<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 14, 1999
REGISTRATION NO. 333-75219
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
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. ELISE M. BRINCK
VENTURE LAW GROUP WILSON SONSINI GOODRICH & ROSATI
A PROFESSIONAL CORPORATION PROFESSIONAL CORPORATION
2775 SAND HILL ROAD 650 PAGE MILL ROAD
MENLO PARK, CA 94025 PALO ALTO, CA 94304
</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.
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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. [ ]
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 APRIL 14, 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 have made 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.
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<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
SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS..... 18
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
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
BUSINESS......................... 37
MANAGEMENT....................... 52
CERTAIN TRANSACTIONS............. 64
PRINCIPAL STOCKHOLDERS........... 66
DESCRIPTION OF CAPITAL STOCK..... 68
SHARES ELIGIBLE FOR
FUTURE SALE.................... 71
UNDERWRITING..................... 73
NOTICE TO CANADIAN RESIDENTS..... 75
LEGAL MATTERS.................... 76
EXPERTS.......................... 76
ADDITIONAL INFORMATION........... 76
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
April 1999, 23 network operators have licensed our software and have commenced
or announced commercial service or are in market or laboratory trials. Our
current network operator customers include AT&T Wireless Services, Bell Atlantic
Mobile, Bell Mobility, SFR/CEGETEL, DDI Corporation, Deutsche Telekom Mobilnet,
France Telecom Mobile, GTE Wireless, IDO Corporation, LG TeleCom, 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 April 1999, 23 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 Electric Corporation, 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 March 31, 1999. This table
excludes:
- 3,321,346 shares subject to outstanding options at a weighted average
exercise price of $1.86 as of March 31, 1999,
- 31,486 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $3.81 per share as of March 31, 1999,
- an aggregate of 5,672,807 shares available for future issuance under our
1995 Stock Plan, 1996 Stock Plan, 1999 Directors' Stock Option Plan and
1999 Employee Stock Purchase Plan as of March 31, 1999.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
DECEMBER 16, 1994 YEAR ENDED JUNE 30, MARCH 31,
(INCEPTION) TO ---------------------------- -------------------
JUNE 30, 1995 1996 1997 1998 1998 1999
----------------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
License........................................ $ -- $ -- $ 80 $ 522 $ 289 $ 1,530
Maintenance and support services............... -- -- 212 1,683 635 3,786
Consulting services............................ -- -- -- -- -- 1,401
------ ------- ------- -------- -------- --------
Total revenues............................. -- -- 292 2,205 924 6,717
------ ------- ------- -------- -------- --------
Gross profit (loss).............................. -- -- (61) 1,047 150 4,023
------ ------- ------- -------- -------- --------
Operating loss................................... (103) (2,666) (8,455) (11,605) (8,258) (14,402)
------ ------- ------- -------- -------- --------
Net loss......................................... $ (103) $(2,470) $(7,991) $(10,623) $ (7,730) $(13,973)
====== ======= ======= ======== ======== ========
Basic and diluted net loss per share............. $(0.02) $ (0.53) $ (1.67) $ (2.03) $ (1.50) $ (2.49)
====== ======= ======= ======== ======== ========
Shares used in computing basic and diluted net
loss
per share...................................... 4,671 4,704 4,776 5,221 5,142 5,618
====== ======= ======= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1999
-------------------------
ACTUAL AS ADJUSTED
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<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments......... $47,831 $
Total assets.............................................. 57,320
Equipment loan and capital lease obligations, less current
portion................................................. 607
Total stockholders' equity................................ 31,998
</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 $14.0
million for the nine months ended March 31, 1999. As of March 31, 1999, we had
an accumulated deficit of $35.2 million. 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 will achieve
6
<PAGE> 8
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. For the nine months ended March 31, 1999, AT&T Wireless Services, DDI
Corporation and a wireless telephone manufacturer accounted for approximately
14%, 11% and 13%,
8
<PAGE> 10
respectively, of our total revenues. We believe that we will continue to be
dependent upon a limited number of customers for a significant portion of our
revenues for each quarter for the foreseeable future. Any failure by us to
capture a significant share of those customers could materially harm our
business.
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
and services that may compete directly with our UP.Link, UP.Browser and
UP.Application products. In addition, Microsoft has announced that it intends to
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
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<PAGE> 11
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 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 and
services that may compete directly with our UP.Link and UP.Browser
products, as well as our UP.Applications. In addition, Microsoft has
announced that it intends to 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.
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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 "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
11
<PAGE> 13
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."
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."
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<PAGE> 14
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 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.
13
<PAGE> 15
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.
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
64% of our total revenues for the nine months ended March 31, 1999. We expect
international sales to continue to account for a significant portion of our
revenues, although the percentage of our total revenues derived from
international sales may vary. 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
14
<PAGE> 16
Analysis of Financial Condition and Results of Operations -- Overview" and
"Business -- Sales and Marketing."
WE FACE YEAR 2000 RISKS.
Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, beginning on January 1,
2000, computer systems and software used by many companies 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.
15
<PAGE> 17
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 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 BE ABLE TO SIGNIFICANTLY INFLUENCE MATTERS REQUIRING
STOCKHOLDER APPROVAL 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, be able to exert significant influence
over matters requiring approval by our stockholders, including the election of
directors and the approval of mergers or other business combinations. This
concentration could have the effect of delaying or preventing a change in
control.
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
16
<PAGE> 18
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.
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 18,144,062 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. The remaining
8,362,796 shares will become eligible for sale in the public market at various
times 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.
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<PAGE> 19
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 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 March 31, 1999;
- the pro forma capitalization of Unwired Planet after giving effect to the
conversion of all outstanding shares of convertible preferred stock into
20,174,170 shares of common stock and the filing of our amended and
restated certificate of incorporation upon completion of this offering;
and
- the as adjusted capitalization to give effect to the sale of shares of
common stock at an assumed initial public offering price of $ 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 MARCH 31, 1999
------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Equipment loan and capital lease obligations, less current
portion................................................. $ 607 $ 607 $
-------- -------- --------
Stockholders' equity:
Convertible preferred stock $0.001 par value, 20,329,720
shares authorized, 20,174,170 shares issued and
outstanding, actual; 5,000,000 shares authorized,
none issued or outstanding, pro forma and as
adjusted............................................. 20 -- --
Common stock $0.001 par value, 32,000,000 shares
authorized, 6,332,688 shares issued and outstanding,
actual; 100,000,000 shares authorized, 26,506,858
shares issued and outstanding, pro forma; and
100,000,000 shares authorized, shares
issued and outstanding, as adjusted(1)............... 6 26
Additional paid-in capital.............................. 69,158 69,158
Deferred stock-based compensation....................... (1,545) (1,545)
Treasury stock.......................................... (196) (196)
Notes receivable from stockholders...................... (285) (285)
Accumulated deficit..................................... (35,160) (35,160)
-------- -------- --------
Total stockholders' equity........................... 31,998 31,998
-------- -------- --------
Total capitalization................................. $ 32,605 $ 32,605 $
======== ======== ========
</TABLE>
- -------------------------
(1) This table excludes the following shares:
- 3,321,346 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $1.86 per share as of March 31, 1999,
- 31,486 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $3.81 per share as of such date, and
- an aggregate of 5,672,807 shares available for future issuance under our
1995 Stock Plan, 1996 Stock Plan, 1999 Directors' Stock Option Plan and
1999 Employee Stock Purchase Plan as of March 31, 1999. See
"Management -- Stock Plans" and Notes 4 and 5 of the Notes to
Consolidated Financial Statements.
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<PAGE> 22
DILUTION
The pro forma net tangible book value of our common stock on March 31, 1999
was $32.0 million, or approximately $1.21 per share. Pro forma net tangible book
value represents the amount of our total tangible assets less total liabilities,
divided by the number of shares of common stock outstanding. Dilution in net
tangible book value per share represents the difference between the amount per
share paid by purchasers of shares of our common stock in this offering and the
net tangible book value per share of our common stock immediately following this
offering. After giving effect to our sale of shares of common stock offered by
this prospectus 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 March 31,
1999................................................. $ 1.21
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 March 31, 1999, the differences
between the number of shares of common stock purchased from us, the total price
and average price per share paid by existing investors and by the new investors,
before deducting the estimated underwriting discounts and commissions and
estimated offering expenses payable by us, assuming 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%
========== ===== ======== =====
</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 nine months ended March 31, 1999,
and the consolidated balance sheet data as of June 30, 1997 and 1998, and March
31, 1999 are derived from our consolidated financial statements that have been
audited by KPMG LLP, independent auditors, which are included elsewhere in this
prospectus. The consolidated statements of operations data for the period from
December 16, 1994 (inception) to June 30, 1995 and the consolidated balance
sheet data as of June 30, 1995 and 1996 are derived from audited consolidated
financial statements that are not included in this prospectus. The consolidated
statements of operations data for the nine months ended March 31, 1998 is
derived from our unaudited consolidated financial statements included elsewhere
in this prospectus and include, in the opinion of management, all adjustments,
consisting only of normal recurring adjustments, that we consider necessary for
the fair presentation of our consolidated financial position and results of
operations for those periods. The historical results presented below are not
necessarily indicative of the results to be expected for any future fiscal year.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 16, YEAR ENDED JUNE 30, MARCH 31,
1994 (INCEPTION) TO ---------------------------- ------------------
JUNE 30, 1995 1996 1997 1998 1998 1999
-------------------- ------- ------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
Revenues:
License............................... $ -- $ -- $ 80 $ 522 $ 289 $ 1,530
Maintenance and support services...... -- -- 212 1,683 635 3,786
Consulting services................... -- -- -- -- -- 1,401
------ ------- ------- -------- ------- --------
Total revenues...................... -- -- 292 2,205 924 6,717
------ ------- ------- -------- ------- --------
Cost of revenues:
License............................... -- -- 87 95 59 172
Maintenance and support services...... -- -- 266 1,063 715 1,876
Consulting services................... -- -- -- -- -- 646
------ ------- ------- -------- ------- --------
Total cost of revenues.............. -- -- 353 1,158 774 2,694
------ ------- ------- -------- ------- --------
Gross profit (loss)................. -- -- (61) 1,047 150 4,023
------ ------- ------- -------- ------- --------
Operating expenses:
Research and development.............. 92 1,387 3,959 5,732 3,871 8,751
Sales and marketing................... 6 757 3,198 5,011 3,307 6,504
General and administrative............ 5 522 1,237 1,801 1,185 2,386
Stock-based compensation.............. -- -- -- 108 45 784
------ ------- ------- -------- ------- --------
Total operating expenses............ 103 2,666 8,394 12,652 8,408 18,425
------ ------- ------- -------- ------- --------
Operating loss...................... (103) (2,666) (8,455) (11,605) (8,258) (14,402)
Interest income, net.................... -- 196 464 982 528 1,139
------ ------- ------- -------- ------- --------
Loss before income taxes............ (103) (2,470) (7,991) (10,623) (7,730) (13,263)
Income taxes............................ -- -- -- -- -- 710
------ ------- ------- -------- ------- --------
Net loss............................ $ (103) $(2,470) $(7,991) $(10,623) $(7,730) $(13,973)
====== ======= ======= ======== ======= ========
Basic and diluted net loss per share.... $(0.02) $ (0.53) $ (1.67) $ (2.03) $ (1.50) $ (2.49)
====== ======= ======= ======== ======= ========
Shares used in computing basic and
diluted net loss per share............ 4,671 4,704 4,776 5,221 5,142 5,618
====== ======= ======= ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
------------------------------------- MARCH 31,
1995 1996 1997 1998 1999
------ ------ ------ ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments......... $2,300 $5,848 $8,014 $33,464 $47,831
Total assets.............................................. 2,315 6,767 9,759 39,144 57,320
Equipment loan and capital lease obligations, less current
portion................................................. -- -- -- 915 607
Total stockholders' equity................................ 2,243 6,464 8,125 28,393 31,998
</TABLE>
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 $1.5 million for the nine months ended March 31, 1999.
We incurred net losses of approximately $8.0 million and $10.6 million for the
fiscal years ended June 30, 1997 and 1998, respectively, and $14.0 million for
the nine months ended March 31, 1999. As of March 31, 1999, we had an
accumulated deficit of $35.2 million.
To provide a worldwide standard for the delivery of Internet-based services
over mass-market wireless telephones, we formed the WAP Forum in close
cooperation with Ericsson, Motorola and Nokia, the world's three largest
manufacturers of wireless telephones. In February 1998, the WAP Forum published
technical specifications for application development and product
interoperability based substantially on 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 April 1999, we have licensed UP.Browser to 23 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
64% of our total revenues for the nine months ended March 31, 1999. We expect
international sales to continue to account for a significant portion of our
revenues, although the percentage of our total revenues derived from
international sales may vary. 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. For the nine months ended March 31, 1999, AT&T Wireless Services, DDI
Corporation and a wireless telephone manufacturer accounted for approximately
14%, 11% and 13%, respectively, of our total revenues. 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."
24
<PAGE> 26
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 ("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 $18.7 million as of March 31, 1999. We expect that
deferred revenue will decline in the long term as network operators deploy
services based on our products. In particular, license revenue was recognized in
the third quarter of fiscal 1999 in connection with the launch by one network
operator of commercial services based on our products and the acceptance of our
products by a second network operator. License revenue also was recognized 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 third 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 third network operator in the
deployment of the prepaid licenses discussed above. Therefore, the remaining
deferred revenue of approximately $4.2 million as of December 31, 1998, relating
to the prepayment is being recognized as revenue ratably over the remaining
estimated deployment period. Accordingly, we recognized revenue of approximately
$0.3 million in the quarter ending March 31, 1999, and will recognize
approximately $1.3 million in each of the quarters ending June 30, 1999,
September 30, 1999, and December 31, 1999, associated with the prepayment.
NINE MONTHS ENDED MARCH 31, 1998 AND 1999
License Revenues
License revenues increased 429% from $289,000 for the nine months ended
March 31, 1998 to $1.5 million for the nine months ended March 31, 1999. The
increase in license revenues was due primarily to the launch by one network
operator of commercial services based on our products, the acceptance of our
products by a second network operator and the satisfaction of our deployment
obligations related to a third network operator.
25
<PAGE> 27
Maintenance and Support Services Revenues
Maintenance and support services revenues increased 496% from $635,000 for
the nine months ended March 31, 1998 to $3.8 million for the nine months ended
March 31, 1999. The increase in maintenance and support services revenues was
attributable primarily to increased maintenance and engineering support fees
received from wireless telephone manufacturers.
Consulting Services Revenues
Consulting services revenues were $1.4 million for the nine months ended
March 31, 1999. No consulting services were performed in the nine months ended
March 31, 1998.
Cost of License Revenues
Cost of license revenues consists primarily of third-party license and
support fees. Cost of license revenues increased from $59,000 for the nine
months ended March 31, 1998 to $172,000 for the nine months ended March 31,
1999. The growth in cost of license revenues was attributable primarily to the
increase in license revenues. As a percentage of license revenues, cost of
license revenues for the nine months ended March 31, 1998 and 1999 was 20% and
11%, respectively.
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 162% from $715,000 for the
nine months ended March 31, 1998 to $1.9 million for the nine months ended March
31, 1999. The growth in cost of maintenance and support services revenues was
attributable primarily to 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 nine
months ended March 31, 1998 and 1999 was 113% and 50%, 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 nine months ended
March 31, 1999 was $646,000. No consulting services were performed in the nine
months ended March 31, 1998. As a percentage of consulting services revenues,
cost of consulting services revenues for the nine months ended March 31, 1999
was 46%. Gross profit on consulting services revenues is impacted by the mix of
company personnel and independent consultants assigned to projects. The gross
profit we achieve is also impacted by the contractual terms of the consulting
assignments we undertake, and the gross profit on fixed price contracts
typically is more susceptible to fluctuation than contracts performed on a
time-and-materials basis. We anticipate that the cost of consulting services
revenues will increase in absolute dollars as we continue to invest in the
growth of our consulting services operations.
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 126% from $3.9
million for the nine months ended March 31, 1998 to $8.8 million for the nine
months ended March 31, 1999. This increase was attributable primarily to the
addition of personnel in our research and development organization associated
with product development and higher expenses associated with increased patent
prosecution activity. Research and development expenses were 419% and 130% of
total revenues for the nine months ended March 31, 1998 and 1999, 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 $3.3 million for the
nine months ended March 31, 1998 to $6.5 million for the nine months ended March
31, 1999. This increase 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 358% and 97% of total revenues for the nine months ended
March 31, 1998 and 1999, 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 101% from $1.2 million for the nine months ended March 31,
1998 to $2.4 million for the nine months ended March 31, 1999. 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 128% and 36% of total
revenues for the nine months ended March 31, 1998 and 1999, 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 nine months ended March 31, 1999 have
been deemed to be compensatory. Total deferred stock-based compensation
associated with such equity arrangements through March 31, 1999 amounted to $2.4
million related to stock options granted and restricted stock issued from
October 1997 through March 1999. These amounts are being amortized over the
respective vesting periods of such equity arrangements in a manner consistent
with Financial Accounting Standards Board Interpretation No. 28. Of the total
deferred stock-based compensation, $45,000 and $784,000 was amortized in the
nine months ended March 31, 1998 and 1999, respectively. We expect amortization
of approximately $227,000, $696,000, $375,000 and $185,000 and $62,000 in the
remainder of the fiscal year ending June 30, 1999, and in the fiscal years
ending June 30, 2000, 2001, 2002 and 2003, respectively.
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 $528,000 and $1.1 million for the nine months ended March 31, 1998 and 1999,
respectively. The increase was primarily attributable to increased cash balances
as a result of our private placement financing consummated in February 1998, and
to a lesser extent, to our private placement financing consummated in March
1999.
Income Taxes
Income tax expense of $710,000 for the nine months ended March 31, 1999,
consisted of foreign taxes. Since inception, we have incurred net losses for
federal and state tax purposes and have not recognized any tax provision or
benefit. As of March 31, 1999, we had net operating loss carryforwards of
approximately $31.0 million for both federal and California income tax purposes.
These carryforwards, if not utilized, expire beginning in the year 2004 through
2019. We also have research and development credit carryforwards of
approximately $367,000 and $279,000 for federal and California income tax
purposes, respectively. The Company also has a foreign tax credit carryforward
of $670,000, which expires in 2004. Federal and California tax laws impose
significant restrictions on the utilization of net operating loss carryforwards
in the event of a shift in our ownership that constitutes an "ownership change,"
as defined in Section 382 of the Internal Revenue Code. If we have an ownership
change, the ability to utilize the stated carryforwards could be significantly
reduced. See Note 7 of Notes to Consolidated Financial Statements.
As of March 31, 1999, we had deferred tax assets of $14.6 million, which
were fully offset by a valuation allowance. Deferred tax assets consist
principally of the federal and state net operating loss carryforwards,
capitalized start-up expenditures, accruals and reserves not currently
deductible for tax purposes, research and development credits, and foreign tax
credit carryforwards. We have provided a valuation allowance due to the
uncertainty of generating future profits that would allow for the realization of
such deferred tax assets. Accordingly, no tax benefit was recorded in the
accompanying consolidated statements of operations.
FISCAL YEARS ENDED JUNE 30, 1996, 1997 AND 1998
License Revenues
License revenues increased 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.
28
<PAGE> 30
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 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.
29
<PAGE> 31
Stock-Based Compensation
We recorded deferred stock-based compensation of $1.9 million through June
30, 1998, associated with stock options granted and restricted stock issued from
October 1997 through June 1998. Amortization of stock-based compensation was
$108,000 for the fiscal year ended June 30, 1998. We recorded no deferred stock
based compensation for the fiscal years ended June 30, 1996 and 1997.
Interest Income, Net
Net interest income was $196,000, $464,000 and $982,000 in the fiscal years
ended June 30, 1996, 1997 and 1998, respectively. The year-to-year increases
resulted primarily from earnings on rising cash, cash equivalent and short-term
investment balances as a result of our private placement financings, partially
offset in the fiscal year ended June 30, 1998 by interest expense related to
obligations under capital leases and our equipment loan.
Income Taxes
Since inception, we have incurred net losses for federal and state tax
purposes and have not recognized any tax provision or benefit. As of June 30,
1998, we had net operating loss carryforwards of approximately $19.0 million for
both federal and California income tax purposes. These carryforwards, if not
utilized, expire beginning in the year 2004 through 2019. We also had research
and development credit carryforwards of approximately $379,000 and $287,000 for
federal and California income tax purposes, respectively. See Note 7 of Notes to
Consolidated Financial Statements.
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 seven quarters ended March 31, 1999. This data has been derived from
unaudited consolidated financial statements that, in the opinion of our
management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of 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, MARCH 31,
1997 1997 1998 1998 1998 1998 1999
--------- -------- --------- -------- --------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
License..................................... $ 17 $ 158 $ 114 $ 233 $ 202 $ 64 $ 1,264
Maintenance and support services............ 94 222 319 1,048 1,005 1,327 1,454
Consulting services......................... -- -- -- -- 161 426 814
------- ------- ------- ------- ------- ------- -------
Total revenues............................ 111 380 433 1,281 1,368 1,817 3,532
------- ------- ------- ------- ------- ------- -------
Cost of revenues:
License..................................... 5 25 29 36 62 26 84
Maintenance and support services............ 175 245 295 348 433 676 767
Consulting services......................... -- -- -- -- 58 77 511
------- ------- ------- ------- ------- ------- -------
Total cost of revenues.................... 180 270 324 384 553 779 1,362
------- ------- ------- ------- ------- ------- -------
Gross profit (loss)....................... (69) 110 109 897 815 1,038 2,170
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and development.................... 1,072 1,381 1,418 1,861 2,533 2,604 3,614
Sales and marketing......................... 837 1,128 1,342 1,704 1,801 2,074 2,629
General and administrative.................. 341 403 441 616 597 843 946
Stock-based compensation.................... -- 6 39 63 249 255 280
------- ------- ------- ------- ------- ------- -------
Total operating expenses.................. 2,250 2,918 3,240 4,244 5,180 5,776 7,469
------- ------- ------- ------- ------- ------- -------
Operating loss............................ (2,319) (2,808) (3,131) (3,347) (4,365) (4,738) (5,299)
Interest income, net.......................... 96 76 356 454 415 365 359
------- ------- ------- ------- ------- ------- -------
Loss before income taxes.................. (2,223) (2,732) (2,775) (2,893) (3,950) (4,373) (4,940)
Income taxes.................................. -- -- -- -- -- -- 710
------- ------- ------- ------- ------- ------- -------
Net loss.................................. $(2,223) $(2,732) $(2,775) $(2,893) $(3,950) $(4,373) $(5,650)
======= ======= ======= ======= ======= ======= =======
Basic and diluted net loss per share.......... $ (0.44) $ (0.53) $ (0.53) $ (0.53) $ (0.71) $ (0.78) $ (0.99)
======= ======= ======= ======= ======= ======= =======
Shares used in computing basic and diluted net
loss per share.............................. 5,050 5,147 5,230 5,459 5,539 5,617 5,699
======= ======= ======= ======= ======= ======= =======
AS A PERCENTAGE OF TOTAL REVENUES
Revenues:
License..................................... 15% 42% 26% 18% 15% 4% 36%
Maintenance and support services............ 85 58 74 82 73 73 41
Consulting services......................... -- -- -- -- 12 23 23
------- ------- ------- ------- ------- ------- -------
Total revenues............................ 100 100 100 100 100 100 100
------- ------- ------- ------- ------- ------- -------
Cost of revenues:
License..................................... 4 7 7 3 4 2 2
Maintenance and support services............ 158 64 68 27 32 37 23
Consulting services......................... -- -- -- -- 4 4 14
------- ------- ------- ------- ------- ------- -------
Total cost of revenues.................... 162 71 75 30 40 43 39
------- ------- ------- ------- ------- ------- -------
Gross profit (loss)....................... (62) 29 25 70 60 57 61
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and development.................... 966 363 327 145 185 144 102
Sales and marketing......................... 754 297 310 133 132 114 74
General and administrative.................. 307 106 102 48 44 46 27
Stock-based compensation.................... -- 2 9 5 18 14 8
------- ------- ------- ------- ------- ------- -------
Total operating expenses.................. 2,027 768 748 331 379 318 211
------- ------- ------- ------- ------- ------- -------
Operating loss............................ (2,089) (739) (723) (261) (319) (261) (150)
Interest income, net.......................... 86 20 82 35 30 20 10
------- ------- ------- ------- ------- ------- -------
Loss before income taxes.................. (2,003) (719) (641) (226) (289) (241) (140)
Income taxes.................................. -- -- -- -- -- -- 20
------- ------- ------- ------- ------- ------- -------
Net loss.................................. (2,003)% (719)% (641)% (226)% (289)% (241)% (160)%
======= ======= ======= ======= ======= ======= =======
AS A PERCENTAGE OF RELATED REVENUES
Cost of license revenues...................... 29% 16% 25% 15% 31% 41% 7%
Cost of maintenance and support services
revenues.................................... 186% 110% 92% 33% 43% 51% 53%
Cost of consulting services revenues.......... -- -- -- -- 36% 18% 63%
</TABLE>
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<PAGE> 33
License revenues increased from $64,000 in the quarter ended December 31,
1998 to $1.3 million in the quarter ended March 31, 1999. This increase was
attributable primarily to the launch by one network operator of commercial
services based on our products, the acceptance of our products by a second
network operator and the satisfaction of our deployment obligations related to a
third network operator.
