at 390 Bridge
Parkway, Redwood Shores, CA 94065, attention: _______________ (and/or if by
facsimile, (415) 596-5299 ___________ or at such other address as any such
party may subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as
a result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit
any such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of
the Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal
or unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
a written statement signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions as to
authorization of this Warrant Agreement and that with respect to the
representations, warranties and covenants set forth in subparagraphs (a) through
(d), (f) and (g) of Section 9 above are true and correct in all internal
reports. If the purchase price for the Leases referenced in the preamble of this
Warrant Agreement exceeds $1,000,000, the Company will also provide
Warrantholder with an opinion from the
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<PAGE> 8
Company's counsel with respect to certain of same representations, warranties
and covenants. The Company shall also supply such other documents as the
Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
COMPANY: UNWIRED PLANET, INC.
By: /s/ RICK SMITH
-----------------------------------------
Title: CFO
--------------------------------------
WARRANTHOLDER: COMDISCO, INC.
By: /s/ JAMES P. LABE
-----------------------------------------
Title: PRESIDENT COMDISCO VENTURE DIVISION
-------------------------------------
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<PAGE> 9
EXHIBIT I
NOTICE OF EXERCISE
TO: UNWIRED PLANET, INC.
(1) The undersigned Warrantholder hereby elects to purchase _________
shares of the Series C Preferred Stock of Unwired Planet, Inc.
pursuant to the terms of the Warrant Agreement dated the _______ day
of _________________, 19__ (the "Warrant Agreement") between
__________________________________ and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full,
together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series C Preferred Stock of
________________________________________, the undersigned hereby
confirms and acknowledges the investment representations and
warranties made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series C Preferred Stock in the name of the undersigned or in such
other name as is specified below.
- -------------------------------------
(Name)
- -------------------------------------
(Address)
WARRANTHOLDER: COMDISCO, INC.
By:
----------------------------------
Title:
-------------------------------
Date:
--------------------------------
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EXHIBIT II
ACKNOWLEDGEMENT OF EXERCISE
The undersigned Unwired Planet, Inc., hereby acknowledge receipt of the
"Notice of Exercise" from Comdisco, Inc., to purchase ___ shares of the Series
C Preferred Stock of Unwired Planet, Inc., pursuant to the terms of the Warrant
Agreement, and further acknowledges that ___ shares remain subject to purchase
under the terms of the Warrant Agreement.
COMPANY: UNWIRED PLANET, INC.
By:
--------------------------
Title:
-----------------------
Date:
------------------------
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<PAGE> 11
EXHIBIT III
(TO TRANSFER OR ASSIGN THE FOREGOING WARRANT AGREEMENT EXECUTE THIS FORM AND
SUPPLY REQUIRED INFORMATION. DO NOT USE THIS FORM TO PURCHASE SHARES.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
- --------------------------------------------------------------------------------
(Please Print)
whose address is
----------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated:
-------------------------------------------------
Holder's Signature:
------------------------------------
Holder's Address:
--------------------------------------
-------------------------------------------------------
Signature Guaranteed:
-----------------------------------------------------------
NOTE: THE SIGNATURE TO THIS TRANSFER NOTICE MUST CORRESPOND WITH THE NAME AS
IT APPEARS ON THE FACE OF THE WARRANT AGREEMENT, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER. OFFICERS OF CORPORATIONS AND THOSE
ACTING IN A FIDUCIARY OR OTHER REPRESENTATIVE CAPACITY SHOULD FILE
PROPER EVIDENCE OF AUTHORITY TO ASSIGN THE FOREGOING WARRANT AGREEMENT.
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<PAGE> 12
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
UNWIRED PLANET, INC.
Dated as of July 17, 1997 (the "Effective Date")
WHEREAS, Unwired Planet, Inc., a Delaware corporation (the "Company") has
entered into a Loan and Security dated as of July 17, 1997. Promissory Note
dated as of July ____, 1997, (collectively, the "Loans") with Comdisco, Inc., a
Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Loans, the right to purchase shares of its Series C Preferred Stock:
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Loans and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder
is entitled, upon the terms and subject to the conditions hereinafter set forth,
to subscribe to and purchase, from the Company, 30,700 fully paid and
non-assessable shares of the Company's Series C Preferred Stock ("Preferred
Stock") at a purchase price of 2,5407 per share (the "Exercise Price"). The
number and purchase price of such shares are subject to adjustment as provided
in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period (i) ten
(10) years or (ii) five (5) years from the effective date of the Company's
initial public offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are
exercisable by the Warrantholder, in whole or in part, at any time, or from time
to time, prior to the expiration of the term set forth in Section 2 above, by
tendering to the Company at its principal office a notice of exercise in the
form attached hereto as Exhibit I (the "Notice of Exercise"), duly completed and
executed. Promptly upon receipt of the Notice of Exercise and the payment of
the purchase price in accordance with the terms set forth below, and in no event
later than twenty-one (21) days thereafter, the Company shall issue to the
Warrantholder a certificate for the number of shares of Preferred Stock
purchased and shall execute the acknowledgment of exercise in the form attached
hereto as Exhibit II (the "Acknowledgment of Exercise") indicating the number of
shares which remain subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either
(i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X=Y(A-B)
-----
A
<PAGE> 13
Where: X= the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y= the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A= the fair market value of one (1) share of Preferred Stock.