Cost of license revenues increased from $26,000 in the quarter ended
December 31, 1998 to $84,000 in the quarter ended March 31, 1999. As a
percentage of license revenues, cost of license revenues was 41% and 7% in the
quarters ended December 31, 1998 and March 31, 1999, respectively. The decrease
as a percentage of license revenues was attributable primarily to higher license
revenues in the quarter ended March 31, 1999 and to the amortization of
relatively fixed maintenance fees relating to third party software licenses. We
expect that cost of license revenues will vary as a percentage of license
revenues from period to period.
Cost of consulting services revenues increased from $77,000 in the quarter
ended December 31, 1998 to $511,000 in the quarter ended March 31, 1999. As a
percentage of consulting services revenues, cost of consulting services revenues
was 18% and 63% in the quarters ended December 31, 1998 and March 31, 1999,
respectively. The increase reflects a higher mix of consulting services
performed on a time and materials basis during the latter period, and we expect
that cost of consulting services revenues will vary as a percentage of
consulting services revenues from period to period.
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;
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<PAGE> 34
- 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 $66.0 million in aggregate
net proceeds through March 31, 1999. We have also financed our operations
through an equipment loan and a capitalized lease, which totaled $1.0 million in
principal amount outstanding at March 31, 1999. As of March 31, 1999, we had
$20.2 million of cash and cash equivalents and $27.6 million of short-term
investments, and working capital of $29.4 million.
Net cash used for operating activities was $2.3 million, $6.6 million and
$5.1 million for the fiscal years ended June 30, 1996, 1997 and 1998,
respectively, and $1.0 million for the nine months ended March 31, 1999. For
each of the fiscal years ended June 30, 1996, 1997 and 1998, and for the nine
months ended March 31, 1999, cash used for operating activities was attributable
primarily to net losses and increases in accounts receivable, offset in part by
depreciation and amortization, increases in accounts payable and accrued
liabilities, and increases in deferred revenue.
Net cash used for investing activities was $852,000, $4.8 million and $18.0
million for the fiscal years ended June 30, 1996, 1997 and 1998, respectively,
and $7.9 million for the nine months ended March 31, 1999. For each of the
fiscal years, cash used in investing activities reflects purchases of property
and equipment, with increased purchases of short-term investments in the fiscal
years ended June 30, 1997 and 1998 and in the nine months ended March 31, 1999.
Net cash provided by financing activities was $6.7 million, $9.7 million
and $31.7 million for the fiscal years ended June 30, 1996, 1997 and 1998,
respectively, and $16.5 million for the nine months ended March 31, 1999. Cash
provided by financing activities in each of these periods was attributable to
proceeds from the issuance of preferred stock, and for the fiscal year ended
June 30, 1998, cash provided by financing activities also was attributable in
part to proceeds from our equipment loan.
As of March 31, 1999, our principal commitments consisted of obligations
outstanding under operating leases, our equipment loan and capitalized lease
obligations. Although we have no material commitments for capital expenditures,
we expect to increase capital expenditures and lease commitments consistent with
our anticipated growth in operations, infrastructure and personnel. We also may
increase our capital expenditures as we expand into additional international
markets. See Notes 3, 4 and 6 of Notes to Consolidated Financial Statements.
We believe that the net proceeds from this offering, together with our
current cash, cash equivalents and short-term investments, will be sufficient to
meet our anticipated cash needs for working capital and capital expenditures for
at least the next twelve months. If cash generated from
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<PAGE> 35
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.
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.
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<PAGE> 36
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 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 March 31, 1999, we had no foreign currency contracts outstanding.
We currently do not use financial instruments to hedge operating expenses
in the U.K. or Japan denominated in their respective local currency. We intend
to assess the need to utilize financial instruments to hedge currency exposures
on an ongoing basis.
We do not use derivative financial instruments for speculative trading
purposes, nor do we currently hedge our foreign currency exposure to offset the
effects of changes in foreign exchange rates.
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<PAGE> 37
Fixed Income Investments
Our exposure to market risks for changes in interest rates relates
primarily to corporate debt securities. We place our investments with high
credit quality issuers and, by policy, limit the amount of the credit exposure
to any one issuer.
Our general policy is to limit the risk of principal loss and ensure the
safety of invested funds by limiting market and credit risk. All highly liquid
investments with a maturity of less than three months at the date of purchase
are considered to be cash equivalents; all investments with maturities of three
months or greater are classified as available-for-sale, and considered to be
short-term investments.
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<PAGE> 38
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 April 1999, 23 network operators have licensed our software
and have commenced or announced commercial service or are in market or
laboratory trials. In addition, 23 wireless telephone manufacturers have
licensed UP.Browser.
INDUSTRY BACKGROUND
Growth of the Internet
The Internet has emerged as a global communications medium enabling
millions of people to share information and conduct business electronically.
International Data Corporation, or IDC, estimates that there were approximately
159 million users of the Internet worldwide at the end of 1998 and that the
number of users will grow to 410 million by the end of 2002. 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> 39
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> 40
<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> 41
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.
LOGO
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 and ESPN Sportszone.
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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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<PAGE> 43
- 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 April 1999, we have licensed UP.Browser to 23 wireless
telephone manufacturers.
- Promote the Development of Internet-Based Services Over Mass-Market
Wireless Telephones. To encourage the growth of our business, we actively
encourage Internet content and application developers to create WML
applications. In connection with this activity, we provide our UP.SDK
software development kit and support to Internet content and application
developers free of charge. To date, there are over 4,500 registered
developers in our Developer Program. Internet content providers that
currently deliver content for wireless telephones equipped with
UP.Browser include ABCNews.com, Quote.com, Bloomberg, Reuters and ESPN
Sportszone.
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> 44
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:
<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 April 1999, 23 network operators, including the following companies,
have licensed our software:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
NAME STAGE TECHNOLOGY COUNTRY
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AT&T Wireless Services Deployed in July 1996 CDPD USA
- --------------------------------------------------------------------------------------------------
Bell Atlantic Mobile Deployed in September 1996 CDPD USA
- --------------------------------------------------------------------------------------------------
GTE Wireless Deployed in May 1997 CDPD USA
- --------------------------------------------------------------------------------------------------
SFR/CEGETEL Deployed in March 1999 GSM France
- --------------------------------------------------------------------------------------------------
Bell Mobility Announced Commercial Launch CDMA Canada
(expected May 1999)
- --------------------------------------------------------------------------------------------------
DDI Corporation Announced Commercial Launch CDMA Japan
(expected April 1999)
- --------------------------------------------------------------------------------------------------
IDO Corporation Announced Commercial Launch CDMA Japan
(expected April 1999)
- --------------------------------------------------------------------------------------------------
LG Telecom Commercial Launch expected CDMA South Korea
June 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
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<PAGE> 47
systems such as billing, provisioning and customer care. We also provide our
network operator customers with assistance in choosing the appropriate content
and applications for their subscribers and creating the promotion and pricing
strategies for their service.
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 April 1999, 23 wireless telephone manufacturers have licensed
UP.Browser, and the following manufacturers have publicly announced products
that will include UP.Browser:
<TABLE>
<S> <C>
- - Alcatel - Panasonic (Matsushita)
- - Hyundai Electronics - Qualcomm
- - IGS - Sagem
- - LG Information & Communications - Samsung Electronics
- - Mitsubishi - Siemens
- - Motorola - Sony
</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. For the nine months ended March 31, 1999, AT&T Wireless
Services, DDI Corporation and a wireless telephone manufacturer accounted for
approximately 14%, 11% and 13%, respectively, of our total revenues.
RESEARCH AND PRODUCT DEVELOPMENT
We continue to enhance the features and performance of our existing
products and introduce new products. For example, in the second half of 1999, we
expect to release the fourth generation of our UP.Link Server Suite and
UP.Browser products. These products are expected to be compliant with version
1.1 of the specifications promulgated by the WAP Forum. We are currently
developing other applications, including a secure provisioning server, which
enables network operators to automate customer provisioning, and compatibility
with two-way short messaging service systems. In addition, our Carrier Services
Group provides outsourced application development and services to our network
operator customers.
Our success depends on a number of factors, which include our ability to
identify and respond to emerging technological trends in our target markets,
develop and maintain competitive products, enhance our existing products by
adding features and functionality that differentiate them from those of our
competitors and bring products to market on a timely basis and at competitive
prices. As a result, we have made, and we intend to continue to make,
significant investments in research and product development. Our research and
development expenses were $4.0 million and $5.7 million for the years ended June
30, 1997 and 1998, respectively, and $8.8 million for the nine months ended
March 31, 1999. As of March 31, 1999, we had 74 employees engaged in research
and product development activities. We are recruiting additional skilled
engineers for research and product development, and our business could be
adversely affected if we are unable to hire such engineers on
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<PAGE> 48
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 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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<PAGE> 49
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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<PAGE> 50
As of March 31, 1999, we had 28 persons in sales and marketing serving the
United States market, and 12 persons in sales and marketing outside the United
States. We plan to significantly expand this group over the next 12 months. In
addition, we have offices in London and Tokyo. Our direct sales force focuses on
selling products and consulting services and assists our indirect channel
partners in selling our products and services. International sales of products
and services accounted for 7% and 44% of our total revenues in the years ended
June 30, 1997 and 1998, respectively, and 64% of our total revenues for the nine
months ended March 31, 1999. We expect international revenues to continue to
account for a significant portion of our revenues, although the percentage of
our total revenues derived from international sales may vary. Our international
sales strategy is to partner with leading distributors and systems integrators
that have strong industry backgrounds and market presence in their respective
markets and geographic regions. 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 and
services that may compete directly with our UP.Link and UP.Browser
products, as well as our UP.Applications. In addition, Microsoft has
announced that it intends to 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 56 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 March 31, 1999, we had a total of 135 employees. None of our
employees is covered by any collective bargaining agreements. We believe that
our relations with our employees are good. 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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<PAGE> 53
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors and their ages as of March 31, 1999
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
Tony Miranzadeh 36 Vice President of Sales and Business Development, Asia
Pacific and Latin America
Malcolm Bird 43 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
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graduate diploma in Public Accountancy from McGill University. Mr. Black is a
member of the California Society of Certified Public Accountants and the
Canadian Institute of Chartered Accountants.
ANDREW LAURSEN. Mr. Laursen joined 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.
TONY MIRANZADEH. Tony Miranzadeh joined Unwired Planet as Vice President of
Sales and Business Development, Asia Pacific and Latin America in March 1999.
From April 1984 to February 1999, Mr. Miranzadeh held various management
positions with Lucent Technologies, including Director of Business Development
and Strategy in the United Kingdom, where he was responsible for the
commercialization and introduction of third generation wireless technologies.
Mr. Miranzadeh also held the position of Director of Sales and Business
Development for GSM and CDMA network technologies for the Asia Pacific region.
Mr. Miranzadeh holds a B.S. degree in Electrical Engineering from the University
of Illinois and an M.S. degree in Electrical and Computer Engineering from the
Illinois Institute of Technology.
MALCOLM BIRD. Prior to joining 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.
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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, Maker Communications,
Inc., a communications semiconductor company, and several other privately-held
companies. Mr. Evans holds a Master of Arts degree in Economics from Cambridge
University, England.
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 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.
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<PAGE> 56
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."
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.
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<PAGE> 57
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.
(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.
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<PAGE> 58
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(1)
OPTIONS GRANTED TO PRICE PER EXPIRATION ------------------
NAME GRANTED EMPLOYEES SHARE DATE 5% 10%
---- ---------- ------------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Alain Rossmann..................... -- -- -- -- -- --
Charles Parrish.................... 106,667 8.6% $2.48 6/24/2008 166,029 421,599
Maurice Jeffery.................... 35,000(2) 2.8 0.60 2/18/2008 13,207 33,469
20,000(3) 1.6 2.48 6/24/2008 31,193 79,050
Malcolm Bird....................... 100,000(2) 8.1 0.39 9/24/2007 24,527 62,156
20,000(3) 1.6 2.48 6/24/2008 31,193 79,050
Michael Matthys(4)................. -- -- -- -- -- --
</TABLE>
- -------------------------
(1) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the Securities and Exchange Commission. 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.
(2) These stock options, which were granted under the 1996 Stock Plan, become
exercisable at a rate of 1/4 of the total number of shares of common stock
subject to the option on the first anniversary of the date of grant, and
1/48 of the total number of shares monthly thereafter, as long as the
optionee remains an employee with, consultant to, or director of Unwired
Planet.
(3) These options, which were granted under the 1996 Stock Plan, become
exercisable at a rate of 1/10 of the total number of shares of common stock
subject to the option on the second anniversary of the date of grant, 2/10
on the third anniversary, 3/10 on the fourth anniversary and 4/10 on the
fourth anniversary, as long as the optionee remains an employee with,
consultant to, or director of Unwired Planet.
(4) Mr. Matthys resigned from Unwired Planet in February 1999.
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<PAGE> 59
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 1,649,462 shares of common stock have been
reserved for issuance under the 1995 Stock Plan. As of March 31, 1999, options
to purchase 445,166 shares of common stock were outstanding at a weighted
average exercise price of $0.16, 1,204,296 shares had been issued upon exercise
of outstanding options or pursuant to restricted stock purchase agreements, and
no shares remained available for future grant.
The 1995 Stock Plan may be administered by the board of directors or a
committee of the Board, called 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
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<PAGE> 60
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 1/4 of the total number of shares
subject to the option 12 months after the date of grant, and 1/48 of the total
number of shares subject to the option each month thereafter.
In the event of our merger with or into another corporation, each option
may be assumed or an equivalent option substituted by the successor corporation.
The administrator has the authority to amend or terminate the 1995 Stock Plan
provided that no action that impairs the rights of any holder of an outstanding
option may be taken without the holder's consent. In addition, stockholder
approval will be obtained for any amendment to the extent required by applicable
law.
In addition to stock options, the administrator may issue stock purchase
rights under the 1995 Stock Plan to employees, directors and consultants. The
administrator determines the number of shares, price, terms, conditions and
restrictions related to a grant of stock purchase rights. The purchase price of
a stock purchase right granted under the 1995 Stock Plan must be at least 85% of
the fair market value of the shares as of the date of the offer. The period
during which the stock purchase right is held open is determined by the
administrator, but in no case shall 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. This amendment to the 1996 Stock Plan
will be submitted for approval by our stockholders prior to the completion of
this offering. Unless terminated earlier by the board of directors, the 1996
Stock Plan shall terminate in September 2006. A total of 7,734,425 shares of
common stock have been reserved for issuance under the 1996 Stock Plan. In
addition, the number of shares reserved under the plan will automatically be
increased each year, beginning on July 1, 2000 in an amount equal to the lesser
of (a) 1,500,000 shares, (b) four percent of the shares outstanding on the last
day of the preceding fiscal year or (c) such lesser number of shares as is
determined by the board of directors. As of March 31, 1999, options to purchase
2,876,180 shares of common stock were outstanding at a weighted average exercise
price of $2.13, 385,438 shares had been issued upon exercise of outstanding
options or pursuant to restricted stock purchase agreements, and 4,472,807
shares remained available for future grant.
The 1996 Stock Plan may be administered by the board of directors or a
committee of the board called the administrator. The administrator determines
the terms of options granted under the 1996
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<PAGE> 61
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 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 over a period of four
or five years.
In the event of our merger with or into another corporation, each option
may be assumed or an equivalent option substituted by the successor corporation.
However, if the successor corporation does not agree to 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.
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<PAGE> 62
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' 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
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<PAGE> 63
automatically without administration; however, to the extent administration is
necessary, it will be performed by the board of directors. To the extent they
arise, it is expected that conflicts of interest will be addressed by abstention
of any interested director from both deliberations and voting regarding matters
in which 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
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<PAGE> 64
in Section 174 of the Delaware General Corporation Law or (d) for any
transaction from which a director derives an improper personal benefit.
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 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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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 and a director 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 a relocation agreement with Charles Parrish on December 23,
1996 pursuant to which we have agreed to pay Mr. Parrish a housing allowance of
$3,570 per month starting in September 1996 through the earlier of August 2003
or the date that Mr. Parrish's terminates employment with Unwired Planet. We
have also entered into a loan agreement with Mr. Parrish on
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<PAGE> 66
December 23, 1996, under which we have agreed to lend Mr. Parrish $300,000 less
the aggregate amount of all payments made to him under the relocation agreement
upon Mr. Parrish's request before August 1, 2003 in order to assist him in
purchasing a residence. In addition, we have agreed to pay Mr. Parrish a
severance payment equal to six months of his base salary if Mr. Parrish's
employment with us is involuntarily terminated. We have entered into a letter
agreement with Malcolm Bird on August 18, 1997, which provides that if Mr.
Bird's employment with us is involuntarily terminated by us other than for
cause, he will receive a severance payment equal to six months of his base
salary and continue to receive his medical insurance benefits for a period of
six months following such termination.
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<PAGE> 67
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of our common stock as of March 31, 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>
Alain Rossmann(2).......................................... 3,737,832 14.1%
Roger Evans(3)............................................. 3,037,475 11.4%
c/o Greylock Management
One Federal Street
Boston, MA 02110
Andrew Verhalen(4)......................................... 3,037,471 11.4%
c/o Matrix Partners
Bay Colony Corporate Center
1000 Winter Street, Suite 4500
Waltham, MA 02154
Greylock Equity Limited Partnership........................ 3,004,142 11.3%
c/o Greylock Management
One Federal Street
Boston, MA 02110
Entities affiliated with Matrix Partners(5)................ 3,004,138 11.3%
Bay Colony Corporate Center
1000 Winter Street, Suite 4500
Waltham, MA 02154
Charles Parrish............................................ 752,822 2.8%
David Kronfeld(6).......................................... 635,763 2.4%
c/o JK&B Capital
205 North Michigan Avenue, Suite 808
Chicago, IL 60601
Malcolm Bird(7)............................................ 41,667 *
Maurice Jeffery(8)......................................... 34,270 *
Michael Matthys(9)......................................... 29,166 *
All directors and executive officers as a group
(12 persons)(10)......................................... 12,321,879 45.9%
</TABLE>
- -------------------------
* Less than 1%.
(1) Applicable percentage of beneficial ownership is based on 26,506,858 shares
of common stock outstanding as of March 31, 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 31, 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> 68
(2) 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.
(3) Consists of 33,333 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 31, 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.
(4) Consists of 33,333 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 31, 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.
(5) Consists of 2,853,934 shares held by Matrix Partners IV, L.P. and 150,204
shares held by Matrix IV Entrepreneurs Fund. Mr. Verhalen is a director of
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.
(6) Consists of 33,333 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 31, 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.
(7) Consists of 41,667 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 31, 1999.
(8) Includes 19,689 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 31, 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 31, 1999.
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<PAGE> 69
DESCRIPTION OF CAPITAL STOCK
Following the closing of the sale of the shares offered hereby, our
authorized capital stock will consist of 100,000,000 shares of common stock,
$0.001 par value, and 5,000,000 shares of preferred stock, $0.001 par value.
COMMON STOCK
As of March 31, 1999, there were 26,506,858 shares of common stock
outstanding that were held of record by approximately 96 stockholders after
giving effect to the conversion of our preferred stock into common stock at a
one-to-one ratio and assuming no exercise or conversion of outstanding
convertible securities after March 31, 1999. There will be shares of
common stock outstanding (assuming no exercise of the underwriters'
over-allotment option and no exercise or conversion of outstanding convertible
securities after March 31, 1999) after giving effect to the sale of the shares
of common stock offered hereby.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of common stock are
entitled to receive ratably 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
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<PAGE> 70
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.
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<PAGE> 71
WARRANTS
As of March 31, 1999, warrants were outstanding to purchase an aggregate of
31,486 shares of common stock at a weighted average exercise price of $3.81 per
share.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is U.S. Stock
Transfer Corporation.
LISTING
We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the trading symbol "UNWP."
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<PAGE> 72
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 26,506,858 shares outstanding upon completion of this
offering will be "restricted securities" as that term is defined under Rule 144.
We issued and sold these restricted securities in private transactions in
reliance on exemptions from registration under the Securities Act. Restricted
securities may be sold in the public market only if they are registered or if
they qualify for an exemption from registration under Rule 144 or Rule 701 under
the Securities Act, as summarized below.
Pursuant to certain "lock-up" agreements, all the executive officers,
directors and certain stockholders of Unwired Planet, who collectively hold an
aggregate of 26,506,858 these restricted securities, have agreed not to offer,
sell, contract to sell, grant any option to purchase or otherwise dispose of any
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, 18,144,062
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
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 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
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<PAGE> 73
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 8,994,153 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> 74
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> 75
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> 76
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> 77
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 March 31,
1999, and the consolidated statements of operations, stockholders' equity and
cash flows for each of the years in the three-year period ended June 30, 1998,
and the nine months ended March 31, 1999, have been included in the Registration
Statement in reliance upon the report of KPMG LLP, independent auditors, and
upon the authority of said firm as experts in accounting and auditing.
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.