B= the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public offering
of the Company's Common Stock, and if the Company's Registration Statement
relating to such public offering has been declared effective by the SEC,
then the fair market value per share shall be the product of (x) the
initial "Price to Public" specified in the final prospectus with respect to
the offering and (y) the number of shares of Common Stock into which each
share of Preferred Stock is convertible at the time of such exercise:
(ii) if this Warrant is exercised after, and not in connection with
the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the product of (x) the average of the closing
prices over a twenty-one (21) day period ending three days before the
day the current fair market value of the securities is being
determined and (y) the number of shares of Common Stock into which
each share of Preferred Stock is convertible at the time of such
exercise; or
(b) if actively traded over-the-counter, the fair market value
shall be deemed to be the product of (x) the average of the closing
bid and asked prices quoted on the NASDAQ system (or similar system)
over the twenty-one (21) day period ending three days before the day
the current fair market value of the securities is being determined
and (y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any
securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the current fair market value of Preferred Stock shall be the
product of (x) the highest price per share which the Company could obtain
from a willing buyer (not a current employee or director) for shares of
Common Stock sold by the Company, from authorized but unissued shares, as
determined in good faith by its Board of Directors and (y) the number of
shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise, unless the Company shall become
subject to a merger, acquisition or other consolidation pursuant to which
the Company is not the surviving party, in which case the fair market value
of Preferred Stock shall be deemed to be the value received by the holders
of the Company's Preferred Stock on a common equivalent basis pursuant to
such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number
of shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any
similar Federal
<PAGE> 14
statute then enforced, or any state securities law, required by reason of any
transfer involved in such conversion), or listing on any domestic securities
exchange, before such shares may be issued upon conversion, the Company will,
at its expense and as expeditiously as possible, use its best efforts to cause
such shares to be duly registered, listed or approved for listing on such
domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the
sale of all or substantially all of the Company's properties and assets to any
other person (hereinafter referred to as a "Merger Event"), then, as a part of
such Merger Event, lawful provision shall be made so that the Warrantholder
shall thereafter be entitled to receive, upon exercise of the Warrant, the
number of shares of preferred stock or other securities of the successor
corporation resulting from such Merger Event, equivalent in value to that which
would have been issuable if Warrantholder had exercised this Warrant
immediately prior to the Merger Event. In any such case, appropriate adjustment
(as determined in good faith by the company's Board of Directors) shall be made
in the application of the provisions of this Warrant Agreement with respect to
the rights and interest of the Warrantholder after the Merger Event to the end
that the provisions of this Warrant Agreement (including adjustments of the
Exercise Price and number of shares of Preferred Stock purchasable) shall be
applicable to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of
any other class or classes, this Warrant Agreement shall thereafter represent
the right to acquire such number and kind of securities as would have been
issuable as the result of such change with respect to the securities which were
subject to the purchase rights under this Warrant Agreement immediately prior
to such combination, reclassification, exchange, subdivision, or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution
specifically provided for in the foregoing subsections (a) or (b)) of the
Company's stock, then the Exercise Price shall be adjusted, from and after the
record date of such dividend or distribution, to that price determined by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction (i) the numerator of which shall be the total number of all shares
of the Company's stock outstanding immediately prior to such dividend or
distribution, and (ii) the denominator of which shall be the total number of
all shares of the Company's stock outstanding immediately after such dividend
or distribution. The Warrantholder shall thereafter be entitled to purchase, at
the Exercise Price resulting from such adjustment, the number of shares of
Preferred Stock
<PAGE> 15
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable to the
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit __ (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold (b)
the number of shares to be issued, and (c) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred.
(f) Notice of Adjustments. If: (i) the Company shall declare any dividend
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred of other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event;
(iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation, or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least twenty (20) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required by
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall
begin on the date Warrantholder actually receives a written notice containing
all the information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever, provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Loans and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under any indenture,
mortgage, contract or other instrument to which it is a
<PAGE> 16
party or by which it is bound, and the Loans and this Warrant Agreement
constitute legal, valid and binding agreements of the Company, enforceable in
accordance with their respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities
law, which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, preferred Stock and any other securities
were issued in full compliance with all federal and applicable state securities
laws. In addition:
(i) The authorized capital of the Company consists of (A)
34,000,000 shares of Common Stock, of which 8,528,811 shares are issued and
outstanding, and (B) 17,098,000 shares of Preferred Stock, of which (1)
7,098,000 have been designated Series A Preferred Stock, 7,098,000 of which
are issued and outstanding, (2) 6,000,000 have been designated Series B
Preferred Stock, 5,999,994 of which are issued and outstanding, and (3)
4,000,000 have been designated Series C Preferred Stock, 3,808,152 of which
are issued and outstanding. All shares of Preferred Stock are currently
convertible into Common Stock on a share-for-share basis.
(ii) The Company has reserved 3,269,604 shares of Common Stock
for issuance under its 1995 Stock Plan, under which (A) 1,307,004 shares
have been issued as Restricted Common Stock, (B) options to purchase
1,456,038 shares of Common Stock have been issued and are outstanding, (C)
options to purchase 100,062 shares of Common Stock have been issued and
exercised and (D) 406,500 shares are remaining for issuance.
(iii) The Company has reserved 2,181,228 shares of Common Stock
for issuance under its 1996 Stock Plan, under which (A) 7,245 shares have
been issued as Restricted Common Stock, (B) options to purchase 568,000
share of Common Stock have been issued and are outstanding, (C) no options
to purchase shares have been exercised and (D) 1,605,983 shares are
remaining for issuance.
(iv) The Company's Articles of incorporation contain no provision
providing any shareholder of the Company with preemptive rights to purchase
new issuances of the Company's capital stock. There are no contractual
rights of first refusal to purchase this Warrant or the Series C Preferred
Stock issuable upon exercise thereof, except such as have been amended or
waived.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in the
Company's Second Amended and Restated Investor Rights Agreement effective
October 16, 1996 and in this Warrant Agreement, the Company is not, pursuant to
the terms of any other agreement currently in existence, under any obligation
to register under the 1933 Act any of its presently outstanding securities or
any of its securities which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon
Section 4(2) thereof, and (ii) the qualification requirements of the applicable
state securities laws.
(h) Compliance with Rule 144. At the written request of the Warrantholder,
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time,
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
<PAGE> 17
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present
intention of selling or engaging in any public distribution of the same except
pursuant to a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred
Stock issuable upon exercise of such rights unless and until (i) it shall have
notified the Company of the proposed disposition, and (ii) if requested by the
Company, it shall have furnished the Company with an opinion of counsel (which
counsel may either be inside or outside counsel to the Warrantholder)
satisfactory to the Company and its counsel to the effect that (A) appropriate
action necessary for compliance with the 1933 Act has been taken, or (B) an
exemption from the registration requirements of the 1933 Act is available.
Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of tis rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from
the beneficial owner of any of the aforementioned securities to its nominee or
from such nominee to its beneficial owner, and shall terminate as to any
particular share of Preferred Stock when (1) such security shall have been
effectively registered under the 1933 Act and sold by the holder thereof in
accordance with such registration or (2) such security shall have been sold
without registration in compliance with Rule 144 under the 1933 Act, or (3) a
letter shall have been issued to the Warrantholder at its request by the staff
of the Securities and Exchange Commission or a ruling shall have been issued to
the Warrantholder at its request by such Commission stating that no action
shall be recommended by such staff or taken by such Commission, as the case may
be, if such security is transferred without registration under the 1933 Act in
accordance with the conditions set forth in such letter or ruling and such
letter or ruling specifies that no subsequent restrictions on transfer are
required. Whenever the restrictions imposed hereunder shall terminate, as
hereinabove provided, the Warrantholder or holder of a share of Preferred Stock
then outstanding as to which such restrictions have terminated shall be
entitled to receive from the Company, without expense to such holder, one or
more new certificates for the Warrant or for such shares of Preferred Stock not
bearing any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act", or if a registration statement covering the
securities under the 1933 Act is not in affect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the
books of the Company upon receipt by the Company of a notice of
<PAGE> 18
transfer in the form attached hereto as Exhibit III (the "Transfer Notice"), at
its principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer.
12. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorney's fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, attention: James Labe, Venture
Group, cc: Legal Department, attn: General Counsel, (and/or, if by facsimile,
(847) 518-5465 and (847) 518-5088) and (ii) to the Company at 390 Bridge
Parkway, Redwood Shore, CA 94065, attention: ________________ and/or if by
facsimile. (415)596-5298 or at such other address as any such party may
subsequently designate by written notice to the other party.
(f) Remedies. In event of any default hereunder, the non-defaulting party
may proceed to protect and enforce its rights either by suit in equity and/or by
action at law, including but not limited to an action for damages as result of
any such default, and/or an action for specific performance for any default
where Warrantholder will not have an adequate remedy at law and where damages
will not be readily ascertainable. The Company expressly agrees that it shall
not oppose an application by the Warrantholder or any other person entitled to
the benefit of this Agreement requiring specific performance of any or all
provisions hereof or enjoining the Company from continuing to commit any such
breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closet to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions as to
authorization of this Warrant Agreement and that the representations,
warranties and covenants set forth in subparagraphs (a) through (d), (f) and (g)
of Section 9 above are true and correct in all material aspects. If the purchase
price for the Loans referenced in the preamble of this Warrant Agreement exceeds
$1,000,000, the Company will also provide Warrantholder with an opinion from the
<PAGE> 19
Company's counsel with respect to certain of those same representations,
warranties and covenants. the Company shall also supply such other documents as
the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
COMPANY: UNWIRED PLANET, INC.
By: /s/ RICK SMITH
--------------------------------------
Title: CFO
------------------------------------
WARRANTHOLDER: COMDISCO, INC.