76
<PAGE> 78
UNWIRED PLANET, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Form of Independent Auditors' Report........................ F-2
Consolidated Balance Sheets as of June 30, 1997 and 1998,
and March 31, 1999........................................ F-3
Consolidated Statements of Operations for the years ended
June 30, 1996, 1997, and 1998, and for the nine months
ended March 31, 1998 (unaudited) and 1999................. F-4
Consolidated Statements of Stockholders' Equity for the
years ended June 30, 1996, 1997, and 1998, and for the
nine months ended March 31, 1999.......................... F-5
Consolidated Statements of Cash Flows for the years ended
June 30, 1996, 1997, and 1998, and for the nine months
ended March 31, 1998 (unaudited) and 1999................. F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 79
When the reverse stock split referred to in Note 5(b) to the Consolidated
Financial Statements has been consummated, we will be in a position to render
the following report.
KPMG LLP
FORM OF 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 March 31,
1999, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended June
30, 1998, and for the nine months ended March 31, 1999. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Unwired Planet, Inc.
and subsidiaries as of June 30, 1997 and 1998, and March 31, 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 30, 1998, and for the nine months ended March 31,
1999, in conformity with generally accepted accounting principles.
Mountain View, California
April 12, 1999
F-2
<PAGE> 80
UNWIRED PLANET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, MARCH 31, 1999
-------------------- -------------------------
1997 1998 ACTUAL PRO FORMA
-------- -------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 4,090 $ 12,677 $ 20,230 $ 20,230
Short-term investments.................................... 3,924 20,787 27,601 27,601
Accounts receivable....................................... 126 2,724 5,461 5,461
Prepaid expenses and other current assets................. 128 352 833 833
-------- -------- -------- --------
Total current assets...................................... 8,268 36,540 54,125 54,125
Property and equipment, net................................. 1,226 1,336 1,710 1,710
Deposits and other assets................................... 265 1,268 1,485 1,485
-------- -------- -------- --------
$ 9,759 $ 39,144 $ 57,320 $ 57,320
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of equipment loan and capital lease
obligations............................................. $ -- $ 424 $ 424 $ 424
Accounts payable.......................................... 213 532 685 685
Accrued liabilities....................................... 565 1,877 4,857 4,857
Deferred revenue.......................................... 856 7,003 18,749 18,749
-------- -------- -------- --------
Total current liabilities................................. 1,634 9,836 24,715 24,715
Equipment loan and capital lease obligations, less current
portion................................................... -- 915 607 607
-------- -------- -------- --------
Total liabilities......................................... 1,634 10,751 25,322 25,322
-------- -------- -------- --------
Commitments
Stockholders' equity:
Convertible preferred stock, $0.001 par value;
actual -- 11,398,664, 17,843,550 and 20,329,720 shares
authorized as of June 30, 1997 and 1998, and March 31,
1999, respectively; 11,270,750, 17,715,627 and
20,174,170 shares issued and outstanding as of June 30,
1997 and 1998, and March 31, 1999, respectively;
aggregate liquidation preference of $18,759, $51,299,
and $69,299 as of June 30, 1997 and 1998, and March 31,
1999, respectively; pro forma -- 5,000,000 shares
authorized; no shares issued and outstanding............ 12 18 20 --
Common stock, $0.001 par value; 32,000,000 shares
authorized; actual -- 5,712,250, 6,192,398 and 6,332,688
shares issued and outstanding as of June 30, 1997 and
1998, and March 31, 1999, respectively; pro
forma -- 100,000,000 shares authorized; 26,506,858
shares issued and outstanding........................... 6 6 6 26
Additional paid-in capital................................ 18,864 51,611 69,158 69,158
Deferred stock-based compensation......................... -- (1,786) (1,545) (1,545)
Treasury stock............................................ (46) (72) (196) (196)
Notes receivable from stockholders........................ (147) (197) (285) (285)
Accumulated deficit....................................... (10,564) (21,187) (35,160) (35,160)
-------- -------- -------- --------
Total stockholders' equity................................ 8,125 28,393 31,998 31,998
-------- -------- -------- --------
$ 9,759 $ 39,144 $ 57,320 $ 57,320
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 81
UNWIRED PLANET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
------------------------------ -----------------------
1996 1997 1998 1998 1999
------- ------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
License............................................... $ -- $ 80 $ 522 $ 289 $ 1,530
Maintenance and support services...................... -- 212 1,683 635 3,786
Consulting services................................... -- -- -- -- 1,401
------- ------- -------- ------- --------
Total revenues...................................... -- 292 2,205 924 6,717
------- ------- -------- ------- --------
Cost of revenues:
License............................................... -- 87 95 59 172
Maintenance and support services...................... -- 266 1,063 715 1,876
Consulting services................................... -- -- -- -- 646
------- ------- -------- ------- --------
Total cost of revenues.............................. -- 353 1,158 774 2,694
------- ------- -------- ------- --------
Gross profit (loss)................................. -- (61) 1,047 150 4,023
------- ------- -------- ------- --------
Operating expenses:
Research and development.............................. 1,387 3,959 5,732 3,871 8,751
Sales and marketing................................... 757 3,198 5,011 3,307 6,504
General and administrative............................ 522 1,237 1,801 1,185 2,386
Stock-based compensation.............................. -- -- 108 45 784
------- ------- -------- ------- --------
Total operating expenses............................ 2,666 8,394 12,652 8,408 18,425
------- ------- -------- ------- --------
Operating loss...................................... (2,666) (8,455) (11,605) (8,258) (14,402)
Interest income, net.................................... 196 464 982 528 1,139
------- ------- -------- ------- --------
Net loss before income taxes........................ (2,470) (7,991) (10,623) (7,730) (13,263)
Income taxes............................................ -- -- -- -- 710
------- ------- -------- ------- --------
Net loss............................................ $(2,470) $(7,991) $(10,623) $(7,730) $(13,973)
======= ======= ======== ======= ========
Basic and diluted net loss per share.................... $ (0.53) $ (1.67) $ (2.03) $ (1.50) $ (2.49)
======= ======= ======== ======= ========
Shares used in computing basic and diluted net loss per
share................................................. 4,704 4,776 5,221 5,142 5,618
======= ======= ======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 82
UNWIRED PLANET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED
STOCK COMMON STOCK ADDITIONAL DEFERRED
--------------------- ------------------ PAID-IN STOCK-BASED TREASURY
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION STOCK
----------- ------- --------- ------ ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances as of June 30, 1995........... 4,731,997 $ 5 4,671,000 $ 5 $ 2,340 $ -- $ --
Issuance of common stock to employees
for cash........................... -- -- 72,806 -- 3 -- --
Issuance of Series B convertible
preferred stock, net of $36 of
issuance costs..................... 3,999,987 4 -- -- 6,680 -- --
Payment on notes receivable from
stockholders....................... -- -- -- -- -- -- --
Net loss............................. -- -- -- -- -- -- --
---------- --- --------- --- ------- ------- -----
Balances as of June 30, 1996........... 8,731,984 9 4,743,806 5 9,023 -- --
Issuance of common stock to officers
and employees for notes
receivable......................... -- -- 1,065,000 1 192 -- --
Issuance of common stock to
consultant......................... -- -- 10,360 -- 2 -- --
Stock options exercised.............. -- -- 93,084 -- 9 -- --
Issuance of Series C convertible
preferred stock, net of $32
issuance costs..................... 2,538,766 3 -- -- 9,638 -- --
Repurchase of common stock in
settlement of notes receivable from
stockholders....................... -- -- (200,000) -- -- -- (46)
Net loss............................. -- -- -- -- -- -- --
---------- --- --------- --- ------- ------- -----
Balances as of June 30, 1997........... 11,270,750 12 5,712,250 6 18,864 -- (46)
Issuance of common stock to officers
and employees for notes
receivable......................... -- -- 226,667 -- 88 -- --
Repayment of notes receivable from
stockholders....................... -- -- -- -- -- -- --
Stock options exercised.............. -- -- 403,481 -- 87 -- --
Issuance of Series D convertible
preferred stock, net of $2,056
issuance costs..................... 6,444,877 6 -- -- 30,678 -- --
Repurchase of common stock in
settlement of notes receivable from
stockholders....................... -- -- (150,000) -- -- -- (26)
Deferred compensation related to
stock option grants................ -- -- -- -- 1,894 (1,894) --
Amortization of stock-based
compensation....................... -- -- -- -- -- 108 --
Net loss............................. -- -- -- -- -- -- --
---------- --- --------- --- ------- ------- -----
Balances as of June 30, 1998........... 17,715,627 18 6,192,398 6 51,611 (1,786) (72)
Issuance of common stock to officers
and employees for notes
receivables........................ -- -- 90,000 -- 223 -- --
Stock options exercised.............. -- -- 154,457 -- 83 -- --
Issuance of Series E convertible
preferred stock, net of $1,100
issuance costs..................... 2,458,543 2 -- -- 16,698 -- --
Repurchase of common stock in
settlement of notes receivable from
stockholders....................... -- -- (104,167) -- -- -- (124)
Repayment of notes receivable from
stockholders....................... -- -- -- -- -- -- --
Deferred compensation related to
stock option grants................ -- -- -- -- 543 (543) --
Amortization of stock-based
compensation....................... -- -- -- -- -- 784 --
Net loss............................. -- -- -- -- -- -- --
---------- --- --------- --- ------- ------- -----
Balances as of March 31, 1999.......... 20,174,170 $20 6,332,688 $ 6 $69,158 $(1,545) $(196)
========== === ========= === ======= ======= =====
<CAPTION>
NOTES
RECEIVABLE TOTAL
FROM ACCUMULATED STOCKHOLDERS'
STOCKHOLDERS DEFICIT EQUITY
------------ ----------- -------------
<S> <C> <C> <C>
Balances as of June 30, 1995........... $ (4) $ (103) $ 2,243
Issuance of common stock to employees
for cash........................... -- -- 3
Issuance of Series B convertible
preferred stock, net of $36 of
issuance costs..................... -- -- 6,684
Payment on notes receivable from
stockholders....................... 4 -- 4
Net loss............................. -- (2,470) (2,470)
----- -------- --------
Balances as of June 30, 1996........... -- (2,573) 6,464
Issuance of common stock to officers
and employees for notes
receivable......................... (193) -- --
Issuance of common stock to
consultant......................... -- -- 2
Stock options exercised.............. -- -- 9
Issuance of Series C convertible
preferred stock, net of $32
issuance costs..................... -- -- 9,641
Repurchase of common stock in
settlement of notes receivable from
stockholders....................... 46 -- --
Net loss............................. -- (7,991) (7,991)
----- -------- --------
Balances as of June 30, 1997........... (147) (10,564) 8,125
Issuance of common stock to officers
and employees for notes
receivable......................... (88) -- --
Repayment of notes receivable from
stockholders....................... 12 -- 12
Stock options exercised.............. -- -- 87
Issuance of Series D convertible
preferred stock, net of $2,056
issuance costs..................... -- -- 30,684
Repurchase of common stock in
settlement of notes receivable from
stockholders....................... 26 -- --
Deferred compensation related to
stock option grants................ -- --
Amortization of stock-based
compensation....................... -- -- 108
Net loss............................. -- (10,623) (10,623)
----- -------- --------
Balances as of June 30, 1998........... (197) (21,187) 28,393
Issuance of common stock to officers
and employees for notes
receivables........................ (223) -- --
Stock options exercised.............. -- -- 83
Issuance of Series E convertible
preferred stock, net of $1,100
issuance costs..................... -- -- 16,700
Repurchase of common stock in
settlement of notes receivable from
stockholders....................... 124 -- --
Repayment of notes receivable from
stockholders....................... 11 -- 11
Deferred compensation related to
stock option grants................ -- --
Amortization of stock-based
compensation....................... -- -- 784
Net loss............................. -- (13,973) (13,973)
----- -------- --------
Balances as of March 31, 1999.......... $(285) $(35,160) $ 31,998
===== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 83
UNWIRED PLANET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
---------------------------- ----------------------
1996 1997 1998 1998 1999
------- ------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(2,470) $(7,991) $(10,623) $ (7,730) $(13,973)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and amortization......................... 108 447 630 442 699
Amortization of deferred stock-based compensation..... -- -- 108 45 784
Changes in operating assets and liabilities:
Accounts receivable................................. -- (126) (2,598) (988) (2,737)
Prepaid expenses and other assets................... (156) (233) (427) (107) (698)
Accounts payable.................................... 175 38 319 166 153
Accrued liabilities................................. 31 462 1,312 798 2,980
Deferred revenue.................................... 25 831 6,147 5,050 11,746
------- ------- -------- -------- --------
Net cash used for operating activities............ (2,287) (6,572) (5,132) (2,324) (1,046)
------- ------- -------- -------- --------
Cash flows from investing activities:
Purchases of property and equipment, net.................. (852) (914) (367) (41) (1,073)
Purchases of short-term investments....................... -- (3,924) (32,338) (21,912) (30,735)
Proceeds from sales and maturities of short-term
investments............................................. -- -- 15,475 7,552 23,921
Other assets.............................................. -- -- (800) -- --
------- ------- -------- -------- --------
Net cash used for investing activities............ (852) (4,838) (18,030) (14,401) (7,887)
------- ------- -------- -------- --------
Cash flows from financing activities:
Net proceeds from sale of convertible preferred stock..... 6,680 9,641 30,684 30,684 16,700
Issuance of common stock.................................. 3 11 87 48 83
Repayment of notes receivable from stockholders........... 4 -- 12 12 11
Proceeds from equipment loan.............................. -- -- 1,300 1,300 --
Repayment of equipment loan and capital lease
obligations............................................. -- -- (334) (239) (308)
------- ------- -------- -------- --------
Net cash provided by financing activities......... 6,687 9,652 31,749 31,805 16,486
------- ------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents........ 3,548 (1,758) 8,587 15,080 7,553
Cash and cash equivalents at beginning of period............ 2,300 5,848 4,090 4,090 12,677
------- ------- -------- -------- --------
Cash and cash equivalents at end of period.................. $ 5,848 $ 4,090 $ 12,677 $ 19,170 $ 20,230
======= ======= ======== ======== ========
Supplemental disclosures of cash flow information:
Property and equipment acquired under capital lease
obligations............................................. $ -- $ -- $ 373 $ 162 $ --
======= ======= ======== ======== ========
Common stock issued to officers and employees for notes
receivable.............................................. $ -- $ 193 $ 88 $ 88 $ 223
======= ======= ======== ======== ========
Repurchase of common stock in settlement of notes
receivable from stockholders............................ $ -- $ 46 $ 26 $ 26 $ 124
======= ======= ======== ======== ========
Deferred stock-based compensation......................... $ -- $ -- $ 1,894 $ 431 $ 543
======= ======= ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 84
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, 1997, AND 1998, AND MARCH 31, 1999
(INFORMATION FOR THE NINE MONTHS ENDED
MARCH 31, 1998, IS UNAUDITED.)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION
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"). Following the
closing of the Company's IPO, the number of authorized shares of convertible
preferred stock and common stock will be 5,000,000 and 100,000,000,
respectively. If the offering is consummated under the terms presently
anticipated, all the then outstanding shares of the Company's convertible
preferred stock will automatically convert into shares of common stock on a
one-for-one basis upon the closing of the proposed IPO. The conversion of all of
the convertible preferred stock has been
F-7
<PAGE> 85
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998, AND MARCH 31, 1999
(INFORMATION FOR THE NINE MONTHS ENDED
MARCH 31, 1998, IS UNAUDITED.)
reflected in the accompanying unaudited pro forma consolidated balance sheet as
if it had occurred on March 31, 1999.
(e) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and highly liquid investments
with remaining maturities of less than 90 days at the date of purchase. The
Company is exposed to credit risk in the event of default by the financial
institutions or the issuers of these investments to the extent of the amounts
recorded on the balance sheet in excess of amounts that are insured by the FDIC.
As of June 30, 1997 and 1998, and March 31, 1999 cash equivalents consisted
principally of money market funds and commercial paper.
(f) ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES
The Company classifies its investments in debt securities as
available-for-sale. Available-for-sale securities are carried at fair market
value, which approximates amortized cost.
(g) FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
The carrying value of the Company's financial instruments, including cash
and cash equivalents, short-term investments, accounts receivable, and equipment
loans approximates fair market value. Financial instruments that subject the
Company to concentrations of credit risk consist primarily of cash and cash
equivalents and trade accounts receivable.
The Company sells its products and services principally to leading wireless
network operators and prominent wireless telephone manufacturers. Credit risk is
concentrated in North America and Japan. The Company performs ongoing credit
evaluations of its customers' financial condition and, generally, requires no
collateral from its customers. The Company has had no write-offs of accounts
receivable to date.
(h) PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation
and amortization. Depreciation is calculated using the straight-line method over
the estimated useful lives of the respective assets, generally three to five
years. Leasehold improvements are amortized over the shorter of the estimated
useful lives of the assets or the lease term.
(i) IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates its long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of any asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount
F-8
<PAGE> 86
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998, AND MARCH 31, 1999
(INFORMATION FOR THE NINE MONTHS ENDED
MARCH 31, 1998, IS UNAUDITED.)
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.
(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
F-9
<PAGE> 87
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998, AND MARCH 31, 1999
(INFORMATION FOR THE NINE MONTHS ENDED
MARCH 31, 1998, IS UNAUDITED.)
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 results of operations and its cash flows for the nine
months ended March 31, 1998.
(q) NET LOSS PER SHARE
Basic net loss per share is computed using the weighted-average number of
outstanding shares of common stock. Diluted net loss per share is computed using
the weighted-average number of shares of common stock outstanding and, when
dilutive, potential common shares from options and warrants to purchase common
stock using the treasury stock method and from convertible securities using the
if-converted basis. The following potential common shares have been excluded
from the computation of diluted net loss per share for all periods presented
because the effect would have been antidilutive (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED JUNE 30, MARCH 31,
-------------------------- ----------------
1996 1997 1998 1998 1999
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Shares issuable under stock options......................... 646 2,071 2,877 2,224 3,321
Shares of restricted stock subject to repurchase............ -- 715 670 680 570
Shares issuable pursuant to warrants to purchase convertible
preferred stock........................................... -- -- 31 31 31
Shares of convertible preferred stock on an "as if
converted" basis.......................................... 8,732 11,271 17,716 17,716 20,174
</TABLE>
The weighted-average exercise price of stock options was $0.11, $0.28 and
$1.00 for the years ended June 30, 1996, 1997 and 1998, respectively, and $0.34
and $1.87 for the nine months ended March 31, 1998 and 1999, respectively. The
weighted-average purchase price of restricted stock was $0.26 and $0.30 for the
years ended June 30, 1997 and 1998, respectively, and $0.30 and $0.71 for the
nine months ended March 31, 1998 and 1999, respectively. The weighted-average
exercise price of warrants was $3.81 for both the fiscal year ended June 30,
1998 and the nine months ended March 31, 1999.
F-10
<PAGE> 88
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998, AND MARCH 31, 1999
(INFORMATION FOR THE NINE MONTHS ENDED
MARCH 31, 1998, IS UNAUDITED.)
(r) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative financial instruments and hedging activities
related to those instruments, as well as other hedging activities. Because the
Company does not currently hold any derivative instruments and does not engage
in hedging activities, the Company expects that the adoption of SFAS No. 133
will not have a material impact on its consolidated financial position, results
of operations, or cash flows. The Company will be required to adopt SFAS No. 133
in fiscal 2000.
(2) BALANCE SHEET COMPONENTS
(a) SHORT-TERM INVESTMENTS
All of the Company's investments are considered available-for-sale
securities and consisted of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
----------------- MARCH 31,
1997 1998 1999
------ ------- ---------
<S> <C> <C> <C>
Commercial paper............................................ $3,148 $13,594 $16,304
Corporate bonds............................................. 3,006 9,213 22,380
Certificates of deposit..................................... -- 7,238 --
------ ------- -------
$6,154 $30,045 $38,684
====== ======= =======
</TABLE>
As of June 30, 1997 and 1998 and March 31, 1999, $2,230,000, $9,258,000,
and $11,083,000, respectively, of the Company's investments are included in cash
and cash equivalents.
The contractual maturity for short-term investments as of March 31, 1999,
is as follows (in thousands):
<TABLE>
<S> <C>
Due within one year......................................... $28,120
Due between one and two years............................... 10,564
-------
$38,684
=======
</TABLE>
(b) PROPERTY AND EQUIPMENT
Property and equipment, consisted of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
----------------- MARCH 31,
1997 1998 1999
------ ------- ---------
<S> <C> <C> <C>
Computer equipment and software............................. $1,615 $ 2,214 $ 3,244
Furniture and equipment..................................... 90 213 253
Leasehold improvements...................................... 77 95 98
------ ------- -------
1,782 2,522 3,595
Accumulated depreciation and amortization................... (556) (1,186) (1,885)
------ ------- -------
$1,226 $ 1,336 $ 1,710
====== ======= =======
</TABLE>
F-11
<PAGE> 89
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998, AND MARCH 31, 1999
(INFORMATION FOR THE NINE MONTHS ENDED
MARCH 31, 1998, IS UNAUDITED.)
(c) ACCRUED EXPENSES
Accrued expenses as of March 31, 1999, include approximately $1,000,000 due
to one of the Company's underwriters for its IPO, related to the Company's
issuance of its Series E convertible preferred stock. This amount was paid on
April 12, 1999.
Equipment under capital leases aggregated $373,000 as of June 30, 1998 and
March 31, 1999. Accumulated amortization on the assets under capital leases
aggregated $42,000 and $136,000 as of June 30, 1998 and March 31, 1999,
respectively.
(4) EQUIPMENT LOAN AND CAPITAL LEASE OBLIGATIONS
In May 1997, the Company entered into a $2,000,000 credit facility with a
business credit corporation that consisted of a $1,300,000 equipment term loan
and a $700,000 lease line of credit. The equipment loan bears interest at 7.5%,
is collateralized by equipment, and is payable in 42 monthly installments of
$35,000 through January 2001. As of June 30, 1998 and March 31, 1999, $1,000,000
and $795,000 was outstanding under the term loan, respectively. During fiscal
1998, the Company borrowed approximately $400,000 under the lease line of credit
with $339,000 and $236,000 outstanding as of June 30, 1998 and March 31, 1999,
respectively, bearing interest at an effective interest rate of 11.8%, and
payable in 42 monthly installments of $11,000 through December 2001. The unused
portion of the lease line of credit expired in July 1998.
As of March 31, 1999, aggregate maturities for the equipment loan and
capital lease obligations for the remainder of fiscal 1999 and fiscal 2000,
2001, and 2002 are $116,000, $450,000, $455,000 and $10,000, respectively.
In conjunction with the equipment loan and lease line of credit, the
Company issued warrants to purchase 20,466 and 11,020 shares, respectively, of
the Company's Series C preferred stock at an exercise price of $3.81 per share.
These warrants expire the earlier of May 2007, or five years after an initial
public offering of the Company's common stock. The fair value of the warrants
issued, calculated using the Black-Scholes option pricing model, using the
following assumptions: no dividends; contractual life of 10 years; risk-free
interest rate of 6.33%; expected volatility of 60%, was not material.
(5) STOCKHOLDERS' EQUITY
(a) CONVERTIBLE PREFERRED STOCK
Convertible preferred stock outstanding as of March 31, 1999, is as
follows:
F-12
<PAGE> 90
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998, AND MARCH 31, 1999
(INFORMATION FOR THE NINE MONTHS ENDED
MARCH 31, 1998, IS UNAUDITED.)