By: /s/ JAMES P. LABE
--------------------------------------
JAMES P. LABE
Title: PRESIDENT COMDISCO VENTURES DIVISION
------------------------------------
<PAGE> 20
EXHIBIT I
NOTICE OF EXERCISE
To: UNWIRED PLANET, INC.
(1) The undersigned Warrantholder hereby elects to purchase ___________
shares of the Series C Preferred Stock of Unwired Plant, Inc.,
pursuant to the terms of the Warrant Agreement dated the ______ day of
_________, 19 _____ ( the "Warrant Agreement") between
_____________________________ and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full,
together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series C Preferred Stock of
_____________________, the undersigned hereby confirms and
acknowledges the investment representations and warranties made in
Section 10 of the Warranty Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series C Preferred Stock in the name of the undersigned or in such
other name as is specified below.
- --------------------------------
(Name)
- --------------------------------
(Address)
Warrantholders: COMDISCO, INC.
By:
-----------------------------
Title:
--------------------------
Date:
---------------------------
<PAGE> 21
EXHIBIT II
ACKNOWLEDGEMENT OF EXERCISE
The undersigned Unwired Planet, Inc., hereby acknowledge receipt of the
"Notice of Exercise" from Comdisco, Inc., to purchase ____ shares of the Series
C Preferred Stock of Unwired Planet, Inc., pursuant to the terms of the Warrant
Agreement, and further acknowledges that ___ shares remain subject to purchase
under the terms of the Warrant Agreement.
COMPANY: UNWIRED PLANET, INC.
By:
--------------------------
Title:
-----------------------
Date:
------------------------
<PAGE> 22
EXHIBIT III
TRANSFER NOTICE
(TO TRANSFER OR ASSIGN THE FOREGOING WARRANT AGREEMENT EXECUTE THIS FORM AND
SUPPLY REQUIRED INFORMATION. DO NOT USE THIS FORM TO PURCHASE SHARES.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
- -------------------------------------------------------------------------------
(Please Print)
whose address is
---------------------------------------------------------------
- -------------------------------------------------------------------------------
Dated:
-------------------------------------------
Holder's Signature:
------------------------------
Holder's Address:
--------------------------------
-------------------------------------------------
Signature Guaranteed:
----------------------------------------------------------
NOTE: THE SIGNATURE TO THIS TRANSFER NOTICE MUST CORRESPOND WITH THE NAME AS IT
APPEARS ON THE FACE OF THE WARRANT AGREEMENT, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER. OFFICERS OF CORPORATIONS AND THOSE
ACTING IN A FIDUCIARY OR OTHER REPRESENTATIVE CAPACITY SHOULD FILE PROPER
EVIDENCE TO AUTHORITY TO ASSIGN THE FOREGOING WARRANT AGREEMENT.
<PAGE> 1
EXHIBIT 10.12
August 18, 1997
Mr. Malcolm Bird
Orchard House, Station Road
Steeple Morden
Royston, Herts
UX S08 ONW
Dear Malcolm:
I am delighted to make you this offer to join Unwired Planet, Inc. Each person
at Unwired Planet will help shape our values and direction; each person will add
his or her unique strengths and perspectives.
This offer is for you to join us in the capacity of General Manager, Europe.
Your base salary will be $US10,000 per month ($US120,000 per year) and your
annual target compensation will be $US200,000, with the bonus component (which
will not be considered "regular pay") determined by the CEO based upon your
performance in achieving defined objectives in your position as General Manager,
Europe. You will be paid monthly in arrears in the UK at the prevailing rate of
exchange (but not lower than average rate during the period June-August 1997),
and any bonus will be paid annually in arrears. All payments made to you
hereunder will be subject to such deductions of tax and national insurance
contributions and other deductions or sums as the Company is legally required to
make.
As an employee, you are also eligible to receive employee benefits. In your
case, such will include: family medical insurance (premiums of up to UKP850 per
annum); automobile allowance (up to UKP650 per month); holiday entitlement (20
days per annum in addition to statutory holidays accruing at 1.667 days per
month); and Company-funded pension (15% of base salary).
You will be expected to work such reasonable periods of time as may be required
by the duties of the job without additional pay. You will not be paid extra for
overtime.
On termination of employment, you will receive one three hundred and sixtieth of
annual base salary for any untaken accrued holiday in the then current year.
Holiday not taken will be forfeited and may not be carried forward to the next
year.
You will be paid statutory sick pay ("SSP") in respect of sick leave duly
certified in accordance with statutory requirements. Your qualifying days for
SSP are Monday to Friday. A self-certification form for SSP purposes is
available from the Company. A doctor's certificate is required for any
incapacity in excess of seven days (including weekends), and for each seven days
it continues.
There is no occupational pension scheme with this employment, but the Company
will contribute on your behalf a fixed percentage (as set forth above) of your
annual base salary into a selected personal pension. A contracting-out
certificate is not in force. You will therefore be contracted into the state
pension scheme unless you choose to make other arrangements through a personal
pension.