<TABLE>
<CAPTION>
SERIES SHARES DESIGNATED ISSUED AND OUTSTANDING CARRYING VALUE
------ ----------------- ---------------------- --------------
<S> <C> <C> <C>
Series A 4,731,997 4,731,997 $ 2,334,000
Series B 4,000,000 3,999,987 6,684,000
Series C 2,666,667 2,538,766 9,641,000
Series D 6,444,886 6,444,877 30,684,000
Series E 2,486,170 2,458,543 16,700,000
---------- ---------- -----------
20,329,720 20,174,170 $66,043,000
========== ========== ===========
</TABLE>
The rights, preferences, and privileges of the holders of Series A, B, C,
D, and E convertible preferred stock are as follows:
- Dividends are noncumulative and payable only upon declaration by the
Company's Board of Directors at a rate of $0.05, $0.17, $0.38, $0.51, and
$0.72 per share for Series A, B, C, D, and E convertible preferred stock,
respectively.
- Holders of Series A, B, C, D, and E convertible preferred stock have a
liquidation preference of $0.50, $1.68, $3.81, $5.08, and $7.24 per
share, respectively, plus any declared but unpaid dividends over holders
of common stock.
- Each share of Series A, B, C, D, and E convertible preferred stock is
convertible at any time into one share of common stock subject to certain
antidilution provisions.
- Each holder of convertible preferred stock has voting rights equal to the
number of shares of common stock into which such shares could be
converted.
(b) REVERSE STOCK SPLIT
On March 26, 1999, the Board of Directors approved a two-for-three reverse
stock split of the Company's convertible preferred stock and common stock to be
completed upon the closing of the Company's IPO. The accompanying consolidated
financial statements have been retroactively restated to give effect to the
reverse stock split.
(c) STOCK PLANS
The Company is authorized to issue up to 9,383,887 shares of common stock
in connection with its 1995 and 1996 stock option plans (the Plans) to
directors, employees, and consultants. The Plans provide for the issuance of
stock purchase rights, incentive stock options, or nonstatutory stock options.
The stock purchase rights are subject to a restricted stock purchase
agreement whereby the Company has the right to repurchase the stock upon the
voluntary or involuntary termination of the purchaser's employment with the
Company at the original issuance cost. The Company's repurchase right lapses at
a rate determined by the stock plan administrator, but at a minimum rate of 20%
per year. Through March 31, 1999, the Company has issued 1,381,667 shares under
restricted stock
F-13
<PAGE> 91
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998, AND MARCH 31, 1999
(INFORMATION FOR THE NINE MONTHS ENDED
MARCH 31, 1998, IS UNAUDITED.)
purchase agreements, of which 454,167 shares have been repurchased and 569,999
are subject to repurchase at a weighted-average price of $0.71 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 March 31, 1999, there were -0- and 4,472,807 additional shares
available for grant under the 1995 and 1996 stock option plans, respectively.
On March 26, 1999, the Company adopted the 1999 Employee Stock Purchase
Plan (the "Purchase Plan") and reserved a total of 600,000 shares of the
Company's common stock for issuance thereunder plus an automatic annual increase
for fiscal year 2000 through 2004 equal to the lesser of 500,000 shares or 1% of
the Company's outstanding common stock on the last day of the immediately
preceding fiscal year. The Purchase Plan permits eligible employees to purchase
common stock through payroll deductions at a purchase price of 85% of the lower
of the fair market value of the common stock at the beginning or end of each
offering period, generally 24 months in length.
On March 26, 1999, the Company adopted the 1999 Directors Stock Option Plan
(the "Directors Plan") and reserved a total of 600,000 shares of the Company's
common stock for issuance thereunder. Each non-employee director who becomes a
member of the Board of Directors will initially be granted an option for 33,333
shares of the Company's common stock and, thereafter, an option to purchase an
additional 2,500 shares of the Company's common stock quarterly commencing in
the fiscal quarter ending September 30, 2000. Options granted under the
Directors Plan vest immediately. The exercise price of the options granted under
the Directors Plan will be at the fair value of the Company's common stock on
the date of grant.
(d) STOCK-BASED COMPENSATION
The Company uses the intrinsic-value method in accounting for its employee
stock-based compensation plans. Accordingly, no compensation cost has been
recognized for any of its stock options granted or restricted stock sold because
the exercise price of each option or purchase price of each share of restricted
stock equaled or exceeded the fair value of the underlying common stock as of
the grant date for each stock option or purchase date of each restricted stock
share, except for stock options granted and restricted stock sold from October
1997 through March 1999. With respect to the stock options granted and
restricted stock sold from October 1997 to March 1999, the
F-14
<PAGE> 92
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998, AND MARCH 31, 1999
(INFORMATION FOR THE NINE MONTHS ENDED
MARCH 31, 1998, IS UNAUDITED.)
Company recorded deferred stock compensation of $2,437,000 for the difference at
the grant or issuance date between the exercise price of each stock option
granted or purchase price of each restricted share sold and the fair value of
the underlying common stock. This amount is being amortized on an accelerated
basis over the vesting period, generally four to five years, consistent with the
method described in FASB Interpretation No. 28. Had compensation costs been
determined in accordance with SFAS No. 123 for all of the Company's stock-based
compensation plans, net loss and basic and diluted net loss per share would have
been as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED JUNE 30, ENDED
------------------------------ MARCH 31,
1996 1997 1998 1999
------- ------- -------- -----------
<S> <C> <C> <C> <C>
Net loss:
As reported................... $(2,470) $(7,991) $(10,623) $(13,973)
======= ======= ======== ========
Pro forma..................... $(2,471) $(8,003) $(10,656) $(14,133)
======= ======= ======== ========
Basic and diluted net loss per
share:
As reported................... $ (0.53) $ (1.67) $ (2.03) $ (2.49)
======= ======= ======== ========
Pro forma..................... $ (0.53) $ (1.68) $ (2.04) $ (2.52)
======= ======= ======== ========
</TABLE>
The fair value of each option was estimated on the date of grant using the
minimum value method with the following weighted-average assumptions: no
dividends; risk-free interest rate of 5.75%, 6.50%, 5.55% and 4.78% for the year
ended June 30, 1996, 1997 and 1998, and the nine months ended March 31, 1999,
respectively; and expected life of 4.40, 3.84, 3.23 and 2.49 years for the year
ended June 30, 1996, 1997 and 1998, and the nine months ended March 31, 1999,
respectively.
F-15
<PAGE> 93
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998, AND MARCH 31, 1999
(INFORMATION FOR THE NINE MONTHS ENDED
MARCH 31, 1998, IS UNAUDITED.)
A summary of the status of the Company's options under the Plans, is as
follows (in thousands, except per share data):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------ NINE MONTHS ENDED
1996 1997 1998 MARCH 31, 1999
------------------ ------------------ ------------------ ------------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
------ --------- ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
period.......................... -- $ -- 646 $0.11 2,071 $0.28 2,877 $1.00
Granted........................... 684 0.11 1,630 0.34 1,422 1.73 762 4.72
Forfeited......................... (38) 0.17 (112) 0.26 (213) 0.30 (164) 0.28
Exercised......................... -- -- (93) 0.13 (403) 0.22 (154) 1.35
--- ----- ----- -----
Outstanding at end of period...... 646 $0.11 2,071 $0.28 2,877 $1.00 3,321 $1.86
=== ===== ===== =====
Options exercisable at end of
period.......................... 11 $0.11 235 $0.15 385 $0.28 885 $1.24
=== ===== ===== =====
Weighted-average fair value of
options granted during the
period with exercise prices
equal to fair value at date of
grant........................... $0.03 $0.07 $0.06 $0.87
Weighted-average fair value of
options granted during the
period with exercise prices less
than fair value at date of
grant........................... -- -- $1.82 $1.55
</TABLE>
As of March 31, 1999, the range of exercise prices and weighted-average
remaining contractual life of outstanding options were as follows (number of
options in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------- OPTIONS EXERCISABLE
WEIGHTED- -----------------------
AVERAGE 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 1,666 7.91 $0.32 713 $0.31
$2.30 - $3.38 1,373 9.35 2.51 72 2.07
$7.25 247 9.93 7.25 100 7.25
$12.00 35 9.99 12.00 -- --
----- ---
3,321 8.68 1.86 885 1.24
===== ===
</TABLE>
(6) LEASES
In fiscal 1998, the Company entered into a new noncancelable operating
lease for its facilities expiring in June 2005. As of March 31, 1999, the
Company has a letter of credit collateralized by a certificate of deposit in the
amount of $800,000, included in deposits and other assets in the accompanying
consolidated balance sheet as of March 31, 1999, related to the new facility
lease. The Company has an additional noncancelable operating lease for its
previous facility, which expires in
F-16
<PAGE> 94
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998, AND MARCH 31, 1999
(INFORMATION FOR THE NINE MONTHS ENDED
MARCH 31, 1998, IS UNAUDITED.)
April 2001. However, the Company has entered into a sublease for this facility,
which also expires in April 2001.
Future minimum lease payments under noncancelable operating leases, net of
sublease payments, as of March 31, 1999, are as follows (in thousands):
<TABLE>
<CAPTION>
NET
MINIMUM MINIMUM MINIMUM
LEASE SUBLEASE LEASE
YEAR ENDING JUNE 30, PAYMENTS PAYMENTS PAYMENTS
-------------------- -------- -------- --------
<S> <C> <C> <C>
1999 (three months).................................. $ 542 $ (261) $ 281
2000................................................. 2,062 (722) 1,340
2001................................................. 2,014 (402) 1,612
2002................................................. 1,678 -- 1,678
2003................................................. 1,727 -- 1,727
Thereafter........................................... 3,445 -- 3,445
------- ------- -------
$11,468 $(1,385) $10,083
======= ======= =======
</TABLE>
Rent expense for the years ended June 30, 1996, 1997 and 1998, and for the
nine months ended March 31, 1998 and 1999, was approximately $105,000, $451,000,
$307,000, $246,000, and $1,328,000, respectively.
(7) INCOME TAXES
The differences between the income tax expense (benefit) computed at the
federal statutory rate and the Company's tax provision for all periods presented
primarily relate to net operating losses not benefited. Income tax expense for
the nine months ended March 31, 1999 relates to foreign taxes.
The individual components of the Company's deferred tax assets are as
follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
-------------------- MARCH 31,
1997 1998 1999
------- ------- ---------
<S> <C> <C> <C>
Accruals and reserves not deductible for tax
purposes......................................... $ 83 $ 146 $ 352
Property and equipment............................. 58 15 91
Capitalized start-up expenditures.................. 583 406 307
Net operating loss carryovers...................... 3,761 7,600 12,565
Research and development credit carryforwards...... 169 666 646
Foreign tax credit carryforward.................... -- -- 670
------- ------- --------
Total deferred tax assets........................ 4,654 8,833 14,631
Valuation allowance................................ (4,654) (8,833) (14,631)
------- ------- --------
Net deferred tax assets........................ $ -- $ -- $ --
======= ======= ========
</TABLE>
In light of the Company's recent history of operating losses, the Company
has provided a valuation allowance for all of its deferred tax assets as it is
presently unable to conclude that it is more likely than not that the deferred
tax assets will be realized.
As of March 31, 1999, the Company has a net operating loss carryover for
federal and California income tax purposes of approximately $31,000,000. In
addition, the Company had federal and
F-17
<PAGE> 95
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998, AND MARCH 31, 1999
(INFORMATION FOR THE NINE MONTHS ENDED
MARCH 31, 1998, IS UNAUDITED.)
California research and development credit carryforwards of approximately
$367,000 and $279,000, respectively. The Company's federal net operating loss
and research and development credit carryforwards will expire in the year 2011
through 2019 if not utilized. The Company's California net operating loss
carryforwards will expire in the year 2004. The state research and development
credit can be carried forward indefinitely. The Company also has a foreign tax
credit carryforward of $670,000 which expires in the year 2004.
Federal and California tax laws impose substantial restrictions on the
utilization of net operating loss and tax credit carryforwards in the event of
an "ownership change" as defined in Internal Revenue Code Section 382. If the
Company has an ownership change, the Company's ability to utilize the above
mentioned carryforwards could be significantly reduced.
(8) GEOGRAPHIC, SEGMENT AND SIGNIFICANT CUSTOMER INFORMATION
During 1999 the Company adopted the provision of SFAS No. 131, Disclosure
about Segments of an Enterprise and Related Information. SFAS No. 131
establishes standards for the reporting by public business enterprises of
information about operating segments, products and services, geographic areas,
and major customers. The method for determining what information to report is
based on the way that management organizes the operating segments within the
Company for making operational decisions and assessments of financial
performance.
The Company's chief operating decision maker is considered to be the
Company's Chief Executive Officer ("CEO"). The CEO reviews financial information
presented on a consolidated basis accompanied by disaggregated information about
revenues by geographic region and by product for purposes of making operating
decisions and assessing financial performance. Therefore, the Company operates
in a single operating segment: Internet-based wireless telephone software and
services. The disaggregated information reviewed on a product basis by the CEO
is as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED JUNE 30, MARCH 31,
---------------------- --------------
1996 1997 1998 1998 1999
---- ---- ------ ---- ------
<S> <C> <C> <C> <C> <C>
Revenue:
UP.Link Server Suite............................. $-- $187 $1,335 $718 $2,382
UP.Browser....................................... -- 105 870 206 2,934
Consulting services.............................. -- -- -- -- 1,401
--- ---- ------ ---- ------
$-- $292 $2,205 $924 $6,717
=== ==== ====== ==== ======
</TABLE>
The Company markets its products primarily from its operations in the
United States. International sales are primarily to customers in Asia Pacific
and Europe. Information regarding the Company's revenues in different geographic
regions is as follows (in thousands):
F-18
<PAGE> 96
UNWIRED PLANET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996, 1997, AND 1998, AND MARCH 31, 1999
(INFORMATION FOR THE NINE MONTHS ENDED
MARCH 31, 1998, IS UNAUDITED.)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED JUNE 30, MARCH 31,
---------------------- --------------
1996 1997 1998 1998 1999
---- ---- ------ ---- ------
<S> <C> <C> <C> <C> <C>
North America............................... $-- $272 $1,220 $811 $2,425
Europe...................................... -- 20 513 80 2,221
Asia Pacific................................ -- -- 472 33 2,071
--- ---- ------ ---- ------
$ $292 $2,205 $924 $6,717
=== ==== ====== ==== ======
</TABLE>
Significant customer information is as follows:
<TABLE>
<CAPTION>
% OF TOTAL REVENUES
---------------------------------------------- % OF TOTAL
NINE MONTHS ACCOUNTS
YEAR ENDED ENDED RECEIVABLE
JUNE 30, MARCH 31, -----------
------------ ---------------------------- MARCH 31,
1997 1998 1998 1999 1999
---- ---- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Customer A............................ 20% 22% 44% 14% 7%
Customer B............................ -- 18% 1% 8% 12%
Customer C............................ 30% -- -- -- --
Customer D............................ 19% 1% 3% -- --
Customer E............................ 10% 2% -- -- --
Customer F............................ -- 2% -- 11% 3%
Customer G............................ -- -- -- 13% --
</TABLE>
F-19
<PAGE> 97
APPENDIX
[Description of graphic on inside front cover page: Unwired Planet logo in
center of concentric circles. Located around the circles are photos of wireless
telephones that incorporate UP.Browser, as well as logos and names of the
manufacturers of the wireless telephones.]
<PAGE> 98
[Description of graphics and text on left front gatefold page:]
[Series of photos of persons using wireless telephones enabled with UP.Browser.
Next to the photos are the following captions, as well as screen captures and
the logos of the Internet content providers referenced in each caption:]
TRAVEL
The message on my phone screen says "Flight Cancelled." Instead of waiting in
line at the counter, I used UP.Browser to connect to [Internet content provider]
and found the next flight out.
YELLOW PAGES
I'm in Las Vegas on business and craving my favorite food. But I need 50
presentations copies by 8:00 am. With UP.Browser and [Internet content
provider], I found the local 24-hour copy center, as well as driving directions
to a nearby Chinese restaurant.
EMAIL
Each morning I take the train into the city and check my email on my phone
screen. I answer important messages with a return voice call or email response,
and hit the ground running when I reach the office.
NEWS
UP.Browser is a critical sales tool for me. With [Internet content provider]
bookmarked on my wireless telephone, I have the key information about customers
and competitors at my fingertips. Before I shake hand with the customer, I've
seen the latest industry news.
SPORTS
Nick is always trying to stump me with obscure sports questions. I answer
correctly every time and he still hasn't figured out that I get the stats and
scores from [Internet content provider], right on the screen of my wireless
telephone.
-2-
<PAGE> 99
[Description of graphics and text on right front gatefold page]
UP.LINK SERVER SUITE is a turnkey software solution that enables network
operators to offer Internet-based services to their wireless subscribers.
UP.Link Server Suite also provides network operators with subscriber
provisioning and network management functions on a robust and scalable software
platform.
[Description of graphic: Schematic of components of UP.Link Server Suite in the
center of concentric circles. The schematic is connected on the left by a
horizontal line to a radio tower with the words "WIRELESS NETWORK" next to it.
The schematic is connected on the right by a diagnonal line to a computer server
labeled "Network Operator Telephony Applications" and by a horizontal line to a
cloud labeled "Internet." The cloud, in turn is connected by vertical lines to
two computer servers labeled " Content Provider Web Sites" and "Corporate
Applications."]
The components of UP.Link Server Suite include:
UP. APPLICATIONS
A suite of wireless Internet-based applications including UP.Mail, an email
application, UP.Organizer, a suite of personal information management
applications, and UP.Web, a Web-based interface for accessing UP.Organizer data
using personal computers
SERVICES
The services component includes the following services, which interact with
applications through a framework of open application programming interfaces:
- -- Push Server. Allows applications to push information to wireless subscribers
- -- Fax Server. Enables the forwarding of email and other data content to fax
machines
- -- Identity Server. Maintains a subscriber registry that retains 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
UP.LINK GATEWAY
Provides network-layer functions and connects Internet- and intranet-based
services to wireless networks and wireless telephones
ADMINISTRATION
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
-3-
<PAGE> 100
[Description of graphics and text on inside back cover page:]
Unwired Planet works with corporate application developers, Internet content
providers, wireless telephone manufacturers, value added resellers and companies
providing complementary technology.
[Unwired Planet logo in the center of concentric circles. The concentric circles
are labeled "Value Added Resellers," "Technology Providers," "Wireless Telephone
Manufacturers," "Internet Content Providers" and Corporate Application
Developers." Each circle contains the logos of companies in the labeled
category.]
-4-
<PAGE> 101
LOGO
<PAGE> 102
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of common stock being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fee and the Nasdaq National Market listing
fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
SEC registration fee........................................ 15,346
NASD filing fee............................................. 6,020
Nasdaq National Market listing fee.......................... 95,000
Printing and engraving expenses............................. 200,000
Legal fees and expenses..................................... 375,000
Accounting fees and expenses................................ 350,000
Blue Sky qualification fees and expenses.................... 5,000
Transfer Agent and Registrar fees........................... 15,000
Miscellaneous fees and expenses............................. 38,634
---------
Total............................................... 1,100,000
=========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (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> 103
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, except as noted below) 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. Deutsche Morgan Grenfell acted as
placement agent in connection with this sale, for which it received
usual and customary placement agent fees.
(4) In March 1999, 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. Credit Suisse First Boston Corporation acted as
placement agent in connection with this sale, for which it received
usual and customary placement agent fees.
(5) As of March 15, 1999, 1,589,734 shares of common stock had been issued
upon exercise of options or pursuant to restricted stock purchase
agreements and 3,321,346 shares of common stock were issuable upon
exercise of outstanding options under 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.
</TABLE>
II-2
<PAGE> 104
<TABLE>
<S> <C>
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>
- -------------------------
+ Previously Filed.
* 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> 105
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> 106
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment to the Registration Statement on Form
S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Redwood City, State of California, on April 14, 1999.
UNWIRED PLANET, INC.
By: /s/ ALAN BLACK
------------------------------------
Alan Black, Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement on Form S-1 has been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chief Executive Officer and April 14, 1999
- ------------------------------------------------ Chairman (Principal Executive
(Alain Rossmann) Officer)
/s/ ALAN BLACK Vice President, Finance and April 14, 1999
- ------------------------------------------------ Administration, Chief Financial
(Alan Black) Officer and Treasurer (Principal
Financial and Accounting Officer)
* Director April 14, 1999
- ------------------------------------------------
(Roger Evans)
* Executive Vice President April 14, 1999
- ------------------------------------------------ and Director
(Charles Parrish)
* Director April 14, 1999
- ------------------------------------------------
(David Kronfeld)
* Director April 14, 1999
- ------------------------------------------------
(Andrew Verhalen)
*By: /s/ ALAN BLACK
------------------------------------------
Alan Black
(Attorney-in-Fact)
</TABLE>
II-5
<PAGE> 107
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>
- -------------------------
+ Previously Filed.
* To be supplied by amendment.
** Confidential treatment has been requested with respect to this exhibit.
II-6
<PAGE> 1
EXHIBIT 5.1
April 14, 1999
Unwired Planet, Inc.
800 Chesapeake Drive
Redwood City, California 94063
Registration Statement on Form S-1 (File No. 333-75219)
-------------------------------------------------------
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 (File No.
333-75219) filed by you, Unwired Planet, Inc., with the Securities and Exchange
Commission on March 29, 1999, as amended (, the "Registration Statement") in
connection with the registration under the Securities Act of 1933, as amended,
of shares of your Common Stock (the "Shares"). As your counsel in connection
with this transaction, were have examined the proceedings taken and we are
familiar with the proceedings proposed to be taken by you in connection with the
sale and issuance of the Shares.
It is our opinion that upon conclusion or the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
the various states where required, the Shares when issued and sold in the manner
described in the Registration Statement will be legally and validly issued,
fully paid and nonassessable
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and in any amendment thereto.
Very truly yours,
VENTURE LAW GROUP
A Professional Corporation
/s/ Venture Law Group
<PAGE> 1
EXHIBIT 10.2
LIBRIS, INC.(1)
1995 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights may also be granted
under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means Libris, Inc., a California corporation.
(g) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange Act,
the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee" means the absence of any
interruption or termination of the employment relationship by the Company or any
Subsidiary. Continuous Status as an Employee shall not be considered interrupted
in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of
absence approved by the Administrator,
- -------------
(1) As amended on December 31, 1998.
<PAGE> 2
provided that such leave is for a period of not more than ninety (90) days,
unless reemployment upon the expiration of such leave is guaranteed by contract
or statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries or its successor.
(i) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported, as quoted
on such exchange or system for the last market trading day prior to the time of
determination) as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System
(but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock or;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(l) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(m) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to the Plan.
(o) "Optioned Stock" means the Common Stock subject to an Option
or a Stock Purchase Right.
(p) "Optionee" means an Employee or Consultant who receives an
Option or Stock Purchase Right.
<PAGE> 3
(q) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(r) "Plan" means this 1995 Stock Plan.
(s) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(t) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 below.
(u) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 below.
(v) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 2,474,195 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and Officers.
With respect to grants of Options or Stock Purchase Rights to Employees who are
also officers or directors of the Company, the Plan shall be administered by (A)
the Board if the Board may administer the Plan in compliance with Rule 16b-3
promulgated under the Exchange Act or any successor thereto ("Rule 16b-3") with
respect to a plan intended to qualify thereunder as a discretionary plan, or (B)
a committee designated by the Board to administer the Plan, which committee
shall be constituted in such a manner as to permit the Plan to comply with Rule
16b-3 with respect to a plan intended to qualify thereunder as a discretionary
plan. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.