I will recommend to the Unwired Planet Board of Directors that you be granted
stock options to purchase 150,000 shares of Unwired Planet Common Stock. Subject
to the approval of the Board of Directors of Unwired Planet, you will be granted
an option to purchase shares of Common Stock at an exercise price equal to the
fair market value of the Common Stock at the date of grant. The shares will vest
over four years with a one year cliff, meaning that one fourth of your shares
will be vested one year from your hire date and the remaining shares will vest
monthly after your first year of employment. Vesting will, of course, depend on
your continued employment with Unwired Planet. If you achieve the performance
objectives established for you, I will recommend at your yearly review in June
1998 to the Board of Directors that options for an additional 30,000 shares be
granted to you, with the strike price of these additional options to be the fair
market value of the Company's Common Stock on the date the Board approves the
grant.
Notice of termination shall be by three month's written notice from either side.
Subject to this notice requirement, you are free to resign at any time, for any
reason or for no reason. Similarly, Unwired Planet is free to conclude its
employment relationship with you at any time, with or without cause, subject to
compliance with the notice requirement. In the event your employment is
terminated involuntarily other than for cause, it is understood that the
Company's sole obligation shall be to pay severance equal to six months' base
salary, plus continuation of medical insurance benefits (or, if this is not
possible, reimbursement of premiums) for said period of time. As used herein,
"cause" means your serious misconduct or your willful and continued breach or
neglect of your duties (other than as a result of physical or natural illness)
after you have been given a written warning by the CEO which sets forth in
detail the specific respects in which such willful breach or neglect is believed
to have occurred and where appropriate gives you a reasonable time to remedy the
same.
During the period of six months after the lawful termination of your employment,
you agree not to directly or indirectly solicit the services of or employ any
employee who was a senior manager or director of the Company at any time during
the period of six months prior to the termination of your employment.
Upon joining Unwired Planet, you will be required to sign a confidentiality and
inventions agreement in which you will be asked to protect the Company's
confidential information and to assign to the Company any inventions produced in
the course of your work.
As we discussed, your first date of employment is schedule for September 1,
1997. No previous service counts as continuous for statutory purposes. Please
review these terms to make sure they are consistent with your understanding. if
so, send back to me this signed offer letter no later than August 22, 1997.
This agreement sets out the whole agreement between the parties. If any
provision of this agreement is held to be invalid or unenforceable by any
judgment of a court of competent jurisdiction, that provision shall be deemed
deleted from this agreement, and the remainder of this agreement shall be
carried out as surely as possible according to its original terms and intent.
Your acceptance of this offer represents a unique opportunity for Unwired Planet
both to grow and to succeed. I want to thank you for the commitment you have
made to our common vision and look forward to working with you.
UNWIRED PLANET, INC.
By:
Alain Rossman
Chairman and CBO
Accepted by:
/s/ MALCOLM BIRD 29 August 97
Malcolm Bird Date
<PAGE> 1
Exhibit 10.13
FY 1999 Incentive Compensation Plan
Malcolm Bird
This document details your Incentive Compensation Plan for Fiscal Year 1999.
I. DEFINITIONS
"Billings" shall mean the actual amount invoiced to customers in the
Territory in FY 1999 as a result of a signed contract, with payment terms of
net 90 days or less. Qualifying Billings include the actual net amount invoiced
(net of all discounts, allowances and taxes) for product license fees,
maintenance and support services provided to carrier and device manufacturer
customers, and consulting services performed by UP.
"Revenues" shall be defined as the net dollar amount recognized by the
Company in its FY 1999 consolidated financial statements that were produced
from customers in the Territory, inclusive of wireless carrier, device
manufacturer and UP Consulting customers.
"Territory" shall mean Europe, South Africa and Israel.
II. GENERAL PROVISIONS
A. The term of this Plan is Fiscal Year 1999.
B. Base compensation/Salary is separate from the incentive compensation that
may be earned under this Plan.
C. This Plan supercedes all prior incentive compensation plans, whether
written or oral, and may only be modified by the CEO of Unwired Planet,
Inc. and you in writing.
D. You must sign and return this Plan document to the CEO. By signing, you
acknowledge that you have read, understand and agreed to abide and be bound
by all the terms and conditions contained herein.
E. Incentive compensation paid under this Plan shall be subject to all
applicable withholding and other employment taxes, as required by law.
F. Equal pay for equal work & EEO Policy: Unwired Planet, Inc. maintains its
commitment to a philosophy of equal pay for equal performance. In addition,
Unwired Planet, Inc.'s Equal Employment Opportunity Policy has been
developed to ensure that all employment decisions, including those
regarding compensation, are free from harassment or discrimination on the
basis of race, religion, color, national origin, ancestry, disability,
marital status, gender, age, sexual orientation or veteran status.
<PAGE> 2
III. DETERMINATION OF TARGET INCENTIVE COMPENSATION
Your target incentive compensation for the Plan Term is $100,000. The actual
amount of incentive compensation you shall earn shall be based on your success
in achieving the three sales quotas described below:
A. Billings Quota
1. Your Billings quota is $7,000,000 for FY 1999.
2. For actual Billings of $0 - $7,000,000, the bonus will be calculated
by multiplying the actual Billings amount by 0.70%.
3. For Billings in excess of $7,000,000, the bonus will be calculated
by multiplying the amount of Billings in excess of $7,000,000 by
4.00%. No cap shall apply.
4. The Billings bonus will be paid on a quarterly basis through the
normal payroll channel.
5. Billings must be invoiced net 90 days or less and be based upon a
signed contract.
1. Allocation of Billings made to device manufacturers shall be as
follows:
o If the relationship with the device manufacturer has been drive by the
requirements of a wireless carrier in your territory that the UP software
be in the manufacturer's devices, then 50% of the Billing amount will be
credited to the territory in which the wireless carrier is headquartered,
and 50% will be credited to the territory in which the device manufacturer
is headquartered. The Vice President with responsibility for the territory
in which the wireless carrier is headquartered must register his claim for
his share of such Billings with the CEO prior to the date the Billing is
made to be eligible for credit.
o If the relationship with the device manufacturer has been driven other than
by the requirements of a wireless carrier, then 100% of the Billing amount
shall be credited to the territory in which the device manufacturer is
headquartered.
Example: If actual Billings for your Territory for FY 1999 were
$9,000,000, your Billings bonus would be calculated as follows:
$7,000,000*0.70% $ 49,000
$2,000,000*4.00% $ 80,000
-------
Total Billings Bonus $129,000
=======
B. Revenue Quota
1. Your Revenues quota is $5,000,000 for FY 1999.
2. Qualifying Revenues are those recognized in your Territory.
3. You will receive a one-time bonus of $30,000 when you reach your revenue
quota.
4. The revenue quota bonus will be paid within forty-five (45) days of the
end of the fiscal quarter in which your Revenues quota is reached.
5. You will receive 100% credit for license, maintenance, consulting and
device revenues recognized during the Term in your Territory.
6. For revenues from device manufacturers, such shall be allocated to
territories in the identical manner in which the Billings relating to such
Revenues were allocated under A. above.
<PAGE> 3
C. Carrier Footprint
1. Your carrier footprint quota is to complete commercial license agreements
for UP.Link Server products with three (3) new wireless carriers during the
Term. Commercial licenses exclude trial licenses of any type.
2. To quality, a wireless carrier must possess a marketshare of more than
500,000 voice subscribers and must be approved by the CEO in advance.
3. You will receive a one-time carrier footprint bonus of $7,000 per
qualifying wireless carrier headquartered in your territory signed to a
commercial license agreement during the Term. There shall be no cap for
carrier footprint bonuses.
4. The carrier footprint bonus will be paid within forty-five (45) days of the
end of the fiscal quarter in which the commercial license agreement was
signed by the wireless carrier.
D. Chargebacks: Chargebacks are reductions to Billings and Revenues made by
the Company retroactively and resulting from: (i) uncollectible accounts
receivable; (ii) erroneous crediting of Billings and/or Revenues to your
Territory; (iii) returned products and/or cancelled licenses and/or
services; and (iv) other like adjustments. The Company reserves the right
to apply Chargebacks against Billings and Earnings previously credited to
your Territory in its sole discretion.
COMPENSATION PLAN ACKNOWLEDGEMENT:
I acknowledge that I have read the Plan, understand all of its terms and
conditions, and agree to abide and be bound by, all the stated terms and
conditions.
/s/ Malcolm Bird 27 Jan 99 /s/ Alain Rossmann Jan 27, 99
- --------------------------------- ----------------------------------
Malcolm Bird Date Alain Rossmann Date
<PAGE> 1
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
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<PAGE> 2
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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<PAGE> 3
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.
Page 5
<PAGE> 6
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
Page 5
<PAGE> 7
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
----------------------------------
Page 7
<PAGE> 8
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> 9
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> 10
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> 11
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
-----------------------------------
<PAGE> 12
RSA DATA SECURITY, INC.
By: /s/ D. James Bidzos
------------------------------------
Printed Name: D. James Bidzos
--------------------------
Title: CEO & President
---------------------------------
Date: 9/25/97
----------------------------------
Page 4
<PAGE> 13
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> 14
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> 15
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 1
<PAGE> 16
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> 17
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
<PAGE> 18
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
<PAGE> 19
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
<PAGE> 20
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> 21
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:
- -------------------------------------
Page 7
<PAGE> 22
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
<PAGE> 23
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> 1
Exhibit 10.15
FY 1999 Incentive Compensation Plan
Maurice Jeffery
This document, revised March 19, 1999, details your Incentive Compensation Plan
for Fiscal Year 1999.
I. DEFINITIONS
"Billings" shall mean the actual amount invoiced to customers in the Territory
in FY 1999 as a result of a signed contract, with payment terms of net 90 days
or less. Qualifying Billings include the actual net amount invoiced (net of all
discounts, allowances and taxes) for product license fees, maintenance and
support services provided to carrier and device manufacturer customers, and
consulting services performed by UP. For purposes of rewarding incentive
compensation for FY 1999, non-contingent billings for future years from
contracts signed in FY 1999 which are not dependent on any deployment or
adoption data will be recognized as follows:
<TABLE>
<S> <C>
Fy 00 = 50%
Fy 01 = 25%
Fy 02 = 12.5%
</TABLE>
The CEO of Unwired Planet shall determine which billings are non-contingent.