<PAGE> 4
(ii) Multiple Administrative Bodies. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.
(iii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Options or Stock Purchase Rights to
Employees or Consultants who are neither directors nor officers of the Company,
the Plan shall be administered by (A) the Board or (B) a committee designated by
the Board, which committee shall be constituted in such a manner as to satisfy
the legal requirements relating to the administration of incentive stock option
plans, if any, of California corporate and securities laws, of the Code, and of
any applicable stock exchange (the "Applicable Laws"). Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom
Options and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and
Stock Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to
be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common Stock; and
(viii) to determine the terms and restrictions applicable
to Stock Purchase Rights and the Restricted Stock purchased by exercising such
Stock Purchase Rights.
<PAGE> 5
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options or Stock Purchase
Rights.
5. Eligibility.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option or
Stock Purchase Right may, if he is otherwise eligible, be granted additional
Options or Stock Purchase Rights.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall
be taken into account in the order in which they were granted, and the Fair
Market Value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Option
granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement.
8. Option Exercise Price and Consideration.
<PAGE> 6
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant
of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of the grant.
(B) granted to any person, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the date
of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) authorization from the Company to retain from the
total number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) delivery
of a properly executed exercise notice together with such other documentation as
the Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price, (7) by delivering an irrevocable
subscription agreement for the Shares which irrevocably obligates the option
holder to take and pay for the Shares not more than twelve months after the date
of delivery of the subscription agreement, (8) any combination of the foregoing
methods of payment, (9) or such other consideration and method of payment for
the issuance of Shares to the extent permitted under Applicable Laws. In making
its determination as to the type of consideration to accept, the Board shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
<PAGE> 7
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board, consist
of any consideration and method of payment allowable under Section 8(b) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 13 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Employment. In the event of termination of an
Optionee's consulting relationship or Continuous Status as an Employee with the
Company (as the case may be), such Optionee may, but only within such period of
time (not less than thirty (30) days) as determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option and not exceeding three (3) months after the date of such
termination (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise his Option to the extent
that Optionee was entitled to exercise it at the date of such termination. To
the extent that Optionee was not entitled to exercise the Option at the date of
such termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(c) Disability of Optionee.
(i) Notwithstanding the provisions of Section 9(b) above,
in the event of termination of an Optionee's consulting relationship or
Continuous Status as an Employee as a result of his total and permanent
disability Optionee may, but only within twelve (12) months from the date of
such termination (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise the Option to the
extent otherwise
<PAGE> 8
entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate.
(ii) Notwithstanding the provisions of Section 9(b) above,
in the event of termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of any disability not constituting a total and permanent
disability he may, but only within six (6) months from the date of such
termination (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), exercise his Option to the
extent he was entitled to exercise it at the date of such termination; provided,
however, that if such Optionee fails to exercise any Incentive Stock Option
within three (3) months from the date of termination of employment, such Option
shall be treated for federal income tax purposes as a Nonstatutory Stock Option.
To the extent that Optionee was not entitled to exercise the Option at the date
of termination, or if Optionee does not exercise such Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of the death of an Optionee,
the Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. An Option or Stock Purchase Right
may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in
any manner other than by will or by the laws of descent or distribution and may
be exercised, during the lifetime of the Optionee, only by the Optionee.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights
<PAGE> 9
under the Plan, it shall advise the offeree in writing of the terms, conditions
and restrictions related to the offer, including the number of Shares that such
person shall be entitled to purchase, the price to be paid (which price shall
not be less than 85% of the Fair Market Value of the Shares as of the date of
the offer), and the time within which such person must accept such offer, which
shall in no event exceed thirty (30) days from the date upon which the
Administrator made the determination to grant the Stock Purchase Right. The
offer shall be accepted by execution of a Restricted Stock purchase agreement in
the form determined by the Administrator. Shares purchased pursuant to the grant
of a Stock Purchase Right shall be referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cash or cancellation of purchase money indebtedness
of the purchaser to the Company. The repurchase option shall lapse at such rate
as the Committee may determine, but at a minimum rate of 20% per year.
(c) Other Provisions. The Restricted Stock purchase agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option or Stock Purchase Right, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by electing to
have the Company withhold from the Shares to be issued upon exercise of the
Option, or the Shares to be issued in connection with the Stock Purchase Right,
if any, that number of Shares having a Fair Market Value equal to the amount
required to be withheld. The Fair Market Value of the Shares to be withheld
shall be determined on the date that the amount of tax to be withheld is to be
determined (the "Tax Date").
<PAGE> 10
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option or Stock Purchase Right as to which the election
is made;
(c) all elections shall be subject to the consent or disapproval
of the Administrator;
(d) if the Optionee is subject to Rule 16b-3, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option or Stock Purchase Right is
exercised but such Optionee shall be unconditionally obligated to tender back to
the Company the proper number of Shares on the Tax Date.
13. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
<PAGE> 11
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger. In the event of a merger of the Company with or into
another corporation, the Option or Stock Purchase Right may be assumed or an
equivalent option or right may be substituted by such successor corporation or a
parent or subsidiary of such successor corporation.
14. Time of Granting Options and Stock Purchase Rights. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Board. Notice of the
determination shall be given to each Employee or Consultant to whom an Option or
Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute
<PAGE> 12
such Shares if, in the opinion of counsel for the Company, such a representation
is required by any of the aforementioned relevant provisions of law.
17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
18. Agreements. Options and Stock Purchase Rights shall be evidenced by
written agreements in such form as the Board shall approve from time to time.
19. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
20. Information to Optionees and Purchasers. The Company shall provide
to each Optionee and to each individual who acquired Shares pursuant to the
Plan, during the period such Optionee or purchaser has one or more Options or
Stock Purchase Rights outstanding, and, in the case of an individual who
acquired Shares pursuant to the Plan, during the period such individual owns
such Shares, copies of all annual reports and other information which are
provided to all shareholders of the Company and at least annually, financial
statements of the Company, including a statement of operations for the most
recent fiscal year and a balance sheet as of the end of such fiscal year.
<PAGE> 13
UNWIRED PLANET, INC.
1995 STOCK PLAN
NOTICE OF STOCK OPTION GRANT
Optionee's Name and Address:
<<Optionee>>
- -------------------------------
- -------------------------------
You have been granted an option to purchase Common Stock of Unwired
Planet, Inc. (the "Company") as follows:
Date of Grant <<GrantDate>>
Option Price Per Share $<<PricePerShare>>
Total Number of Shares Granted <<Shares>>
Total Price of Shares Granted <<TotalPrice>>
Type of Option: [ ] Incentive Stock Option
[ ] Nonstatutory Stock Option
Term/Expiration Date: <<ExpirationDate>>
Vesting Commencement Date: <<VestingStartDate>>
Exercise Schedule:
Subject to the terms of the attached Stock Option Agreement, the Option
shall become exercisable cumulatively, to the extent of 25% of the Shares
subject to the Option at the end of twelve full months following the Vesting
Commencement Date, and 1/48th of the Shares at the end of each month thereafter.
Termination Period:
The option may be exercised for a period of 60 days after termination of
employment or consulting relationship except as set out in Sections 7 and 8 of
the Stock Option Agreement (but in no event later than the Expiration Date).
1
<PAGE> 14
By your signature and the signature of the Company's representative
below, you and the Company agree that this option is granted under and governed
by the terms and conditions of the 1995 Stock Plan and the Stock Option
Agreement, all of which are attached and made a part of this document.
<<Optionee>>: UNWIRED PLANET , INC.
By:
- ------------------------------- -------------------------------
Signature
Title:
- ------------------------------- -------------------------------
Print Name
2
<PAGE> 15
UNWIRED PLANET, INC.
1995 STOCK PLAN
STOCK OPTION AGREEMENT
1. Grant of Option. Unwired Planet, Inc., a Delaware corporation (the
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase a total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the Unwired Planet, Inc. 1995 Stock
Plan (the "Plan") adopted by the Company, which is incorporated herein by
reference. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is intended to
qualify as an Incentive Stock Option as defined in Section 422 of the Code.
2. Exercise of Option. This Option shall be exercisable during its term
in accordance with the Exercise Schedule set out in the Notice of Grant and with
the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a fraction of a
share.
(b) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitation contained in subsection
2(i)(c).
(c) In no event may this Option be exercised after the
date of expiration of the term of this Option as set forth in the Notice of
Grant.
(ii) Method of Exercise. This Option shall be exercisable by
written notice (in the form attached as Exhibit A) which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Secretary of the Company. The written notice shall
be accompanied by payment of the Exercise Price. This Option shall be deemed to
be exercised upon receipt by the Company of such written notice accompanied by
the Exercise Price.
1
<PAGE> 16
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of law and the requirements of any stock exchange upon which the Shares may then
be listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, concurrently with the exercise of all or any portion of this
Option, make the requisite investment representations set forth in the form
attached hereto as Exhibit A, and shall read the applicable rules of the
Commissioner of Corporations attached to such form.
4. Method of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of other shares of Common Stock of the Company
which (A) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the date
of surrender, and (B) have a fair market value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or
(iv) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised (i) until
such time as the Plan has been approved by the shareholders of the Company, or
(ii) if the issuance of such Shares upon such exercise or the method of payment
of consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event of termination of
Optionee's consulting relationship or Continuous Status as an Employee, Optionee
may, to the extent otherwise so entitled at the date of such termination (the
"Termination Date"), exercise this Option during the Termination Period set out
in the Notice of Grant. To the extent that Optionee was not entitled to
2
<PAGE> 17
exercise this Option at the date of such termination, or if Optionee does not
exercise this Option within the time specified herein, the Option shall
terminate.
7. Disability of Optionee.
(i) Notwithstanding the provisions of Section 6 above, in the
event of termination of an Optionee's consulting relationship or Continuous
Status as an Employee as a result of his total and permanent disability Optionee
may, but only within twelve (12) months from the date of such termination (but
in no event later than the expiration date of the term of such Option as set
forth in the Option Agreement), exercise the Option to the extent otherwise
entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate.
(ii) Notwithstanding the provisions of Section 6 above, in the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of any disability not constituting a total and permanent
disability he may, but only within six (6) months from the date of such
termination (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), exercise his Option to the
extent he was entitled to exercise it at the date of such termination; provided,
however, that if such Optionee fails to exercise any Incentive Stock Option
within three (3) months from the date of termination of employment, such Option
shall be treated for federal income tax purposes as a Nonstatutory Stock Option.
To the extent that Optionee was not entitled to exercise the Option at the date
of termination, or if Optionee does not exercise such Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.
8. Death of Optionee. In the event of the death of Optionee, the Option
may be exercised at any time within six (6) months following the date of death
(but in no event later than the date of expiration of the term of this Option as
set forth in Section 10 below), by Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only to the
extent the Optionee could exercise the Option at the date of death.
9. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by him. The terms of this
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and Options granted to more than ten percent (10%) shareholders shall apply to
this Option.
11. Taxation Upon Exercise of Option. Optionee understands that, upon
exercising a nonstatutory Option, he or she will recognize income for tax
purposes in an amount equal to the
3
<PAGE> 18
excess of the then fair market value of the Shares over the exercise price.
However, the timing of this income recognition may be deferred for up to six
months if Optionee is subject to Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). If the Optionee is an employee, the
Company will be required to withhold from Optionee's compensation, or collect
from Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income. Additionally, the Optionee may at some
point be required to satisfy tax withholding obligations with respect to the
disqualifying disposition of an Incentive Stock Option. The Optionee shall
satisfy his or her tax withholding obligation arising upon the exercise of this
Option by one or some combination of the following methods: (i) by cash payment,
or (ii) out of Optionee's current compensation, or (iii) if permitted by the
Administrator, in its discretion, by surrendering to the Company Shares which
(a) in the case of Shares previously acquired from the Company, have been owned
by the Optionee for more than six months on the date of surrender, and (b) have
a fair market value on the date of surrender equal to or less than Optionee's
marginal tax rate times the ordinary income recognized, (iv) by electing to have
the Company withhold from the Shares to be issued upon exercise of the Option
that number of Shares having a fair market value equal to the amount required to
be withheld. For this purpose, the fair market value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined (the "Tax Date").
If the Optionee is subject to Section 16 of the Exchange Act (an
"Insider"), any surrender of previously owned Shares to satisfy tax withholding
obligations arising upon exercise of this Option must comply with the applicable
provisions of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3") and
shall be subject to such additional conditions or restrictions as may be
required thereunder to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(i) the election must be made on or prior to the applicable Tax
Date;
(ii) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(iii) all elections shall be subject to the consent or
disapproval of the Administrator;
(iv) if the Optionee is an Insider, the election must comply with
the applicable provisions of Rule 16b-3 and shall be subject to such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
12. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal and Delaware tax consequences of exercise
of this Option and
4
<PAGE> 19
disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(i) Exercise of ISO. If this Option qualifies as an ISO, there
will be no regular federal income tax liability or Delaware income tax liability
upon the exercise of the Option, although the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to the alternative minimum tax in the year of
exercise.
(ii) Exercise of Nonstatutory Stock Option. If this Option does
not qualify as an ISO, there may be a regular federal income tax liability and a
Delaware income tax liability upon the exercise of the Option. The Optionee will
be treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the fair market value of the Shares
on the date of exercise over the Exercise Price. If Optionee is an employee, the
Company will be required to withhold from Optionee's compensation or collect
from Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.
(iii) Disposition of Shares. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal and Delaware income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and are disposed of at least two
years after the Date of Grant, any gain realized on disposition of the Shares
will also be treated as long-term capital gain for federal and Delaware income
tax purposes. If Shares purchased under an ISO are disposed of within such
one-year period or within two years after the Date of Grant, any gain realized
on such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the fair market value of
the Shares on the date of exercise over the Exercise Price.
(iv) Notice of Disqualifying Disposition of ISO Shares. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee from the early disposition by payment in cash or out
of the current earnings paid to the Optionee.
UNWIRED PLANET, INC.
a Delaware corporation
5
<PAGE> 20
By: _____________________________
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS OR HER RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE HIS OR HER EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated: _______________ ______________________________
Optionee
6
<PAGE> 21
EXHIBIT A
1995 STOCK PLAN
EXERCISE NOTICE
Unwired Planet, Inc.
- -------------------------------
- -------------------------------
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, ___________, 19__, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Unwired Planet, Inc. (the
"Company") under and pursuant to the Company's 1995 Stock Plan, as amended (the
"Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option Agreement dated
________ (the "Option Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions. Optionee represents that
Optionee is purchasing the Shares for Optionee's own account for investment and
not with a view to, or for sale in connection with, a distribution of any of
such Shares.
3. Compliance with Securities Laws. Optionee understands and
acknowledges that the Shares may not have been registered under the Securities
Act of 1933, as amended (the "1933 Act"), and, notwithstanding any other
provision of the Option Agreement to the contrary, the exercise of any rights to
purchase any Shares is expressly conditioned upon compliance with the 1933 Act,
all applicable state securities laws and all applicable requirements of any
stock exchange or over the counter market on which the Company's Common Stock
may be listed or traded at the time of exercise and transfer. Optionee agrees to
cooperate with the Company to ensure compliance with such laws.
4. Federal Restrictions on Transfer. Optionee understands that the
Shares may not have been registered under the 1933 Act and, in such event,
cannot be resold and must be held indefinitely unless they are registered under
the 1933 Act or unless an exemption from such registration is available and that
the certificate(s) representing the Shares may bear a legend to that effect.
Optionee understands that the Company is under no obligation to register the
Shares and that an exemption may not be available or may not permit Optionee to
transfer Shares in the amounts or at the times proposed by Optionee. Optionee is
familiar with the provisions of Rule 701 and Rule 144, each promulgated under
the 1933 Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly from the issuer thereof, in a
non-public offering subject to the satisfaction of certain conditions. Rule 701
provides that if the issuer qualifies under Rule 701 at the time of the Closing,
such issuance will be exempt from
<PAGE> 22
registration under the 1933 Act. In the event the Company becomes subject to the
reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, ninety (90) days thereafter the securities exempt under Rule 701 may be
resold, subject to the satisfaction of certain of the conditions specified by
Rule 144, including among other things: (1) the sale being made through a broker
in an unsolicited "broker's transaction" or in transactions directly with a
market maker (as said term is defined under the Securities Exchange Act of
1934); and, in the case of an affiliate, (2) the availability of certain public
information about the Company, and the amount of securities being sold during
any three month period not exceeding the limitations specified in Rule 144(e),
if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of the Closing, then securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires among other
things: (1) the resale occurring not less than two years after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than three years, (2) the availability of
certain public information about the Company, (3) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934), and (4) the amount of securities being sold during any three month period
not exceeding the specified limitations stated therein, if applicable.
Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required. Purchaser understands that no assurances can be
given that any such other registration exemption will be available in such
event.
5. Rights as Shareholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 12 of the Plan.
Optionee shall enjoy rights as a shareholder until such time as Optionee
disposes of the Shares or the Company and/or its assignee(s) exercises the Right
of First Refusal hereunder. Upon such exercise, Optionee shall have no further
rights as a holder of the Shares so purchased except the right to receive
payment for the Shares so purchased in accordance with the provisions of this
Agreement, and Optionee shall forthwith cause the certificate(s) evidencing the
Shares so purchased to be surrendered to the Company for transfer or
cancellation.
6. Company's Right of First Refusal. Before any Shares held by Optionee
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall
<PAGE> 23
have a right of first refusal, subject to the provisions of Section 6(g) below,
to purchase the Shares on the terms and conditions set forth in this Section
(the "Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding purchase money indebtedness of the Holder to
the Company for the purchase price of the Shares or a portion thereof or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be
given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal before any Shares held by the Holder may be
sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to the Optionee's immediate family or a trust for the benefit of
the Optionee's immediate family shall be exempt from the provisions of this
Section. "Immediate Family" as used herein shall mean spouse, lineal
<PAGE> 24
descendant or antecedent, father, mother, brother or sister. In such case, the
transferee or other recipient shall receive and hold the Shares so transferred
subject to the provisions of this Section, and there shall be no further
transfer of such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate at such time as a public market exists for the Company's
capital stock (or any other stock issued to purchasers in exchange for the
Shares purchased under this Agreement). For the purpose of this Agreement, a
"Public Market" shall be deemed to exist if (i) such stock is listed on a
national securities exchange (as that term is used in the Securities Exchange
Act of 1934) or (ii) such stock is traded on the over-the-counter market and
prices are published daily on business days in a recognized financial journal.
7. Tax Consultation. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
8. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to the extent the Company determines such legends to be applicable, to
be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by state or federal securities laws:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL FOR THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE
COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY,
OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION
THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER
OF
<PAGE> 25
CORPORATIONS OF THE STATE OF DELAWARE, EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES.
Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the Delaware Corporations Commissioner, a
copy of which is attached hereto.
(b) Stop-Transfer Notices. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
9. Market Standoff Agreement. Optionee hereby agrees that if so
requested by the Company or any representative of the underwriters in connection
with any registration of the offering of any securities of the Company under the
1933 Act, Optionee shall not sell or otherwise transfer any Shares or other
securities of the Company during the 180-day period following the effective date
of a registration statement of the Company filed under the 1933 Act; provided,
however, that such restriction shall only apply to the first registration
statement of the Company to become effective under the 1933 Act which include
securities to be sold on behalf of the Company to the public in an underwritten
public offering under the 1933 Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such 180-day period.
10. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
11. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.
12. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
<PAGE> 26
13. Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
14. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
15. Delivery of Payment. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.
16. Entire Agreement. The Plan and Notice of Grant/Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Notice of
Grant/Option Agreement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof, and is governed by
Delaware law except for that body of law pertaining to conflict of laws.
Submitted By: Accepted By:
OPTIONEE: UNWIRED PLANET, INC.
By:
- ------------------------------- -------------------------------
Signature
Its:
-------------------------------
Address: Address:
--------------------- --------------------------
--------------------- --------------------------
<PAGE> 1
EXHIBIT 10.3
UNWIRED PLANET, INC.
1996 STOCK PLAN
(As amended in March 1999)
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights may also be granted
under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
administration of stock option and restricted stock purchase plans under
applicable U.S. state corporate laws, U.S. federal and applicable state
securities laws, the Code, any stock exchange rules or regulations and the
applicable laws of any other country or jurisdiction where Options or Stock
Purchase Rights are granted under the Plan, as such laws, rules, regulations and
requirements shall be in place from time to time.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Unwired Planet, Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any Director of the Company whether
compensated for such services or not.
(i) "Continuous Status as an Employee or Consultant" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as
<PAGE> 2
an Employee or Consultant shall not be considered interrupted in the case of:
(i) sick leave; (ii) military leave; (iii) any other leave of absence approved
by the Administrator, provided that such leave is for a period of not more than
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (iv) in the case of transfers
between locations of the Company or between the Company, its Subsidiaries or its
successor. For purposes of this Plan, a change in status from an Employee to a
Consultant or from a Consultant to an Employee will not constitute an
interruption of Continuous Status as an Employee or Consultant.
(j) "Director" means a member of the Board.
(k) "Employee" means any person (including if appropriate, any Named
Executive, Officer or Director) employed by the Company or any Parent or
Subsidiary of the Company, with the status of employment determined based upon
such minimum number of hours or periods worked as shall be determined by the
Administrator in its discretion, subject to any requirements of the Code. The
payment of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported, as quoted
on such exchange or system for the last market trading day prior to the time of
determination) as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but not
on the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written option agreement.
-2-
<PAGE> 3
(o) "Listed Security" means any security of the Company that is
listed or approved for listing on a national securities exchange or designated
or approved for designation as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc.
(p) "Named Executive" means any individual who, on the last day of
the Company's fiscal year, is the chief executive officer of the Company (or is
acting in such capacity) or among the four most highly compensated officers of
the Company (other than the chief executive officer). Such officer status shall
be determined pursuant to the executive compensation disclosure rules under the
Exchange Act.
(q) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
(r) "Officer" means a person who is an officer of the Company within
the meaning of Section 16(a) of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Optioned Stock" means the Common Stock subject to an Option or a
Stock Purchase Right.
(u) "Optionee" means an Employee or Consultant who receives an Option
or Stock Purchase Right.
(v) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(w) "Plan" means this 1996 Stock Plan.
(x) "Reporting Person" means an Officer, Director, or greater than
ten percent shareholder of the Company within the meaning of Rule 16a-2 under
the Exchange Act, who is required to file reports pursuant to Rule 16a-3 under
the Exchange Act.
(y) "Restricted Stock" means shares of Common Stock acquired pursuant
to a grant of a Stock Purchase Right under Section 12 below.
(z) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 14 below.
(aa) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 12 below.
-3-
<PAGE> 4
(bb) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
(cc) "Ten Percent Holder" means a person who owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary.
3. Stock Subject to the Plan. Subject to the provisions of Section 14 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 7,734,425 shares of Common Stock (on a post-split basis), plus
an automatic annual increase on the first day of each of the Company's fiscal
years beginning in 2000 and ending in 2006 equal to the lesser of (i) 1,500,000
Shares; (ii) four percent (4%) of the Shares outstanding on the last day of the
immediately preceding fiscal year; or (iii) such lesser number of shares as is
determined by the Board of Directors. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. Shares repurchased by the Company pursuant to any
repurchase right which the Company may have shall not be available for future
grant under the Plan.