"Revenues" shall be defined as the net dollar amount recognized by the
Company in its FY 1999 consolidated financial statements that were produced from
customers in the Territory, inclusive of wireless carrier, device manufacturer
and UP.Consulting customers.
"Territory" shall mean North America. This consists of the United States
of America and its territories, and Canada.
II. GENERAL PROVISIONS
A. The Term of this Plan is Fiscal Year 1999.
B. Base compensation/Salary (paid semi-monthly) is separate from the incentive
compensation that may be earned under this Plan.
C. This Plan supercedes all prior incentive compensation plans, whether
written or oral, and may only be modified by the CEO of Unwired Planet,
Inc. and you in writing.
D. You must sign and return this Plan document to the CEO. By signing, you
acknowledge that you have read, understand and agreed to abide and be bound
by all the terms and conditions contained herein.
E. Incentive compensation paid under this Plan shall be subject to all
applicable withholding and other employment taxes, as required by law.
<PAGE> 2
F. Equal pay for equal work & EEO Policy: Unwired Planet, Inc. maintains its
commitment to a philosophy of equal pay for equal performance. In addition,
Unwired Planet, Inc.'s Equal Employment Opportunity policy has been
developed to ensure that all employment decisions, including those
regarding compensation, are free from harassment or discrimination on the
basis of race, religion, color, national origin, ancestry, disability,
marital status, gender, age, sexual orientation or veteran status.
G. Nothing in this Plan document shall be construed to imply a contract of
employment between Unwired Planet, Inc. and yourself. Unwired Planet, Inc.
reserves the right to terminate your employment or participation in the
Plan at any time, with or without cause.
III. RECOVERABLE DRAW
A. The Plan provides for a recoverable draw, which is payable semi-monthly.
B. The semi-monthly recoverable draw amount is one forty-eighth (1/48th) of
your annual incentive compensation target.
C. The recoverable incentive compensation draw amount may be reduced by the
Company at any time in its sole discretion.
D. The amount of recoverable draw shall be calculated by the Finance
Department and paid by Payroll.
E. Within forty five (45) days of the end of each fiscal quarter, the
cumulative year-to-date amount of recoverable draw payments made through
the end of the preceding fiscal quarter will be compared to the actual
amount of incentive bonuses earned through such date. Where the actual
amount of incentive bonuses earned exceeds the amount of recoverable draw
payments made, the Company shall pay you the excess amount within forty
five (45) days of the end of the applicable fiscal quarter. Where the
actual amount of incentive bonuses earned is less than the amount of
recoverable draw payments made, the negative balance owed to the Company
shall be carried forward to the next fiscal quarter.
F. Any negative balance owed to the Company at the end of the Plan Term shall
be rolled forward to the succeeding fiscal year in accordance with the
protocol described in E. above. Notwithstanding the foregoing, in the event
your employment with Unwired Planet, Inc terminates for any reason, any
negative balance owed by you as of such date shall be repaid immediately.
IV. DETERMINATION OF TARGET INCENTIVE COMPENSATION
Your target incentive compensation for the Plan Term is $100,000. The actual
amount of incentive compensation you shall earn shall be based on your success
in achieving the three sales quotas described below:
A. Billings Quota: Your Billings quota is $7,000,000 for FY 1999.
1. For actual Billings of $0 - $7,000,000, the bonus will calculated by
multiplying the
<PAGE> 3
actual Billings amount by 0.70%.
2. For Billings in excess of $7,000,000, the bonus will be calculated by
multiplying the amount of Billings in excess of $7,000,000 by 4.00%. No cap
shall apply.
3. The Billings bonus will be paid on a quarterly basis through the normal
payroll channel.
4. Billings must be invoiced net 90 days or less and be based upon a signed
contract.
5. Allocation of Billings made to device manufacturers shall be as follows:
6. If the relationship with the device manufacturer has been driven by the
requirements of a wireless carrier in your territory that the UP software
be in the manufacturer's devices, then 50% of the Billing amount will be
credited to the territory in which the wireless carrier is headquartered,
and 50% will be credited to the territory in which the device manufacturer
is headquartered. The Vice President with responsibility for the territory
in which the wireless carrier is headquartered must register his claim for
his share of such Billings with the CEO prior to the date the Billing is
made to be eligible for credit.
o If the relationship with the device manufacturer has been
driven other than by the requirements of a wireless carrier,
then 100% of the Billing amount shall be credited to the
territory in which the device manufacturer is headquartered.
Example: If actual Billings for your Territory for FY1999
were $9,000,000, your Billings bonus would be calculated as
follows:
<TABLE>
<S> <C> <C>
$7,000,000*0.70% $ 49,000
$2,000,000*4.00 % $ 80,000
--------
Total Billings Bonus $129,000
</TABLE>
B. Revenue Quota: Your Revenues quota is $5,000,000 for FY 1999.
1. Qualifying Revenues are those recognized in your Territory.
2. The maximum bonus you will receive for reaching your revenues quota is
$31,000. Upon reaching 75% of your revenues quota ($3,750,000) you
will be paid a bonus amount equal to 75% of your total eligible bonus.
The remainder of the bonus amount will be paid on a prorated basis as
you reach the remainder of your revenues quota.
3. The revenues quota bonus will be paid within forty-five (45) days of
the end of the fiscal quarter in which your Revenues quota is reached.
<TABLE>
<CAPTION>
<S> <C> <C>
Example: Timeframe Revenues Quota Reached Eligible Bonus
Q3 $3.75M (75%) $ 23,250
Q4 $4.25M (85%) $ 3,100
Q4 $5.00M (100%) $ 4,650
</TABLE>
A bonus of $23,250 will be paid within 45 days of the end of the
third quarter. A bonus of $7,750 will be paid within 45 days of
the end of the fourth quarter.
4. You will receive 100% credit for license, maintenance, consulting and
device
<PAGE> 4
revenues recognized during the Term in your Territory.
5. For revenues from device manufacturers, such shall be allocated to
territories in the identical manner in which the Billings relating to
such Revenues were allocated under A. above.
C. Carrier Footprint
1. Your carrier footprint quota is to complete commercial license
agreements for UP.Link Server products with three (3) new wireless
carriers during the Term. Commercial licenses exclude trial licenses
of any type.
2. To qualify, a wireless carrier must possess a marketshare of more than
500,000 voice subscribers and must be approved by the CEO in advance.
3. You will receive a one-time carrier footprint bonus of $7,000 per
qualifying wireless carrier headquartered in your territory signed to
a commercial license agreement during the Term. There shall be no cap
for carrier footprint bonuses.
4. The carrier footprint bonus will be paid within forty-five (45) days
of the end of the fiscal quarter in which the commercial license
agreement was signed by the wireless carrier.
D. Special Incentive Bonus
1. You will receive a one time incentive bonus of $50,000 if Sprint signs
a contract with UP to utilize the Uplink Server product in Fiscal Year
1999 and if Sprint has a verifiable plan to deploy the UP product(s)
in calendar year 1999.
2. If Sprint signs a contract with UP in Fiscal Year 1999, but does not
have a plan to deploy in calendar year 1999, then you will receive a
one-time bonus of $25,000.
3. This bonus will be paid at the end of the quarter in which the
contract is signed.
E. Chargebacks: Chargebacks are reductions to Billings and Revenues made by
the Company retroactively and resulting from: (i) uncollectible accounts
receivable; (ii) erroneous crediting of Billings and/or Revenues to your
Territory; (iii) returned products and/or cancelled licenses and/or
services; and (iv) other like adjustments. The Company reserves the right
to apply Chargebacks against Billings and Earnings previously credited to
your Territory in its sole discretion.
COMPENSATION PLAN ACKNOWLEDGEMENT:
I acknowledge that I have read the Plan, understand all of its terms and
conditions, and agree to abide and be bound by, all the stated terms and
conditions.
<PAGE> 5
<TABLE>
<S> <C>
/s/ MAURICE JEFFERY 3/29/99 /s/ ALAIN ROSSMANN 3/22/99
- ----------------------------- --------------------------------
Maurice Jeffery Date Alain Rossmann Date
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
<TABLE>
<CAPTION>
Name Jurisdiction
- ---- ------------
<S> <C>
Unwired Planet (Europe) Ltd. United Kingdom
Nihon Unwired Planet K.K. Japan
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use of our report included herein and to the references
to our firm under the headings "Experts" and "Selected Consolidated Financial
Data" in the Prospectus.
KPMG LLP
Mountain View, California
March 29, 1999
II-7
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-1998
<PERIOD-START> JUL-01-1998 JUL-01-1997
<PERIOD-END> DEC-31-1998 JUN-30-1998
<CASH> 4,878 12,677
<SECURITIES> 24,383 20,787
<RECEIVABLES> 2,091 2,724
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 31,804 36,540
<PP&E> 3,152 2,522
<DEPRECIATION> 1,635 1,186
<TOTAL-ASSETS> 34,627 39,144
<CURRENT-LIABILITIES> 13,320 9,836
<BONDS> 0 0
0 0
18 18
<COMMON> 6 6
<OTHER-SE> 20,571 28,369
<TOTAL-LIABILITY-AND-EQUITY> 34,627 39,144
<SALES> 0 0
<TOTAL-REVENUES> 3,185 2,205
<CGS> 0 0
<TOTAL-COSTS> 1,332 1,158
<OTHER-EXPENSES> 10,956 12,652
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 79 142
<INCOME-PRETAX> (8,323) (10,623)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (8,323) (10,623)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> ( 8,323) (10,623)
<EPS-PRIMARY> (1.49) (2.03)
<EPS-DILUTED> (1.49) (2.03)
</TABLE>