4. Administration of the Plan.
(a) General. The Plan shall be administered by the Board or a
Committee, or a combination thereof, as determined by the Board. The Plan may be
administered by different administrative bodies with respect to different
classes of Optionees and, if permitted by the Applicable Laws, the Board may
authorize one or more officers (who may (but need not) be Officers) to grant
Options or Stock Purchase Rights to Employees and Consultants.
(b) Administration With Respect to Reporting Persons. With respect to
Options granted to Reporting Persons and Named Executives, the Plan may (but
need not) be administered so as to permit such Options to qualify for the
exemption set forth in Rule 16b-3 and to qualify as performance-based
compensation under Section 162(m) of the Code.
(c) Committee Composition. If a Committee has been appointed pursuant
to this Section 4, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of any Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies (however caused) and remove all members of a Committee
and thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws and, in the case of a Committee administering the Plan pursuant
to Section 4(b) above, to the extent permitted or required by Rule 16b-3 and
Section 162(m) of the Code.
-4-
<PAGE> 5
(d) Powers of the Administrator. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(m) of the Plan;
(ii) to select the Consultants and Employees to whom Options and
Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder, which terms and
conditions include but are not limited to the exercise or purchase price, the
time or times when Options or Stock Purchase Rights may be exercised (which may
be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option,
Optioned Stock, Stock Purchase Right or Restricted Stock, based in each case on
such factors as the Administrator, in its sole discretion, shall determine;
(vii) to determine whether and under what circumstances an Option
may be settled in cash under subsection 10(g) instead of Common Stock; and
(viii) to determine the terms and restrictions applicable to
Stock Purchase Rights and the Restricted Stock purchased by exercising such
Stock Purchase Rights.
(e) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options or Stock Purchase Rights.
5. Eligibility.
(a) Recipients of Grants. Nonstatutory Stock Options and Stock
Purchase Rights may be granted to Employees and Consultants. Incentive Stock
Options may be granted only to Employees. An Employee or Consultant who has been
granted an Option or Stock Purchase Right may, if he is otherwise eligible, be
granted additional Options or Stock Purchase Rights.
-5-
<PAGE> 6
(b) Type of Option. Each Option shall be designated in the written
option agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Options
designated as Incentive Stock Options are exercisable for the first time by any
Optionee during any calendar year (under all plans of the Company or any Parent
or Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares shall be determined as of the time the
Option with respect to such Shares is granted.
(c) Employment Relationship. The Plan shall not confer upon any
Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with such
Optionee's right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 20 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 16 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, is a
Ten Percent Holder, the term of the Option shall be five (5) years from the date
of grant thereof or such shorter term as may be provided in the Option
Agreement.
8. Limitation on Grants to Employees. Subject to adjustment as provided
in Section 14 below, the maximum number of Shares which may be subject to
Options and Stock Purchase Rights granted to any one Employee under this Plan
for any fiscal year of the Company shall be 1,000,000 Shares.
9. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, is a Ten Percent Holder, the per Share exercise
price shall be no less than 110% of the Fair Market Value per Share on the date
of grant.
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<PAGE> 7
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted prior to the date, if any, on which the Common
Stock becomes a Listed Security to a person who, at the time of the grant of
such Option, is a Ten Percent Holder, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of the grant.
(B) granted to a person who, at the time of the grant of
such Option, is a Named Executive of the Company, the per share Exercise Price
shall be no less than 100% of the Fair Market Value on the date of grant if such
Option is intended to qualify as performance-based compensation under Section
162(m) of the Code; or
(C) granted prior to the date, if any, on which the Common
Stock becomes a Listed Security to any person other than a Named Executive or a
Ten Percent Holder, the per Share exercise price shall be no less than 85% of
the Fair Market Value per Share on the date of grant if required by Applicable
Law and, if not so required, shall be such price as is determined by the
Administrator.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) authorization from the Company to retain from the
total number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) delivery
of a properly executed exercise notice together with such other documentation as
the Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price, (7) by delivering an irrevocable
subscription agreement for the Shares which irrevocably obligates the option
holder to take and pay for the Shares not more than twelve months after the date
of delivery of the subscription agreement, (8) any combination of the foregoing
methods of payment, (9) or such other consideration and method of payment for
the issuance of Shares to the extent permitted under Applicable Laws. In making
its determination as to the type of consideration to accept, the Board shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
10. Exercise of Option.
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<PAGE> 8
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, consistent with the terms of the Plan, and
reflected in the Option Agreement, including vesting requirements and/or
performance criteria with respect to the Company and/or the Optionee; provided
however that, if required by the Applicable Laws, any Option granted prior to
the date, if any, upon which the Common Stock becomes a Listed Security shall
become exercisable at a rate of at least 20% per year over five years from the
date the Option is granted. In the event that any of the Shares issued upon
exercise of an Option (which exercise occurs prior to the date, if any, upon
which the Common Stock becomes a Listed Security) should be subject to a right
of repurchase in the Company's favor, such repurchase right shall, if required
by the Applicable Laws, lapse at the rate of at least 20% per year over five
years from the date the Option is granted. Notwithstanding the above, in the
case of an Option granted to an officer (including but not limited to Officers),
Director or Consultant, the Option may become exercisable, or a repurchase
right, if any, in favor of the Company shall lapse, at any time or during any
period established by the Administrator. The Administrator shall have the
discretion to determine whether and to what extent the vesting of Options shall
be tolled during any unpaid leave of absence; provided however that in the
absence of such determination, vesting of Options shall be tolled during any
such leave.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 14 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment. In the event of termination of an
Optionee's Continuous Status as an Employee or Consultant, such Optionee may,
but only within such period of time (not less than thirty (30) days) as
determined by the Board, with such determination in the case of an Incentive
Stock Option being made at the time of grant of the Option and not exceeding
three (3) months after the date of such termination (but in no event later than
the expiration date of the term of such Option as set forth in the Option
Agreement), exercise his Option to the extent that Optionee was entitled to
exercise it at the date of such
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<PAGE> 9
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of such termination, or if Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate. No termination shall be deemed to occur and this Section 9(b) shall
not apply if (i) the Optionee is a Consultant who becomes an Employee or (ii)
the Optionee is an Employee who becomes a Consultant.
(c) Disability of Optionee.
(i) Notwithstanding the provisions of Section 9(b) above, in the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of his total and permanent disability Optionee may, but
only within twelve (12) months from the date of such termination (but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(ii) Notwithstanding the provisions of Section 9(b) above, in the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of any disability not constituting a total and permanent
disability he may, but only within six (6) months from the date of such
termination (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), exercise his Option to the
extent he was entitled to exercise it at the date of such termination; provided,
however, that if such Optionee fails to exercise any Incentive Stock Option
within three (3) months from the date of termination of employment, such Option
shall be treated for federal income tax purposes as a Nonstatutory Stock Option.
To the extent that Optionee was not entitled to exercise the Option at the date
of termination, or if Optionee does not exercise such Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of the death of an Optionee
during the period of Continuous Status as an Employee or Consultant, the Option
may be exercised, at any time within twelve (12) months following the date of
death (but in no event later than the expiration date of the term of such Option
as set forth in the Option Agreement), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent the Optionee was entitled to exercise the Option at the date
of death. To the extent that Optionee was not entitled to exercise the Option at
the date of termination, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate.
(e) Extension of Exercise Period. The Administrator shall have full
power and authority to extend the period of time for which an Option is to
remain exercisable following termination of an Optionee's Continuous Status as
an Employee or Consultant from the periods set forth in Sections 10(b), 10(c)
and 10(d) above or in the Option Agreement to such greater time as the Board
shall deem appropriate, provided that in no event shall such Option be
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<PAGE> 10
exercisable later than the date of expiration of the term of such Option as set
forth in the Option Agreement.
(f) Rule 16b-3. Options granted to Reporting Persons must comply with
Rule 16b-3 and shall contain such additional conditions or restrictions as may
be required thereunder to qualify for the maximum exemption for Plan
transactions.
(g) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Non-Transferability of Options and Stock Purchase Rights. An Option or
Stock Purchase Right may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution; provided that, after the date, if any, upon which the
Common Stock becomes a Listed Security, the Administrator may in its discretion
grant transferable Nonstatutory Stock Options pursuant to Option Agreements
specifying (i) the manner in which such Nonstatutory Stock Options are
transferable and (ii) that any such transfer shall be subject to the Applicable
Laws. The designation of a beneficiary by an Optionee will not constitute a
transfer. An Option or Stock Purchase Right may be exercised, during the
lifetime of the holder of Option or Stock Purchase Right, only by such holder or
a transferee permitted by this Section 11.
12. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and the time within which such person must
accept such offer, which shall in no event exceed 30 days from the date upon
which the Administrator made the determination to grant the Stock Purchase
Right. In the case of a Stock Purchase Right granted prior to the date, if any,
on which the Common Stock becomes a Listed Security and if required by the
Applicable Laws at such time, the purchase price of Shares subject to such Stock
Purchase Rights shall not be less than 85% of the Fair Market Value of the
Shares as of the date of the offer, or, in the case of a Ten Percent Holder, the
price shall not be less than 100% of the Fair Market Value of the Shares as of
the date of the offer. If the Applicable Laws do not impose the requirements set
forth in the preceding sentence and with respect to any Stock Purchase Rights
granted after the date, if any, on which the Common Stock becomes a Listed
Security, the purchase price of Shares subject to Stock Purchase Rights shall be
as determined by the Administrator. The offer to purchase Shares subject to
Stock Purchase Rights shall be accepted by execution of a Restricted Stock
Purchase Agreement in the form determined by the Administrator.
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<PAGE> 11
(b) Repurchase Option. Unless the Administrator determines otherwise,
the Restricted Stock purchase agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cash or cancellation of purchase money indebtedness
of the purchaser to the Company. The repurchase option shall lapse at such rate
as the Administrator may determine; provided however that with respect to a
Stock Purchase Right granted prior to the date, if any, on which the Common
Stock becomes a Listed Security to a purchaser who is not an officer (including
an Officer), Director or Consultant of the Company or of any Parent or
Subsidiary of the Company, it shall lapse at a minimum rate of 20% per year if
required by the Applicable Laws.
(c) Other Provisions. The Restricted Stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
13. Taxes.
(a) As a condition of the exercise of an Option or Stock Purchase
Right granted under the Plan, the Participant (or in the case of the
Participant's death, the person exercising the Option or Stock Purchase Right)
shall make such arrangements as the Administrator may require for the
satisfaction of any applicable federal, state, local or foreign withholding tax
obligations that may arise in connection with the exercise of Option or Stock
Purchase Right and the issuance of Shares. The Company shall not be required to
issue any Shares under the Plan until such obligations are satisfied.
(b) In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to satisfy
such tax obligations from the next payroll payment otherwise payable after the
date of an exercise of the Option or Stock Purchase Right.
(c) This Section 13(c) shall apply only after the date, if any, upon
which the Common Stock becomes a Listed Security. In the case of Participant
other than an Employee (or in the case of an Employee where the next payroll
payment is not sufficient to satisfy such tax obligations, with respect to any
remaining tax obligations), in the absence of any other arrangement and to the
extent permitted under the Applicable Laws, the Participant shall be
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<PAGE> 12
deemed to have elected to have the Company withhold from the Shares to be issued
upon exercise of the Option or Stock Purchase Right that number of Shares having
a Fair Market Value determined as of the applicable Tax Date (as defined below)
equal to the amount required to be withheld. For purposes of this Section 13,
the Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined under the
Applicable Laws (the "Tax Date").
(d) If permitted by the Administrator, in its discretion, a
Participant may satisfy his or her tax withholding obligations upon exercise of
an Option or Stock Purchase Right by surrendering to the Company Shares that (i)
in the case of Shares previously acquired from the Company, have been owned by
the Participant for more than six (6) months on the date of surrender, and (ii)
have a Fair Market Value determined as of the applicable Tax Date equal to the
amount required to be withheld.
(e) Any election or deemed election by a Participant to have Shares
withheld to satisfy tax withholding obligations under Section 13(c) or (d) above
shall be irrevocable as to the particular Shares as to which the election is
made and shall be subject to the consent or disapproval of the Administrator.
Any election by a Participant under Section 13(d) above must be made on or prior
to the applicable Tax Date.
(f) In the event an election to have Shares withheld is made by a
Participant and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Participant shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Participant shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the applicable Tax
Date.
14. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with
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<PAGE> 13
respect to, the number or price of shares of Common Stock subject to an Option
or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Sale of Assets. In the event of a proposed sale of all
or substantially all of the Company's assets or a merger of the Company with or
into another corporation, each outstanding Option shall be assumed or an
equivalent option or right shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation, unless the successor
corporation does not agree to assume the Option or to substitute an equivalent
option, in which case such Option shall terminate upon the consummation of the
merger or sale of assets.
(d) Certain Distributions. In the event of any distribution to the
Company's shareholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
15. Time of Granting Options and Stock Purchase Rights. The date of grant
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Board. Notice of the
determination shall be given to each Employee or Consultant to whom an Option or
Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
16. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuance or termination (other than an adjustment made pursuant to
Section 14 above) shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with the Applicable Laws, the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
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<PAGE> 14
17. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
18. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
19. Agreements. Options and Stock Purchase Rights shall be evidenced by
written agreements in such form as the Board shall approve from time to time.
20. Stockholder Approval. If required by the Applicable Laws, continuance
of the Plan shall be subject to approval by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted. Such
stockholder approval shall be obtained in the manner and to the degree required
under the Applicable Laws.
21. Information to Optionees and Purchasers. Prior to the date, if any,
upon which the Common Stock becomes a Listed Security and if required by the
Applicable Laws, the Company shall provide to each Optionee and to each
individual who acquired Shares pursuant to the Plan, during the period such
Optionee or purchaser has one or more Options or Stock Purchase Rights
outstanding, and, in the case of an individual who acquired Shares pursuant to
the Plan, during the period such individual owns such Shares, copies of all
annual reports and other information which are provided to all shareholders of
the Company and at least annually, financial statements of the Company. The
Company shall not be required to provide such information if the issuance of
Options and Stock Purchase Rights under the Plan is limited to key employees
whose duties in connection with the Company assure their access to equivalent
information. In addition, at the time of issuance of any securities under the
Plan, the Company shall provide to the Optionee a copy of the Plan and a copy of
any agreement(s) pursuant to which securities under the Plan are issued.
<PAGE> 15
UNWIRED PLANET, INC.
1996 STOCK PLAN
NOTICE OF STOCK OPTION GRANT
Optionee's Name and Address:
<<Optionee>>
- -------------------------------
- -------------------------------
You have been granted an option to purchase Common Stock of Unwired
Planet, Inc. (the "Company") as follows:
Date of Grant <<GrantDate>>
Option Price Per Share $<<PricePerShare>>
Total Number of Shares Granted <<Shares>>
Total Price of Shares Granted <<TotalPrice>>
Type of Option: [ ] Incentive Stock Option
Nonstatutory Stock Option
Term/Expiration Date: <<ExpirationDate>>
Vesting Commencement Date: <<VestingStartDate>>
Exercise Schedule:
Subject to the terms of the attached Stock Option Agreement, the Option
shall become exercisable cumulatively, to the extent of
[ ] 25% of the Shares subject to the Option at the end of twelve full
months following the Vesting Commencement Date, and 1/48th of the
Shares at the end of each month thereafter.
[ ] 1.667% of the shares subject to the Option at the end of each month
following the Vesting Commencement Date.
[ ] 10% of the Shares subject to the Option on the second anniversary of
the Vesting Commencement Date, 20% on the third anniversary, 30% on
the fourth anniversary and 40% on the fifth anniversary.
Termination Period:
The option may be exercised for a period of [30-90] days after
termination of employment or consulting relationship except as set out in
Sections 7 and 8 of the Stock Option Agreement (but in no event later than the
Expiration Date).
<PAGE> 16
By your signature and the signature of the Company's representative
below, you and the Company agree that this option is granted under and governed
by the terms and conditions of the 1996 Stock Plan and the Stock Option
Agreement, all of which are attached and made a part of this document.
<<Optionee>>: UNWIRED PLANET , INC.
By:
- ------------------------------- -------------------------------
Signature
Title:
- ------------------------------- ----------------------------
Print Name
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<PAGE> 17
UNWIRED PLANET, INC.
1996 STOCK PLAN
STOCK OPTION AGREEMENT
1. Grant of Option. Unwired Planet, Inc., a Delaware corporation (the
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase a total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the Unwired Planet, Inc. 1996 Stock
Plan (the "Plan") adopted by the Company, which is incorporated herein by
reference. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is intended to
qualify as an Incentive Stock Option as defined in Section 422 of the Code.
2. Exercise of Option. This Option shall be exercisable during its term
in accordance with the Exercise Schedule set out in the Notice of Grant and with
the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a fraction of a
share.
(b) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitation contained in subsection
2(i)(c).
(c) In no event may this Option be exercised after the
date of expiration of the term of this Option as set forth in the Notice of
Grant.
(ii) Method of Exercise. This Option shall be exercisable by
written notice (in the form attached as Exhibit A) which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Secretary of the Company. The written notice shall
be accompanied by payment of the Exercise Price. This Option shall be deemed to
be exercised upon receipt by the Company of such written notice accompanied by
the Exercise Price.
<PAGE> 18
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of law and the requirements of any stock exchange upon which the Shares may then
be listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, concurrently with the exercise of all or any portion of this
Option, make the requisite investment representations set forth in the form
attached hereto as Exhibit A, and shall read the applicable rules of the
Commissioner of Corporations attached to such form.
4. Method of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check;
(iii) promissory note;
(iii) surrender of other shares of Common Stock of the Company
which (A) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the date
of surrender, and (B) have a fair market value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or
(iv) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised (i) until
such time as the Plan has been approved by the shareholders of the Company, or
(ii) if the issuance of such Shares upon such exercise or the method of payment
of consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event of termination of
Optionee's consulting relationship or Continuous Status as an Employee, Optionee
may, to the extent otherwise so entitled at the date of such termination (the
"Termination Date"), exercise this Option during the Termination Period set out
in the Notice of Grant. To the extent that Optionee was not entitled to
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<PAGE> 19
exercise this Option at the date of such termination, or if Optionee does not
exercise this Option within the time specified herein, the Option shall
terminate.
7. Disability of Optionee.
(i) Notwithstanding the provisions of Section 6 above, in the
event of termination of an Optionee's consulting relationship or Continuous
Status as an Employee as a result of his total and permanent disability Optionee
may, but only within twelve (12) months from the date of such termination (but
in no event later than the expiration date of the term of such Option as set
forth in the Option Agreement), exercise the Option to the extent otherwise
entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate.
(ii) Notwithstanding the provisions of Section 6 above, in the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of any disability not constituting a total and permanent
disability he may, but only within six (6) months from the date of such
termination (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), exercise his Option to the
extent he was entitled to exercise it at the date of such termination; provided,
however, that if such Optionee fails to exercise any Incentive Stock Option
within three (3) months from the date of termination of employment, such Option
shall be treated for federal income tax purposes as a Nonstatutory Stock Option.
To the extent that Optionee was not entitled to exercise the Option at the date
of termination, or if Optionee does not exercise such Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.
8. Death of Optionee. In the event of the death of Optionee, the Option
may be exercised at any time within twelve (12) months following the date of
death (but in no event later than the date of expiration of the term of this
Option as set forth in Section 10 below), by Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent the Optionee could exercise the Option at the date of death.
9. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by him. The terms of this
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and Options granted to more than ten percent (10%) shareholders shall apply to
this Option.
11. Taxation Upon Exercise of Option. Optionee understands that, upon
exercising a nonstatutory Option, he or she will recognize income for tax
purposes in an amount equal to the
-3-
<PAGE> 20
excess of the then fair market value of the Shares over the exercise price.
However, the timing of this income recognition may be deferred for up to six
months if Optionee is subject to Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). If the Optionee is an employee, the
Company will be required to withhold from Optionee's compensation, or collect
from Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income. Additionally, the Optionee may at some
point be required to satisfy tax withholding obligations with respect to the
disqualifying disposition of an Incentive Stock Option. The Optionee shall
satisfy his or her tax withholding obligation arising upon the exercise of this
Option by one or some combination of the following methods: (i) by cash payment,
or (ii) out of Optionee's current compensation, or (iii) if permitted by the
Administrator, in its discretion, by surrendering to the Company Shares which
(a) in the case of Shares previously acquired from the Company, have been owned
by the Optionee for more than six months on the date of surrender, and (b) have
a fair market value on the date of surrender equal to or less than Optionee's
marginal tax rate times the ordinary income recognized, (iv) by electing to have
the Company withhold from the Shares to be issued upon exercise of the Option
that number of Shares having a fair market value equal to the amount required to
be withheld. For this purpose, the fair market value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined (the "Tax Date").
If the Optionee is subject to Section 16 of the Exchange Act (an
"Insider"), any surrender of previously owned Shares to satisfy tax withholding
obligations arising upon exercise of this Option must comply with the applicable
provisions of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3") and
shall be subject to such additional conditions or restrictions as may be
required thereunder to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(i) the election must be made on or prior to the applicable Tax
Date;
(ii) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(iii) all elections shall be subject to the consent or
disapproval of the Administrator;
(iv) if the Optionee is an Insider, the election must comply with
the applicable provisions of Rule 16b-3 and shall be subject to such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
12. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal and Delaware tax consequences of exercise
of this Option and
-4-
<PAGE> 21
disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(i) Exercise of ISO. If this Option qualifies as an ISO, there
will be no regular federal income tax liability or Delaware income tax liability
upon the exercise of the Option, although the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to the alternative minimum tax in the year of
exercise.
(ii) Exercise of Nonstatutory Stock Option. If this Option does
not qualify as an ISO, there may be a regular federal income tax liability and a
Delaware income tax liability upon the exercise of the Option. The Optionee will
be treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the fair market value of the Shares
on the date of exercise over the Exercise Price. If Optionee is an employee, the
Company will be required to withhold from Optionee's compensation or collect
from Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.
(iii) Disposition of Shares. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal and Delaware income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and are disposed of at least two
years after the Date of Grant, any gain realized on disposition of the Shares
will also be treated as long-term capital gain for federal and Delaware income
tax purposes. If Shares purchased under an ISO are disposed of within such
one-year period or within two years after the Date of Grant, any gain realized
on such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the fair market value of
the Shares on the date of exercise over the Exercise Price.
(iv) Notice of Disqualifying Disposition of ISO Shares. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee from the early disposition by payment in cash or out
of the current earnings paid to the Optionee.
-5-
<PAGE> 22
UNWIRED PLANET, INC.
a Delaware corporation
By: _____________________________
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS OR HER RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE HIS OR HER EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated: _______________ ______________________________
Optionee
-6-
<PAGE> 23
EXHIBIT A
1996 STOCK PLAN
EXERCISE NOTICE
Unwired Planet, Inc.
- -------------------------------
- -------------------------------
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, ___________, 19__, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Unwired Planet, Inc. (the
"Company") under and pursuant to the Company's 1996 Stock Plan, as amended (the
"Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option Agreement dated
________ (the "Option Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions. Optionee represents that
Optionee is purchasing the Shares for Optionee's own account for investment and
not with a view to, or for sale in connection with, a distribution of any of
such Shares.
3. Compliance with Securities Laws. Optionee understands and
acknowledges that the Shares may not have been registered under the Securities
Act of 1933, as amended (the "1933 Act"), and, notwithstanding any other
provision of the Option Agreement to the contrary, the exercise of any rights to
purchase any Shares is expressly conditioned upon compliance with the 1933 Act,
all applicable state securities laws and all applicable requirements of any
stock exchange or over the counter market on which the Company's Common Stock
may be listed or traded at the time of exercise and transfer. Optionee agrees to
cooperate with the Company to ensure compliance with such laws.
4. Federal Restrictions on Transfer. Optionee understands that the
Shares may not have been registered under the 1933 Act and, in such event,
cannot be resold and must be held indefinitely unless they are registered under
the 1933 Act or unless an exemption from such registration is available and that
the certificate(s) representing the Shares may bear a legend to that effect.
Optionee understands that the Company is under no obligation to register the
Shares and that an exemption may not be available or may not permit Optionee to
transfer Shares in the amounts or at the times proposed by Optionee. Optionee is
familiar with the provisions of Rule 701 and Rule 144, each promulgated under
the 1933 Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly from the issuer thereof, in a
non-public offering subject to the satisfaction of certain conditions. Rule 701
provides that if the issuer qualifies under Rule 701 at the time of the Closing,
such issuance will be exempt from registration under the 1933 Act. In the event
the Company becomes subject to the reporting
<PAGE> 24
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter the securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including among other things: (1) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, and the amount of securities being sold during any three
month period not exceeding the limitations specified in Rule 144(e), if
applicable.
In the event that the Company does not qualify under Rule 701 at the
time of the Closing, then securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires among other
things: (1) the resale occurring not less than one year after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than two years, (2) the availability of certain
public information about the Company, (3) the sale being made through a broker
in an unsolicited "broker's transaction" or in transactions directly with a
market maker (as said term is defined under the Securities Exchange Act of
1934), and (4) the amount of securities being sold during any three month period
not exceeding the specified limitations stated therein, if applicable.
Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required. Purchaser understands that no assurances can be
given that any such other registration exemption will be available in such
event.
5. Rights as Shareholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 12 of the Plan.
Optionee shall enjoy rights as a shareholder until such time as Optionee
disposes of the Shares or the Company and/or its assignee(s) exercises the Right
of First Refusal hereunder. Upon such exercise, Optionee shall have no further
rights as a holder of the Shares so purchased except the right to receive
payment for the Shares so purchased in accordance with the provisions of this
Agreement, and Optionee shall forthwith cause the certificate(s) evidencing the
Shares so purchased to be surrendered to the Company for transfer or
cancellation.
6. Company's Right of First Refusal. Before any Shares held by Optionee
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall
<PAGE> 25
have a right of first refusal, subject to the provisions of Section 6(g) below,
to purchase the Shares on the terms and conditions set forth in this Section
(the "Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding purchase money indebtedness of the Holder to
the Company for the purchase price of the Shares or a portion thereof or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be
given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal before any Shares held by the Holder may be
sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to the Optionee's immediate family or a trust for the benefit of
the Optionee's immediate family shall be exempt from the provisions of this
Section. "Immediate Family" as used herein shall mean spouse, lineal
<PAGE> 26
descendant or antecedent, father, mother, brother or sister. In such case, the
transferee or other recipient shall receive and hold the Shares so transferred
subject to the provisions of this Section, and there shall be no further
transfer of such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate at such time as a public market exists for the Company's
capital stock (or any other stock issued to purchasers in exchange for the
Shares purchased under this Agreement). For the purpose of this Agreement, a
"Public Market" shall be deemed to exist if (i) such stock is listed on a
national securities exchange (as that term is used in the Securities Exchange
Act of 1934) or (ii) such stock is traded on the over-the-counter market and
prices are published daily on business days in a recognized financial journal.
7. Tax Consultation. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
8. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to the extent the Company determines such legends to be applicable, to
be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by state or federal securities laws:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL FOR THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE
COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY,
OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION
THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER
OF
<PAGE> 27
CORPORATIONS OF THE STATE OF DELAWARE, EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES.
Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the Delaware Corporations Commissioner, a
copy of which is attached hereto.
(b) Stop-Transfer Notices. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
9. Market Standoff Agreement. Optionee hereby agrees that if so
requested by the Company or any representative of the underwriters in connection
with any registration of the offering of any securities of the Company under the
1933 Act, Optionee shall not sell or otherwise transfer any Shares or other
securities of the Company during the 180-day period following the effective date
of a registration statement of the Company filed under the 1933 Act; provided,
however, that such restriction shall only apply to the first registration
statement of the Company to become effective under the 1933 Act which include
securities to be sold on behalf of the Company to the public in an underwritten
public offering under the 1933 Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such 180-day period.
10. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
11. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.
12. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
<PAGE> 28
13. Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
14. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
15. Delivery of Payment. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.
16. Entire Agreement. The Plan and Notice of Grant/Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Notice of
Grant/Option Agreement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof, and is governed by
Delaware law except for that body of law pertaining to conflict of laws.
Submitted By: Accepted By:
OPTIONEE: UNWIRED PLANET, INC.
By:
- ------------------------------- -------------------------------
Signature
Its:
Address: Address:
--------------------- --------------------------
--------------------- --------------------------
<PAGE> 1
EXHIBIT 10.4
UNWIRED PLANET, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Stock
Purchase Plan of Unwired Planet, Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. DEFINITIONS.
(a) "BOARD" means the Board of Directors of the Company.
(b) "CODE" means the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" means the Common Stock of the Company.
(d) "COMPANY" means Unwired Planet, Inc., a Delaware corporation.
(e) "COMPENSATION" means all regular straight time gross earnings and
shall not include commissions or payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses and other compensation.
(f) "CONTINUOUS STATUS AS AN EMPLOYEE" means the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of (i) sick leave; (ii)
military leave; (iii) any other leave of absence approved by the Administrator,
provided that such leave is for a period of not more than 90 days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company and its Designated Subsidiaries.
(g) "CONTRIBUTIONS" means all amounts credited to the account of a
participant pursuant to the Plan.
(h) "CORPORATE TRANSACTION" means a sale of all or substantially all
of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation, or any other
transaction or series of related transactions in which the Company's
stockholders immediately prior thereto own less than 50% of the voting stock of
the Company (or its successor or parent) immediately thereafter.
<PAGE> 2
(i) "DESIGNATED SUBSIDIARIES" means the Subsidiaries which have been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan; provided however that the Board shall only have the
discretion to designate Subsidiaries if the issuance of options to such
Subsidiary's Employees pursuant to the Plan would not cause the Company to incur
adverse accounting charges.
(j) "EMPLOYEE" means any person, including an Officer, who is
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "OFFERING DATE" means the first business day of each Offering
Period of the Plan.
(m) "OFFERING PERIOD" means a period of twenty-four (24) months
commencing on November 1 and May 1 of each year, except for the first Offering
Period as set forth in Section 4(a).
(n) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(o) "PLAN" means this Employee Stock Purchase Plan.
(p) "PURCHASE DATE" means the last day of each Purchase Period of the
Plan.
(q) "PURCHASE PERIOD" means a period of six (6) months within an
Offering Period, except for the Purchase Periods in the first Offering Period as
set forth in Section 4(b).
(r) "PURCHASE PRICE" means with respect to a Purchase Period an
amount equal to 85% of the Fair Market Value (as defined in Section 7(b) below)
of a Share of Common Stock on the Offering Date or on the Purchase Date,
whichever is lower; provided, however, that in the event (i) of any increase in
the number of Shares available for issuance under the Plan as a result of a
stockholder-approved amendment to the Plan, and (ii) all or a portion of such
additional Shares are to be issued with respect to one or more Offering Periods
that are underway at the time of such increase ("Additional Shares"), and (iii)
the Fair Market Value of a Share of Common Stock on the date of such increase
(the "Approval Date Fair Market Value") is higher than the Fair Market Value on
the Offering Date for any such Offering Period, then in such instance the
Purchase Price with respect to Additional Shares shall be 85% of the Approval
Date Fair Market Value or the Fair Market Value of a Share of Common Stock on
the Purchase Date, whichever is lower.
(s) "SHARE" means a share of Common Stock, as adjusted in accordance
with Section 19 of the Plan.
-2-
<PAGE> 3
(t) "SUBSIDIARY" means a corporation, domestic or foreign, of which
not less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
3. ELIGIBILITY.
(a) Any person who is an Employee as of the Offering Date of a given
Offering Period shall be eligible to participate in such Offering Period under
the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code; provided however that eligible Employees
may not participate in more than one Offering Period at a time.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own capital stock of
the Company and/or hold outstanding options to purchase stock possessing five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company or of any subsidiary of the Company, or (ii) if such
option would permit his or her rights to purchase stock under all employee stock
purchase plans (described in Section 423 of the Code) of the Company and its
Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) of the Fair Market Value (as defined in Section 7(b) below) of such
stock (determined at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
4. OFFERING PERIODS AND PURCHASE PERIODS.
(a) OFFERING PERIODS. The Plan shall be generally implemented by a
series of Offering Periods of twenty-four (24) months' duration, with new
Offering Periods (other than the first Offering Period) commencing on or about
November 1 and May 1 of each year (or at such other time or times as may be
determined by the Board of Directors). The first Offering Period shall commence
on the beginning of the effective date of the Registration Statement on Form S-1
for the initial public offering of the Company's Common Stock (the "IPO Date")
and continue until April 30, 2001. The Plan shall continue until terminated in
accordance with Section 19 hereof. The Board of Directors of the Company shall
have the power to change the duration and/or the frequency of Offering Periods
with respect to future offerings without stockholder approval if such change is
announced at least five (5) days prior to the scheduled beginning of the first
Offering Period to be affected.
(b) PURCHASE PERIODS. Each Offering Period shall generally consist of
four (4) consecutive purchase periods of six (6) months' duration. The last day
of each Purchase Period shall be the "Purchase Date" for such Purchase Period. A
Purchase Period commencing on November 1 shall end on the next April 30. A
Purchase Period commencing on May 1 shall end on the next October 31. The first
Purchase Period of the first Offering Period shall commence on the IPO Date and
shall end on January 31, 2000 with subsequent Purchase Periods ending on April
30, 2000, October 31, 2000 and April 30, 2001. The Board of Directors of the
Company shall have the power to change the duration and/or frequency of Purchase
Periods with
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<PAGE> 4
respect to future purchases without stockholder approval if such change is
announced at least five (5) days prior to the scheduled beginning of the first
Purchase Period to be affected.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given Offering Period. The
subscription agreement shall set forth the percentage of the participant's
Compensation (subject to Section 6(a) below) to be paid as Contributions
pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll following
the Offering Date and shall end on the last payroll paid on or prior to the last
Purchase Period of the Offering Period to which the subscription agreement is
applicable, unless sooner terminated by the participant as provided in Section
10.
6. METHOD OF PAYMENT OF CONTRIBUTIONS.
(a) A participant shall elect to have payroll deductions made on each
payday during the Offering Period in an amount not less than one percent (1%)
and not more than twenty percent (20%) (or such other percentage as the Board
may establish from time to time before an Offering Date) of such participant's
Compensation on each payday during the Offering Period. All payroll deductions
made by a participant shall be credited to his or her account under the Plan. A
participant may not make any additional payments into such account.
(b) A participant may discontinue his or her participation in the
Plan as provided in Section 10, or, on one occasion only during the Offering
Period may increase and on one occasion only during the Offering Period may
decrease the rate of his or her Contributions with respect to the Offering
Period by completing and filing with the Company a new subscription agreement
authorizing a change in the payroll deduction rate. The change in rate shall be
effective as of the beginning of the next calendar month following the date of
filing of the new subscription agreement, if the agreement is filed at least ten
(10) business days prior to such date and, if not, as of the beginning of the
next succeeding calendar month.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) herein, a participant's
payroll deductions may be decreased during any Offering Period scheduled to end
during the current calendar year to 0%. Payroll deductions shall re-commence at
the rate provided in such participant's subscription agreement at the beginning
of the first Offering Period which is scheduled to end in the following calendar
year, unless terminated by the participant as provided in Section 10.
7. GRANT OF OPTION.
(a) On the Offering Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to
purchase on each Purchase
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<PAGE> 5
Date a number of Shares of the Company's Common Stock determined by dividing
such Employee's Contributions accumulated prior to such Purchase Date and
retained in the participant's account as of the Purchase Date by the applicable
Purchase Price; provided however that the maximum number of Shares an Employee
may purchase during each Purchase Period shall be 2,500 Shares (subject to any
adjustment pursuant to Section 19 below), and provided further that such
purchase shall be subject to the limitations set forth in Sections 3(b) and 13.
(b) The fair market value of the Company's Common Stock on a given
date (the "Fair Market Value") shall be determined by the Board in its
discretion based on the closing sales price of the Common Stock for such date
(or, in the event that the Common Stock is not traded on such date, on the
immediately preceding trading date), as reported by the National Association of
Securities Dealers Automated Quotation (Nasdaq) National Market or, if such
price is not reported, the mean of the bid and asked prices per share of the
Common Stock as reported by Nasdaq or, in the event the Common Stock is listed
on a stock exchange, the Fair Market Value per share shall be the closing sales
price on such exchange on such date (or, in the event that the Common Stock is
not traded on such date, on the immediately preceding trading date), as reported
in The Wall Street Journal. For purposes of the Offering Date under the first
Offering Period under the Plan, the Fair Market Value of a share of the Common
Stock of the Company shall be the Price to Public as set forth in the final
prospectus filed with the Securities and Exchange Commission pursuant to Rule
424 under the Securities Act of 1933, as amended.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in Section 10, his or her option for the purchase of Shares will be
exercised automatically on each Purchase Date of an Offering Period, and the
maximum number of full Shares subject to the option will be purchased at the
applicable Purchase Price with the accumulated Contributions in his or her
account. No fractional Shares shall be issued. The Shares purchased upon
exercise of an option hereunder shall be deemed to be transferred to the
participant on the Purchase Date. During his or her lifetime, a participant's
option to purchase Shares hereunder is exercisable only by him or her.
9. DELIVERY. As promptly as practicable after each Purchase Date of each
Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the Shares purchased upon exercise of
his or her option. Any payroll deductions accumulated in a participant's account
which are not sufficient to purchase a full Share shall be retained in the
participant's account for the subsequent Purchase Period or Offering Period,
subject to earlier withdrawal by the participant as provided in Section 10
below. Any other amounts left over in a participant's account after a Purchase
Date shall be returned to the participant.
10. VOLUNTARY WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time prior to
each Purchase Date by giving written notice to the Company. All of the
participant's Contributions credited to his or her account will be paid to him
or her promptly after receipt of his or her notice of withdrawal and
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<PAGE> 6
his or her option for the current period will be automatically terminated, and
no further Contributions for the purchase of Shares will be made during the
Offering Period.
(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Purchase Date of an Offering Period for any reason,
including retirement or death, the Contributions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14, and his or her option will
be automatically terminated.
(c) In the event an Employee fails to remain in Continuous Status as
an Employee of the Company for at least twenty (20) hours per week during the
Offering Period in which the employee is a participant, he or she will be deemed
to have elected to withdraw from the Plan and the Contributions credited to his
or her account will be returned to him or her and his or her option terminated.
(d) A participant's withdrawal from an offering will not have any
effect upon his or her eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.
11. AUTOMATIC WITHDRAWAL. If the Fair Market Value of the Shares on any
Purchase Date of an Offering Period is less than the Fair Market Value of the
Shares on the Offering Date for such Offering Period, then every participant
shall automatically (i) be withdrawn from such Offering Period at the close of
such Purchase Date and after the acquisition of Shares for such Purchase Period,
and (ii) be enrolled in the Offering Period commencing on the first business day
subsequent to such Purchase Period. Participants shall automatically be
withdrawn as of October 31, 1999 from the Offering Period beginning on the IPO
Date and re-enrolled in the Offering Period beginning on November 1, 1999 if the
Fair Market Value of the Shares on the IPO Date is greater than the Fair Market
Value of the Shares on October 31, 1999, unless a participant notifies the
Administrator prior to October 31, 1999 that he or she does not wish to be
withdrawn and re-enrolled.
12. INTEREST. No interest shall accrue on the Contributions of a
participant in the Plan.
13. STOCK.
(a) Subject to adjustment as provided in Section 19, the maximum
number of Shares which shall be made available for sale under the Plan shall be
600,000 Shares, plus an automatic annual increase on the first day of each of
the Company's fiscal years beginning in 2000, 2001, 2002, 2003 and 2004 equal to
the lesser of (i) 500,000 Shares, or (ii) one percent (1%) of the Shares
outstanding on the last day of the immediately preceding fiscal year. If the
Board determines that, on a given Purchase Date, the number of shares with
respect to which options are to be exercised may exceed (i) the number of shares
of Common Stock that were available for sale under the Plan on the Offering Date
of the applicable Offering Period, or (ii) the number of shares available for
sale under the Plan on such Purchase Date, the Board may in its sole discretion
provide (x) that the Company shall make a pro rata allocation of the Shares
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<PAGE> 7
of Common Stock available for purchase on such Offering Date or Purchase Date,
as applicable, in as uniform a manner as shall be practicable and as it shall
determine in its sole discretion to be equitable among all participants
exercising options to purchase Common Stock on such Purchase Date, and continue
all Offering Periods then in effect, or (y) that the Company shall make a pro
rata allocation of the shares available for purchase on such Offering Date or
Purchase Date, as applicable, in as uniform a manner as shall be practicable and
as it shall determine in its sole discretion to be equitable among all
participants exercising options to purchase Common Stock on such Purchase Date,
and terminate any or all Offering Periods then in effect pursuant to Section 20
below. The Company may make pro rata allocation of the Shares available on the
Offering Date of any applicable Offering Period pursuant to the preceding
sentence, notwithstanding any authorization of additional Shares for issuance
under the Plan by the Company's stockholders subsequent to such Offering Date.
(b) The participant shall have no interest or voting right in Shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. ADMINISTRATION. The Board, or a committee named by the Board, shall
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan.
15. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who
is to receive any Shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of a
Purchase Period but prior to delivery to him or her of such Shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Purchase Date of an Offering Period. If
a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
(and his or her spouse, if any) at any time by written notice. In the event of
the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such Shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its discretion, may deliver such Shares and/or cash to the spouse or to any
one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.
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<PAGE> 8
16. TRANSFERABILITY. Neither Contributions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
Shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 15) by the participant. Any such attempt
at assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Section 10.
17. USE OF FUNDS. All Contributions received or held by the Company under
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
18. REPORTS. Individual accounts will be maintained for each participant
in the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of Contributions,
the per Share Purchase Price, the number of Shares purchased and the remaining
cash balance, if any.
19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the stockholders of
the Company, the number of Shares covered by each option under the Plan which
has not yet been exercised and the number of Shares which have been authorized
for issuance under the Plan but have not yet been placed under option
(collectively, the "Reserves"), as well as the maximum number of shares of
Common Stock which may be purchased by a participant in a Purchase Period, the
number of shares of Common Stock set forth in Section 13(a)(i) above, and the
price per Share of Common Stock covered by each option under the Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common Stock
(including any such change in the number of Shares of Common Stock effected in
connection with a change in domicile of the Company), or any other increase or
decrease in the number of Shares effected without receipt of consideration by
the Company; provided however that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares subject to an option.
(b) CORPORATE TRANSACTIONS. In the event of a dissolution or
liquidation of the Company, any Purchase Period and Offering Period then in
progress will terminate immediately prior to the consummation of such action,
unless otherwise provided by the Board. In the event of a Corporate Transaction,
each option outstanding under the Plan shall be assumed or an equivalent option
shall be substituted by the successor corporation or a parent or Subsidiary of
such successor corporation. In the event that the successor corporation refuses
to assume or substitute for outstanding options, each Purchase Period and
Offering Period then in progress shall be shortened and a new Purchase Date
shall be set (the "New Purchase Date"), as of which
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<PAGE> 9
date any Purchase Period and Offering Period then in progress will terminate.
The New Purchase Date shall be on or before the date of consummation of the
transaction and the Board shall notify each participant in writing, at least ten
(10) days prior to the New Purchase Date, that the Purchase Date for his or her
option has been changed to the New Purchase Date and that his or her option will
be exercised automatically on the New Purchase Date, unless prior to such date
he or she has withdrawn from the Offering Period as provided in Section 10. For
purposes of this Section 19, an option granted under the Plan shall be deemed to
be assumed, without limitation, if, at the time of issuance of the stock or
other consideration upon a Corporate Transaction, each holder of an option under
the Plan would be entitled to receive upon exercise of the option the same
number and kind of shares of stock or the same amount of property, cash or
securities as such holder would have been entitled to receive upon the
occurrence of the transaction if the holder had been, immediately prior to the
transaction, the holder of the number of Shares of Common Stock covered by the
option at such time (after giving effect to any adjustments in the number of
Shares covered by the option as provided for in this Section 19); provided
however that if the consideration received in the transaction is not solely
common stock of the successor corporation or its parent (as defined in Section
424(e) of the Code), the Board may, with the consent of the successor
corporation, provide for the consideration to be received upon exercise of the
option to be solely common stock of the successor corporation or its parent
equal in Fair Market Value to the per Share consideration received by holders of
Common Stock in the transaction.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per Share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of Shares of its outstanding Common
Stock, and in the event of the Company's being consolidated with or merged into
any other corporation.
20. AMENDMENT OR TERMINATION.
(a) The Board may at any time and for any reason terminate or amend
the Plan. Except as provided in Section 19, no such termination of the Plan may
affect options previously granted, provided that the Plan or an Offering Period
may be terminated by the Board on a Purchase Date or by the Board's setting a
new Purchase Date with respect to an Offering Period and Purchase Period then in
progress if the Board determines that termination of the Plan and/or the
Offering Period is in the best interests of the Company and the stockholders or
if continuation of the Plan and/or the Offering Period would cause the Company
to incur adverse accounting charges as a result of a change after the effective
date of the Plan in the generally accepted accounting rules applicable to the
Plan. Except as provided in Section 19 and in this Section 20, no amendment to
the Plan shall make any change in any option previously granted which adversely
affects the rights of any participant. In addition, to the extent necessary to
comply with Rule 16b-3 under the Exchange Act, or under Section 423 of the Code
(or any successor rule or provision or any applicable law or regulation), the
Company shall obtain stockholder approval in such a manner and to such a degree
as so required.
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<PAGE> 10
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be entitled to change the Offering Periods and Purchase
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.
21. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such Shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, applicable state securities laws and the requirements of
any stock exchange upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective upon the
IPO Date. It shall continue in effect for a term of twenty (20) years unless
sooner terminated under Section 20.
24. ADDITIONAL RESTRICTIONS OF RULE 16B-3. The terms and conditions of
options granted hereunder to, and the purchase of Shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the Shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
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<PAGE> 11
UNWIRED PLANET, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
New Election ______
Change of Election ______
1. I, ________________________, hereby elect to participate in the
Unwired Planet, Inc.. 1999 Employee Stock Purchase Plan (the "Plan") for the
Offering Period ______________, ____ to _______________, ____, and subscribe to
purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 20% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Purchase
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.
4. I understand that I may discontinue at any time prior to the Purchase
Date my participation in the Plan as provided in Section 10 of the Plan. I also
understand that I can increase or decrease the rate of my Contributions on one
occasion only with respect to any increase and one occasion only with respect to
any decrease during any Offering Period by completing and filing a new
Subscription Agreement with such increase or decrease taking effect as of the
beginning of the calendar month following the date of filing of the new
Subscription Agreement, if filed at least ten (10) business days prior to the
beginning of such month. Further, I may change the rate of deductions for future
Offering Periods by filing a new Subscription Agreement, and any such change
will be effective as of the beginning of the next Offering Period. In addition,
I acknowledge that, unless I discontinue my participation in the Plan as
provided in Section 10 of the Plan, my election will continue to be effective
for each successive Offering Period.
<PAGE> 12
5. I have received a copy of the Company's most recent description of the
Plan and a copy of the complete "Unwired Planet, Inc. 1999 Employee Stock
Purchase Plan." I understand that my participation in the Plan is in all
respects subject to the terms of the Plan.
6. Shares purchased for me under the Plan should be issued in the name(s)
of (name of employee or employee and spouse only):
------------------------------------
------------------------------------
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print)
------------------------------------
(First) (Middle) (Last)
- -------------------- ------------------------------------
(Relationship) (Address)
------------------------------------
8. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Offering Date (the first day of the
Offering Period during which I purchased such shares) or within 1 year after the
Purchase Date, I will be treated for federal income tax purposes as having
received ordinary compensation income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares on the
Purchase Date over the price which I paid for the shares, regardless of whether
I disposed of the shares at a price less than their fair market value at the
Purchase Date. The remainder of the gain or loss, if any, recognized on such
disposition will be treated as capital gain or loss.
I hereby agree to notify the Company in writing within 30 days after
the date of any such disposition, and I will make adequate provision for
federal, state or other tax withholding obligations, if any, which arise upon
the disposition of the Common Stock. The Company may, but will not be obligated
to, withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
9. If I dispose of such shares at any time after expiration of the 2-year
and 1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received compensation income only to the extent of
an amount equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I paid for
the shares under the option, or (2) 15% of the fair market value of the
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<PAGE> 13
shares on the Offering Date. The remainder of the gain or loss, if any,
recognized on such disposition will be treated as capital gain or loss.
I understand that this tax summary is only a summary and is subject to
change. I further understand that I should consult a tax advisor concerning the
tax implications of the purchase and sale of stock under the Plan.
10. I hereby agree to be bound by the terms of the Plan. The effectiveness
of this Subscription Agreement is dependent upon my eligibility to participate
in the Plan.
SIGNATURE:
------------------------------------
SOCIAL SECURITY #:
----------------------------
DATE:
-----------------------------------------
SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):
- ----------------------------------------------
(Signature)
- ----------------------------------------------
(Print name)
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<PAGE> 14
UNWIRED PLANET, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I, __________________________, hereby elect to withdraw my participation in
the Unwired Planet, Inc. 1999 Employee Stock Purchase Plan (the "Plan") for the
Offering Period that began on _________ ___, _____. This withdrawal covers all
Contributions credited to my account and is effective on the date designated
below.
I understand that all Contributions credited to my account will be paid to
me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding offering periods only by delivering to the
Company a new Subscription Agreement.
Dated:
---------------------- ----------------------------------------
Signature of Employee
----------------------------------------
Social Security Number
<PAGE> 1
EXHIBIT 10.5
UNWIRED PLANET, INC.
1999 DIRECTORS' STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this Directors' Stock Option
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be nonstatutory stock
options.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CHANGE OF CONTROL" means a sale of all or substantially all
of the Company's assets, or any merger or consolidation of the Company with or
into another corporation other than a merger or consolidation in which the
holders of more than 50% of the shares of capital stock of the Company
outstanding immediately prior to such transaction continue to hold (either by
the voting securities remaining outstanding or by their being converted into
voting securities of the surviving entity) more than 50% of the total voting
power represented by the voting securities of the Company, or such surviving
entity, outstanding immediately after such transaction.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMON STOCK" means the Common Stock of the Company.
(e) "COMPANY" means Unwired Planet, Inc., a Delaware corporation.
(f) "CONTINUOUS STATUS AS A DIRECTOR" means the absence of any
interruption or termination of service as a Director.
(g) "CORPORATE TRANSACTION" means a dissolution or liquidation of
the Company, a sale of all or substantially all of the Company's assets, or a
merger, consolidation or other capital reorganization of the Company with or
into another corporation.
(h) "DIRECTOR" means a member of the Board.
(i) "EMPLOYEE" means any person, including any officer or
Director, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
<PAGE> 2
(k) "OPTION" means a stock option granted pursuant to the Plan.
All options shall be nonstatutory stock options (i.e., options that are not
intended to qualify as incentive stock options under Section 422 of the Code).
(l) "OPTIONED STOCK" means the Common Stock subject to an Option.
(m) "OPTIONEE" means an Outside Director who receives an Option.
(n) "OUTSIDE DIRECTOR" means a Director who is not an Employee.
(o) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(p) "PLAN" means this 1999 Directors' Stock Option Plan.
(q) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(r) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 600,000 Shares of Common Stock (the "Pool"). The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan has been terminated, become available for future
grant under the Plan. In addition, any Shares of Common Stock that are retained
by the Company upon exercise of an Option in order to satisfy the exercise price
for such Option, or any withholding taxes due with respect to such exercise,
shall be treated as not issued and shall continue to be available under the
Plan. If Shares that were acquired upon exercise of an Option are subsequently
repurchased by the Company, such Shares shall not in any event be returned to
the Plan and shall not become available for future grant under the Plan.
4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) ADMINISTRATOR. Except as otherwise required herein, the Plan
shall be administered by the Board.
(b) PROCEDURE FOR GRANTS. All grants of Options hereunder shall
be automatic and nondiscretionary and shall be made strictly in accordance with
the following provisions:
-2-
<PAGE> 3
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options granted to Outside Directors.
(ii) Each Outside Director who becomes an Outside Director
after the effective date of this Plan (a "New Outside Director") shall be
automatically granted an Option to purchase 33,333 Shares (the "First Option")
on the date on which such person first becomes an Outside Director, whether
through election by the stockholders of the Company or appointment by the Board
to fill a vacancy.
(iii) Each New Outside Director shall thereafter be
automatically granted an Option to purchase 2,500 Shares (a "Subsequent Option")
on the first Board of Directors meeting date of each calendar quarter that
begins at least one year following the grant date of the First Option to such
New Outside Director (but in no event earlier than October 1, 2000).
(iv) Each Outside Director who is not a New Outside
Director shall automatically be granted a Subsequent Option to purchase 2,500
Shares on the first Board of Directors meeting date of each calendar quarter
beginning on or after October 1, 2000.
(v) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, in the event that a grant would cause the number of Shares subject
to outstanding Options plus the number of Shares previously purchased upon
exercise of Options to exceed the Pool, then each such automatic grant shall be
for that number of Shares determined by dividing the total number of Shares
remaining available for grant by the number of Outside Directors receiving an
Option on the automatic grant date. Any further grants shall then be deferred
until such time, if any, as additional Shares become available for grant under
the Plan through action of the stockholders to increase the number of Shares
which may be issued under the Plan or through cancellation or expiration of
Options previously granted hereunder.
(vi) Notwithstanding the provisions of subsections (ii)
and (iii) hereof, any grant of an Option made before the Company has obtained
stockholder approval of the Plan in accordance with Section 17 hereof shall be
conditioned upon obtaining such stockholder approval of the Plan in accordance
with Section 17 hereof.
(vii) The terms of each option granted hereunder shall be
as follows:
(1) each option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 9 below;
(2) the exercise price per Share shall be 100% of the
fair market value per Share on the date of grant of each option, determined in
accordance with Section 8 hereof; and
(3) each option shall be exercisable in its entirety
immediately upon grant.
-3-
<PAGE> 4
(c) POWERS OF THE BOARD. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its discretion:
(i) to determine, upon review of relevant information and in accordance with
Section 8(b) of the Plan, the fair market value of the Common Stock; (ii) to
determine the exercise price per Share of Options to be granted, which exercise
price shall be determined in accordance with Section 8 of the Plan; (iii) to
interpret the Plan; (iv) to prescribe, amend and rescind rules and regulations
relating to the Plan; (v) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option previously
granted hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(e) SUSPENSION OR TERMINATION OF OPTION. If the Chief Executive
Officer or his or her designee reasonably believes that an Optionee has
committed an act of misconduct, such officer may suspend the Optionee's right to
exercise any option pending a determination by the Board (excluding the Outside
Director accused of such misconduct). If the Board (excluding the Outside
Director accused of such misconduct) determines an Optionee has committed an act
of embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of the Company rules
resulting in loss, damage or injury to the Company, or if an Optionee makes an
unauthorized disclosure of any Company trade secret or confidential information,
engages in any conduct constituting unfair competition, induces any Company
customer to breach a contract with the Company or induces any principal for whom
the Company acts as agent to terminate such agency relationship, neither the
Optionee nor his or her estate shall be entitled to exercise any Option
whatsoever. In making such determination, the Board of Directors (excluding the
Outside Director accused of such misconduct) shall act fairly and shall give the
Optionee an opportunity to appear and present evidence on Optionee's behalf at a
hearing before the Board or a committee of the Board.
5. ELIGIBILITY. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) above. An Outside Director who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate his or her directorship at any time.
6. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective on the
effectiveness of the registration statement under the Securities Act of 1933, as
amended, relating to the Company's initial public offering of securities. It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 13 of the Plan.
-4-
<PAGE> 5
7. TERM OF OPTIONS. The term of each Option shall be five (5) year(s)
from the date of grant thereof unless an Option terminates sooner pursuant to
Section 9 below.
8. EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per Share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be 100% of the fair market
value per Share on the date of grant of the Option.
(b) FAIR MARKET VALUE. The fair market value shall be determined
by the Board; provided however that in the event the Common Stock is traded on
the Nasdaq National Market or listed on a stock exchange, the fair market value
per Share shall be the closing sales price on such system or exchange on the
date of grant of the Option (or, in the event that the Common Stock is not
traded on such date, on the immediately preceding trading date), as reported in
The Wall Street Journal, or if there is a public market for the Common Stock but
the Common Stock is not traded on the Nasdaq National Market or listed on a
stock exchange, the fair market value per Share shall be the mean of the bid and
asked prices of the Common Stock in the over-the-counter market on the date of
grant, as reported in The Wall Street Journal (or, if not so reported, as
otherwise reported by the National Association of Securities Dealers Automated
Quotation ("Nasdaq") System).
(c) FORM OF CONSIDERATION. The consideration to be paid for the
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which the
Option shall be exercised (which, if acquired from the Company, shall have been
held for at least six months), or any combination of such methods of payment
and/or any other consideration or method of payment as shall be permitted under
applicable corporate law.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) above; provided however that no Options shall be exercisable prior to
stockholder approval of the Plan in accordance with Section 17 below has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may consist of any consideration and
method of payment allowable under Section 8(c) of the Plan. Until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to
-5-
<PAGE> 6
the Optioned Stock, notwithstanding the exercise of the Option. A share
certificate for the number of Shares so acquired shall be issued to the Optionee
as soon as practicable after exercise of the Option. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) TERMINATION OF CONTINUOUS STATUS AS A DIRECTOR. If an Outside
Director ceases to serve as a Director, he or she may, but only within ninety
(90) days after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. Notwithstanding the foregoing, in no event
may the Option be exercised after its term set forth in Section 7 has expired.
To the extent that such Outside Director was not entitled to exercise an Option
at the date of such termination, or does not exercise such Option (to the extent
he or she was entitled to exercise) within the time specified above, the Option
shall terminate and the Shares underlying the unexercised portion of the Option
shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. Notwithstanding Section 9(b) above,
in the event a Director is unable to continue his or her service as a Director
with the Company as a result of his or her total and permanent disability (as
defined in Section 22(e)(3) of the Code), he or she may, but only within twelve
(12) months from the date of such termination, exercise his or her Option to the
extent he or she was entitled to exercise it at the date of such termination.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired. To the extent that he or she was not
entitled to exercise the Option at the date of termination, or if he or she does
not exercise such Option (to the extent he or she was entitled to exercise)
within the time specified above, the Option shall terminate and the Shares
underlying the unexercised portion of the Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee:
(A) during the term of the Option who is, at the time of his or her death, a
Director of the Company and who shall have been in Continuous Status as a
Director since the date of grant of the Option, or (B) three (3) months after
the termination of Continuous Status as a Director, the Option may be exercised,
at any time within twelve (12) months following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of death or the date of termination, as applicable.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired. To the extent that an Optionee was not
entitled to exercise the Option at the date of death or termination or if he or
she does not exercise such Option (to the extent he or she was entitled to
exercise) within the time specified above, the Option shall terminate and the
Shares underlying the unexercised portion of the Option shall revert to the
Plan.
-6-
<PAGE> 7
10. NONTRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution or pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder). The
designation of a beneficiary by an Optionee does not constitute a transfer. An
Option may be exercised during the lifetime of an Optionee only by the Optionee
or a transferee permitted by this Section.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, the number of Shares of Common Stock set forth in
Sections 4(b)(ii) and (iii) above, and the number of Shares of Common Stock
which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per Share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued Shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock (including any such change
in the number of Shares of Common Stock effected in connection with a change in
domicile of the Company) or any other increase or decrease in the number of
issued Shares of Common Stock effected without receipt of consideration by the
Company; provided however that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option.
(b) CORPORATE TRANSACTIONS; CHANGE OF CONTROL. In the event of a
Corporate Transaction, each outstanding Option shall be assumed or an equivalent
option shall be substituted by the successor corporation or a Parent or
Subsidiary of such successor corporation, unless the successor corporation does
not agree to assume the outstanding Options or to substitute equivalent options,
in which case the Options shall terminate upon the consummation of the
transaction; provided however that in the event of a Change of Control, each
optionee shall have the right to exercise all of his or her options to purchase
Shares, immediately prior to the consummation of the transaction.
For purposes of this Section 11(b), an Option shall be considered
assumed, without limitation, if, at the time of issuance of the stock or other
consideration upon such Corporate Transaction or Change of Control, each
Optionee would be entitled to receive upon exercise of an Option the same number
and kind of shares of stock or the same amount of property, cash or securities
as the Optionee would have been entitled to receive upon the occurrence of such
transaction if the Optionee had been, immediately prior to such transaction, the
holder of the number of Shares of Common Stock covered by the Option at such
time (after giving effect to any adjustments in the number of Shares covered by
the Option as provided for
-7-
<PAGE> 8
in this Section 11); provided however that if such consideration received in the
transaction was not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon exercise of the Option to be
solely common stock of the successor corporation or its Parent equal to the Fair
Market Value of the per Share consideration received by holders of Common Stock
in the transaction.
(c) CERTAIN DISTRIBUTIONS. In the event of any distribution to
the Company's stockholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without receipt
of consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate
the Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act (or any other applicable law or regulation), the Company
shall obtain approval of the stockholders of the Company to Plan amendments to
the extent and in the manner required by such law or regulation.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Notwithstanding any other
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the legal requirements relating to the administration
of stock option plans under applicable U.S. state corporate laws, U.S. federal
and applicable state securities laws, the Code, any stock exchange or Nasdaq
rules or regulations to which the Company may be subject and the applicable laws
of any other country or jurisdiction where Options are granted under the Plan,
as such laws, rules, regulations and requirements shall be in place from time to
time (the "Applicable Laws"). Such compliance shall be determined by the Company
in consultation with its legal counsel.
-8-
<PAGE> 9
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. STOCKHOLDER APPROVAL. If required by the Applicable Laws,
continuance of the Plan shall be subject to approval by the stockholders of the
Company. Such stockholder approval shall be obtained in the manner and to the
degree required under the Applicable Laws.
-9-
<PAGE> 10
UNWIRED PLANET, INC.
1999 DIRECTORS' STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
<<Optionee>>
<<OptioneeAddress1>>
<<OptioneeAddress2>>
You have been granted an option to purchase Common Stock of Unwired
Planet, Inc. (the "Company") as follows:
<TABLE>
<S> <C>
Date of Grant <<GrantDate>>
Vesting Commencement Date <<VestingStartDate>>
Exercise Price per Share <<ExercisePrice>>
Total Number of Shares Granted <<SharesGranted>>
Total Exercise Price <<TotalExercisePrice>>
Expiration Date <<ExpirDate>>
Vesting Schedule This Option may be exercised, in whole
or in part, in accordance with the
following schedule: <<VestingSchedule>>
Termination Period This Option may be exercised for 90 days
after termination of Optionee's Continuous
Status as a Director, or such longer
period as may be applicable upon death or
Disability of Optionee as provided in the
Plan, but in no event later than the
Expiration Date as provided above.
</TABLE>
-10-
<PAGE> 11
By your signature and the signature of the Company's representative
below, you and the Company agree that this option is granted under and governed
by the terms and conditions of the 1999 Directors' Stock Option Plan and the
Nonstatutory Stock Option Agreement, all of which are attached and made a part
of this document.
OPTIONEE: UNWIRED PLANET, INC.
By:
- ------------------------------- -------------------------------
Signature
Title:
- ------------------------------- ----------------------------
Print Name
-11-
<PAGE> 12
UNWIRED PLANET, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
1. GRANT OF OPTION. The Board of Directors of the Company hereby grants
to the Optionee named in the Notice of Stock Option Grant attached as Part I of
this Agreement (the "Optionee"), an option (the "Option") to purchase a number
of Shares, as set forth in the Notice of Stock Option Grant, at the exercise
price per share set forth in the Notice of Stock Option Grant (the "Exercise
Price"'), subject to the terms and conditions of the 1999 Directors' Stock
Option Plan (the "Plan"), which is incorporated herein by reference.
(Capitalized terms not defined herein shall have the meanings ascribed to such
terms in the Plan.) In the event of a conflict between the terms and conditions
of the Plan and the terms and conditions of this Nonstatutory Stock Option
Agreement, the terms and conditions of the Plan shall prevail.
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option is exercisable during its term
in accordance with the Vesting Schedule set out in the Notice of Stock Option
Grant and the applicable provisions of the Plan and this Nonstatutory Stock
Option Agreement. In the event of Optionee's death, disability or other
termination of Optionee's employment or consulting relationship, the
exercisability of the Option is governed by the applicable provisions of the
Plan and this Nonstatutory Stock Option Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable by delivery of
an exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment of
the aggregate Exercise Price as to all Exercised Shares. This Option shall be
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the
Option is exercised with respect to such Exercised Shares.
3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash;
<PAGE> 13
(b) check;
(c) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
4. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution or
pursuant to a domestic relations order (as defined by the Code or the rules
thereunder) and may be exercised during the lifetime of Optionee only by the
Optionee or a transferee permitted by Section 10 of the Plan. The terms of the
Plan and this Nonstatutory Stock Option Agreement shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
5. TERM OF OPTION. This Option may be exercised only within the term set
out in the Notice of Stock Option Grant, and may be exercised during such term
only in accordance with the Plan and the terms of this Nonstatutory Stock Option
Agreement.
6. TAX CONSEQUENCES. Set forth below is a brief summary of certain
federal and California tax consequences relating to this Option under the law in
effect as of the date of grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT HIS OR
HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) EXERCISING THE OPTION. Since this Option does not qualify as
an incentive stock option under Section 422 of the Code, the Optionee may incur
regular federal and California income tax liability upon exercise. The Optionee
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price.
(b) DISPOSITION OF SHARES. If the Optionee holds the Option
Shares for more than one year, gain realized on disposition of the Shares will
be treated as long-term capital gain for federal and California income tax
purposes. The long-term capital gain will be taxed for federal income tax and
alternative minimum tax purposes as a maximum rate of 28% if the Shares are held
more than one year but less than 18 months after exercise and at 20% if the
Shares are held more than 18 months after exercise.
-13-
<PAGE> 14
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Nonstatutory Stock Option
Agreement. Optionee has reviewed the Plan and this Nonstatutory Stock Option
Agreement in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Nonstatutory Stock Option Agreement and fully
understands all provisions of the Plan and Nonstatutory Stock Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Nonstatutory Stock Option Agreement.
UNWIRED PLANET, INC.
By:
- ------------------------------- -------------------------------
<<Optionee>>
Title:
----------------------------
-14-
<PAGE> 15
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Nonstatutory Stock Option Agreement.
In consideration of the Company's granting his or her spouse the right to
purchase Shares as set forth in the Plan and this Nonstatutory Stock Option
Agreement, the undersigned hereby agrees to be irrevocably bound by the terms
and conditions of the Plan and this Nonstatutory Stock Option Agreement and
further agrees that any community property interest shall be similarly bound.
The undersigned hereby appoints the undersigned's spouse as attorney-in-fact for
the undersigned with respect to any amendment or exercise of rights under the
Plan or this Nonstatutory Stock Option Agreement.
-------------------------------
Spouse of Optionee
<PAGE> 16
EXHIBIT A
NOTICE OF EXERCISE
To: Unwired Planet, Inc.
Attn: Stock Option Administrator
Subject: Notice of Intention to Exercise Stock Option
This is official notice that the undersigned ("Optionee") intends to
exercise Optionee's option to purchase __________ shares of Unwired Planet, Inc.
Common Stock, under and pursuant to the Company's 1999 Directors' Stock Option
Plan and the Nonstatutory Stock Option Agreement dated _______________, as
follows:
Grant Number:
-------------------------------
Date of Purchase:
-------------------------------
Number of Shares:
-------------------------------
Purchase Price:
-------------------------------
Method of Payment of
Purchase Price:
-------------------------------
Social Security No.:
-------------------------------
The shares should be issued as follows:
Name:
-------------------------------
Address:
-------------------------------
-------------------------------
-------------------------------
Signed:
-------------------------------
Date:
-------------------------------
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use of our form of report included herein and to the
references to our firm under the headings "Experts" and "Selected Consolidated
Financial Data" in the Prospectus.
KPMG LLP
Mountain View, California
April 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-1998
<PERIOD-START> JUL-01-1998 JUL-01-1997
<PERIOD-END> MAR-31-1999 JUN-30-1998
<CASH> 20,230 12,677
<SECURITIES> 27,601 20,787
<RECEIVABLES> 5,461 2,724
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 54,125 36,540
<PP&E> 3,595 2,522
<DEPRECIATION> 1,885 1,186
<TOTAL-ASSETS> 57,320 39,144
<CURRENT-LIABILITIES> 24,715 9,836
<BONDS> 0 0
0 0
20 18
<COMMON> 6 6
<OTHER-SE> 31,972 28,369
<TOTAL-LIABILITY-AND-EQUITY> 57,320 39,144
<SALES> 0 0
<TOTAL-REVENUES> 6,717 2,205
<CGS> 0 0
<TOTAL-COSTS> 2,694 1,158
<OTHER-EXPENSES> 18,425 12,652
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 113 142
<INCOME-PRETAX> (13,263) (10,623)
<INCOME-TAX> 710 0
<INCOME-CONTINUING> (13,973) (10,623)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (13,973) (10,623)
<EPS-PRIMARY> (2.49) (2.03)
<EPS-DILUTED> (2.49) (2.03)
</TABLE>
